New technologies, evolving customer behaviour and market dynamics have challenged banks’ central role in the payments ecosystem over the last decade, according to a study from the Euro Banking Association (EBA) and McKinsey & Company.
The white paper on the future role of banks in payments, also shows that that payments and account services continue to be at the core of banks’ value proposition, despite a mounting challenge from payments disruptors offering a range of merchant and consumer services.
The study outlines how the ‘new normal’ shaped by the current pandemic has accelerated some of the trends and highlighted the importance of payments in the consumer experience.
As the ecosystem evolution converges with the effects of the pandemic, the early 2020s are likely to become an inflection point for payments, it predicted.
Reinhard Hoell, a partner from McKinsey & Company’s payment practice said: “The banks we surveyed identified both the challenges and the opportunities that will shape their role in the ecosystem in the years to come.”
“The pandemic has not altered the general strategic direction banks have taken to grow their payments business but has certainly reinforced banks’ commitment to invest in areas such as digitising customer journeys, introducing machine learning, and improving technological and operational resilience.”
Despite the uncertainties of the current environment, the paper concludes, now could be the moment for banks to secure the growth of value in their payments business over the next cycle – and to come together with other stakeholders to solve sector-wide challenges and capture opportunities.
“Banks face multiple strategic choices and have a range of opportunities to collaborate with partners for selected activities and applications,” said Wolfgang Ehrmann, Chairman of the EBA. “All banks interviewed believed that industry cooperation is extremely important to fill capability gaps, drive economies of scale, mitigate investment risk, reduce the complexity of providing non-differentiating activities and help set new market standards.”
Recent Stories