Other parts of this series:
We have been posting daily blogs from Sibos in Sydney. Here on day three, the focus of meetings and discussions were the topics of disruption, collaboration and regulation.
Accenture organized a session related to disruption, hosted by our Global Banking lead, Alan McIntyre, on the topic of “The payment industry – what if it were instant, invisible and free?”
Alan pointed out that one-third of the growth in revenues of banks is now going to newcomers, as 80 percent of new players in the banking industry are active in payments. This influx of players has been leveraging the investment of private equity funds (US $30 billion so far), which dedicate 50 percent of their funds to the payment industry.
Payment companies are not typically covered by banking regulations and this might create an unlevel playing field. There are vulnerabilities, as well; new entrants have been victims of large-scale fraud schemes and several have been forced to close.
One of the key questions is: If transaction fees tend toward zero, where will new revenues come from? Can companies leverage investments related to compliance and turn them into valuable solutions? Or can they create an Amazon-type marketplace, with particularly attractive opportunities in the corporate/SME world?
Whatever the path of action, major hurdles include the lack of a customer-centric organization, the need to develop collaboration with multiple players including fintechs and the need to train teams to address new tasks.
New revenue streams can be generated in value-added services around retail payments. Payments will become invisible and simply happen in the background as part of the end-to-end experience and as an enabler for services, just as payment for ride-sharing services like Uber and Lyft is essentially invisible.
Banks are taking different approaches, including creating their own closed loop or collaborating and building an ecosystem in which payments firms can participate and create value. In some cases, regulators are mandating the formation of payment ecosystems.
Our trade finance roundtable focused on collaboration, which is needed to identify new sources of revenue and new avenues to profitability. These might include leveraging banks’ key assets, such as customer trust or expertise in security, combined with other players’ strengths.
Collaboration might also include standardizing some activities to keep the cost of new technologies down, and to ensure interoperability between the various consortia and solutions that are being developed. Banks also need to put collaborative models in place within their own organizations, for instance, to achieve the objective of rapidly and intensively retraining the workforce.
Regulation remains a major area of concern, with key topics discussed including:
- The role of regulators in fostering innovation (with Open Banking regulation as an example)
- Ensuring resilience and transparency in payment systems
- Managing settlement risk
- Helping provide ubiquity and accessibility to consumers
- Directing or even mandating investment
Sibos 2018 wraps up tomorrow, but in the meantime, have a look at what day 3 was all about.