EXCLUSIVE- Bank of America has quietly shuttered its #free #checking account, now requiring #customers to keep a certain minimum balance in their #accounts, or set up direct deposit of at least $ 250, to avoid a $ 12 monthly fee, the Wall Street Journal reported yesterday. The #banks’s eBanking customers, all of which were switched into accounts […]
Bank Innovation
Walt #Disney #World is piloting a #cashless resort at its Animal Kingdom Lodge next month. According to a WDW report, starting Feb. 12, Jambo House at the Animal Kingdom Lodge Resort will be the first location to go cashless for both purchases and services. Forms of payments that will be acceptable at the resort includes […]
Bank Innovation
The American square #dance evolved from 16th-century English folk dances, in which the dancers are prompted or cued through a sequence of dance steps by a caller to the beat of the music. The caller is typically on a stage beside the musicians, giving full attention to directing the dancers.
Payments stakeholders in Europe are gearing up for #Open #Banking, a new type of square dance where they are answering the regulatory compliance calls of the revised Payment Services Directive (PSD2). If they pick the right partners and are skilled enough in the dance, then they’ll stick around long enough to benefit from the new value being created. But if they are not careful, they risk falling over their own feet. #Banks need partners in this new dance and some of the most important are retail #merchants.
PSD2 allows consumers to grant merchants access to their bank accounts for direct payments, rather than using a credit or debit card. By using bank-to-bank payments, merchants can clear and capture funds faster and significantly reduce—if not eliminate—the fees they pay for card and processor interchange services. The British Retail Consortium estimates that merchants in the UK alone could save £650 million per year1, thanks to the PSD2-required Interchange Fee regulation. Innovative application programming interfaces (APIs) will play an important role in enabling retailers to deliver faster, more personalised shopping experiences at a lower cost.
Smart banks will view merchants as attractive dance partners—and will help them optimise Open Banking to reap benefits and grow their business—despite it cannibalising existing bank revenue streams. If banks sit on the sidelines, then the merchants will undoubtedly find other partners.
For example, banks can offer APIs that give merchants access to the bank’s capabilities. A recent Accenture online #pulse #survey of 50 payment executives within the European retail industry indicates that most plan to implement PSD2-related APIs over the next two years. Only nine percent of the retailers who are familiar with PSD2 do not have any immediate plans to do so; 63 percent of them cited slow customer adoption as the main reason. Most of the retailers we polled would consider embedding bank account balance displays, payment initiation, and bank account transaction history APIs into their point-of-sale (POS) systems.
Considering high levels of consumer confidence in banks handing their data and transactions, banks are in a strong position to take on and dominate the new role of registered account information service providers (AISPs). In that role, banks can aggregate their massive amounts of customer transaction data (that is approved by regulation and authorised by consumers) to isolate and identify spending patterns based on age, region, store location, and so forth. (Think Nedbank Market EdgeTM) Merchants will value and pay for such insight to gain a better understanding of their market and to tailor their offers. Seventy-four percent of retailers familiar with PSD2 say that access to better consumer information is most important to their organisation, followed by API-initiated payments (53%), fraud reduction (53%) and the ability to generate offers at the POS based on insight from bank account data (51%). As AISPs, banks can serve as financial advisors to both merchants and their shoppers to monetise their data.
Like the AISP role, banks are well positioned to serve as PISPs, initiating direct payments to merchants on behalf of their customers. Seventy-six percent of consumers we surveyed are likely to choose traditional banks as their PISP over third-party PISPs. Merchants are also likely to choose to partner with PISP banks to accelerate the bypassing of card networks for online payments, improve their merchant service fee structure, and gain access to ancillary services. Over the next three years, 65 percent of European merchants plan to use a third party to provide AISP or payment initiation service provider (PISP) services. In operating a PISP service, a bank would have the opportunity to capture an additional slice of transaction revenue while also providing opportunities for customer loyalty schemes and cross-selling. Accenture estimates PISP services could account for up to 16 percent of online retail payments by 2020. It’s an opportunity for banks to help merchants deliver more seamless shopping while also protecting their own relationships with customers, and avoiding being cut out of the value chain by merchants and other non-bank players.
Whether collaborating in promenade or do-si-do style, banks and merchants can perform a variety of Open Banking dance moves to strategically lead the migration away from card payments. Banks can become “the dance caller,” giving full attention to directing the migration towards new revenue models and market relevance. Those who sit with their arms crossed on the sidelines are unlikely to be part of the long-run future of the industry.
I invite you to share your thoughts on the near-term dance partnership between banks, merchants and consumers.
[i] Currencycloud.com, “How Will EU Interchange Caps Affect the Industry?, February 27, 2016. https://www.currencycloud.com/en-us/news/blog/how-will-eu-interchange-caps-affect-the-industry/
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EXCLUSIVE— The march of mobile banking and payments continues across the U.S., but it may be smarter for those startups looking to break into that market to look at other regions, Eric Wiesen, general partner for Bullpen Capital, told Bank Innovation. “In the U.S., my guess is that mobile payments will continue to grow perfectly […]
Bank Innovation
Startup #Varo #Money has raised $ 45 million for its plans to #become a full-fledged, “#national #bank,” the startup announced yesterday. The funds will go towards marketing its service as well as for laying “the foundation” to become a bank, company CEO Colin Walsh told TechCrunch. Varo, a mobile banking startup that provides an FDIC-insured bank […]
Bank Innovation
EXCLUSIVE – Since its launch in 2010, #Citi #Ventures has focused on investments that are strategic to its parent, the global financial services provider Citigroup. But when your parent company is a bank that spans the world, you can get involved with a lot of things. The portfolio of Citi Ventures, which comprises 35 companies, […]
Bank Innovation
The #Commonwealth #Bank of Australia today unveiled its own #chatbot, called #Ceba, that performs more than 200 banking tasks, including activating cards, paying bills, receiving bank statements, and more. Check out the video of how Ceba works. Ceba will first be rolled out to 6.2 million NetBank and CommBank app users in the coming weeks and […]
Bank Innovation
EXCLUSIVE—The U.S. Securities and Exchange Commission, or SEC, has expressed serious reservations regarding #bitcoin #ETFs, in a public letter published on the regulator’s website yesterday. The reservations come at a time when bitcoin has experienced a series of falls in value, just wobbling over its previously celebrated mark of $ 10,000. The #currency is standing at […]
Bank Innovation
EXCLUSIVE – After a successful 2017, Goldman Sachs’s consumer lending offshoot #Marcus is hoping for a better 2018 by expanding its products beyond personal loans and savings offerings. Now, Marcus will be providing home improvement loans ranging between $ 3,500 to $ 40,000 for periods of three to six years. Marcus previously offered loans topping out at […]
Bank Innovation
This post marks the beginning of my career as an Accenture blogger. I’m looking forward to communicating with you in 2018 and beyond and to commenting on developments in the #banking industry in Europe. I joined Accenture late last year as head of the banking practice in Europe. I am an industry veteran with extensive experience both as a consultant and as a banker.
This is an enormously exciting time to be working in the banking industry, particularly in Europe. There is #massive change taking place on many fronts:
As Accenture has noted, most banks in Europe have been vertically integrated, covering all aspects of the value chain from origination to servicing. The universal bank concept is well-established, with the retail sector more stable in recent years than the commercial and investment banking side. Within Europe, there has been more regulation, but regulatory barriers to entry have enabled intra-industry competition. While regulation has deterred cross-industry threats from retailers, telecoms and consumer tech giants, it has also fostered a wide variety of institutions, including private, mutual and cooperative banks.
This is all about to change. The combination of competitive disruption and regulatory actions like PSD2 in Europe and the Open Banking initiative in the UK is forcing banks to open up faster than other industries while maintaining the security that is part of their DNA. Before too long, bank customers will be able to share access to their financial data with non-bank third parties, and third parties will be able to integrate their services with those of a bank to create a better banking experience while keeping client data secure.
#European banks are facing many other challenges, including continuing low levels of profitability and the need to formulate and execute digital strategies. Digital strategies, in turn, call for a new look at how people are selected, trained and motivated as banks shift from product-driven to customer- and people-driven organizations.
I will be writing about these and other topics in the months to come, particularly as they pertain to Accenture’s own vision and its view of banking strategy, #technology and operations. I welcome your comments and questions, and look forward to a lively exchange of ideas.
The post Confronting massive changes in European banking appeared first on Accenture Banking Blog.
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