TRANSFORMATION: REVENUE STREAMS
Allforone?
Banks are striving to solve an increasingly urgent payments revenue challenge. Gavin Maclean of Lloyds Bank Commercial Banking told us collaboration will help
The famous rallying cry of literary history’s three bearded swashbucklers has never rung truer than during the fight against the unseen enemy that is COVID-19. During the most volatile almost-two years in recent economic history, financial services players of all shapes and sizes collaborated in unprecedented ways to survive. One of the starkest examples was that of players working together to meet their customers’ increasing demands f or payments ease amidst an explosion of e-commerce and the consequent acceleration of digitisation. However, having risen to that occasion, banks now face the twofold challenge of continuing to innovate in order to compete, and attract and retain customers, while deriving the necessary value from the hugely-increased volume of low-value payments to ensure their own sustainability. In fact, a new The Future of Competitive Advantage In Banking And Payments report from payment, invoice and document automation solutions provider, Bottomline Technologies, estimates that 10-to-15 per cent of banks’ retail payments revenue is now at risk, equating to between $100billion and $150billion globally, based on figures from contributor Aite-Novarica Group. ffnews.com
The report asked 311 financial industry representatives – from C-suite executives to those working in treasury, fraud and operations teams, across diverse geographies including the UK, Europe, the United States and parts of Asia – how they ‘measured up in meeting customer expectations and their progress toward a payments modernisation strategy’. The report cites author and financial analyst Nassim Nicholas Taleb, who summed up the imperative organisations now face when it comes to payments: “If you are in banking and lending, surprisingly, outcomes are likely to be negative for you. This report is aimed at removing those surprises, because they are competitive killers. “The rapid evolution of payments has seen financial institutions having to juggle their strategies in the face of a flurry of new industry and regulatory deadlines. Among them, overhauls of messaging standardisation, a drive towards real time and the need for product roadmap fulfilment within tight deadlines. “COVID-19 has accelerated the transition to the digitalisation of payments and raised customer expectations for speed, agility and fraud protection from providers. PSD2 (the Revised Payment Services Directive) and
open banking have encouraged competition, opened up the market to challengers and focussed more on interoperability for access to global markets. “All of the above is good news if it means banks and FIs can improve their operational efficiency and develop new revenue streams. However, with competition comes the need to ensure that you are keeping up and providing your customers with what they demand in order to retain the current ones and acquire new ones.” Continuing this theme, Ron van Wezel, strategic advisor, retail banking and payments, Aite-Novarica Group, is quoted saying: “The profitability of the payments business stands at a crossroads. The combined forces of fierce competition, regulatory interventions and necessary investments in infrastructure and compliance put operating margins under pressure. At the same time, the pandemic has boosted the adoption of digital payments, creating new opportunities for banks and other payment companies. “Banks clearly recognise the importance of investment in the modernisation of their payments platforms to meet the increasing competition in the payments value chain.” Issue 10 | ThePaytechMagazine
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