Payments transformation: are the banks ready to compete?

Payments transformation: are the banks ready to compete?

Bruce Jennings

International Strategy Development Director at FIS

Views 698

Payments transformation: are the banks ready to compete?

06:00 am

When it comes to innovation in financial services, the payments sector is leading the way. The widespread adoption of new technologies has completely changed the way we are able to make payments – from NFC and contactless cards to Pingit and mobile wallets. Recent research from Pinsent Masons suggests Paypal poses a bigger threat to the high street giants than challenger banks. As customers increasingly embrace these new methods, could banks be well placed to capitalise on payments transformation?

The buzz surrounding the sector, fuelled by powerful new entrants entering the fray, has led some to see slick new payment options as a competitive differentiator. In that sense, banks may have an advantage: they possess an existing infrastructure that backs up the necessary fundamentals of scalability, trust, security, reliability and performance. However, this requires a robust, cost-effective back-end that is equipped to support front-end innovation. Focusing on front-end also means banks pit themselves against dozens of nimble, innovative new challengers and competitors.

A need for fast, reliable, secure payments, 24 hours a day, is creating more pressure than ever before. The UK has been a leader through its implementation of the Faster Payments service. Despite the challenges for banks having to adjust to a system that is straight through and always on, consumer adoption is driving the industry to find new ways to apply it to everyday payment needs. Sweden and Singapore are amongst others who have also gone live with comparable systems – with the US and other Eurozone countries lining up. This represents a new frontier – a widespread ability to make account-to-account transfers in near real-time, and open up opportunities to generate new revenue streams.

But challenges remain. Settlement and liability across different jurisdictions are obstacles, while fraud and AML checks also become more difficult with real-time payments. The journey to instant payments with reasonable costs on a global scale will be a long one – and will likely still face consumers and businesses with the choice of paying a premium for immediacy in cross-border payments.  In the mean-time, the likes of Apple (mobile OS owners), Uber (focused service app owners) and the multiplicity of social network providers own the mobile user experience.  

In this increasingly competitive space, banks may in fact be better placed to provide the necessary building blocks to these service and payments providers, aligning their services to their core competencies, partnering with service and payment providers to offer workable and cost effective consumer solutions. And for those that do compete head on, speed will be the name of the game. In a recent FIS webinar, nearly half (49%) of attendees cited ‘simplicity and speed’ as banks’ key competitive advantages in payments – ahead of security, reliability and innovation. But equally, a lack of one of these latter attributes would create a competitive disadvantage. Only time will tell whether the banks are up for the fight, and indeed, which battles they chose to fight.

Latest blogs

Tom Kellermann Carbon Black

Governance, Risk and Compliance - Enacting Proactive Risk Management

In the highly regulated industries of finance, healthcare and energy, a focus on governance, risk and compliance (GRC) is crucial to effectively combat a cybersecurity breach. Unfortunately, when considering international data sharing, this can Read more »

James Daniels FIME

Key takeaways from MWC Shanghai and Seamless Asia

At the end of last month, two major technology events took place in Asia. The first was Seamless Asia, which focused on the future of finance and commerce. The second, MWC Shanghai, centred around ‘Intelligent Connectivity’ – bringing together Read more »

Henry Balani Encompass Corporation

KYC Solutions Provider Encompass Corporation Comments on FCA Anti-Money Laundering Annual Report 2018/19

From this report, it is clear that the FCA is taking real action across the board when it comes to tackling money laundering. It is important to note the focus on Capital Markets. Given the reputation of London as a major financial centre, this is Read more »

Aditya Arora Teleperformance DIBS

How can financial institutions keep the human touch despite the ever growing wave of automation?

The past decade has welcomed an era of rapidly evolving and innovative technology, launching the race for automation and use of Artificial Intelligence across verticals in order to streamline processes and ease tasks for its employees and customers Read more »

Lina Andolf-Orup Fingerprints

Fingerprint On The Pulse: Biometrics On The Move In More Places Than One

We may be halfway through 2019, but as the year hurtles onwards, it’s important to pause and reflect on the latest and greatest news from Q2. With milestones surpassed – and fading into the distance – coupled with the ongoing adoption of biometrics Read more »

Magazine
ALL
Free Newsletter Sign-up
+44 (0) 208 819 32 53 +44 (0) 173 261 71 47
Download Our Mobile App
Financial It Youtube channel