“In any one minute, we’ve more people in our mobile app, than in our entire branch network in a week. The only problem – the average user stays for just 17 #seconds,” said one CIO at a leading European retail bank. This is quite the statement. It highlights perfectly the monumental change in #consumer #behavior […]
Bank Innovation
The explosion of software at the point of sale (POS) is a major force of change in #acquiring today. This trend is not new, but its speed and scope are. Addressing the competitive implications of integrated payments is now a priority concern for acquirers. Understandably so.
Software is migrating down market into smaller merchants. It performs various business functions for merchants and is replacing traditional terminals and PC-based solutions. Increasingly, these solutions are integrating payments and capturing the economics of payment acceptance.
The merchant market is characterized by industry verticals with niche business needs and specialized accounting processes. For example, health and fitness companies can handle scheduling, e-commerce, membership collections, and on-premise payments through the business solutions available to the vertical. And not-for-profits can integrate donor management, events, fundraising campaigns, and e-commerce. Also, faith-based organizations can take recurring payments and payments through e-commerce websites and kiosks. All of this is possible because of these business solutions.
By streamlining business operations through a single application and creating new user experiences for merchants and their customers, software developers are filling gaps that traditional acquirers are not. With payments now central to developers’ businesses, delivering payments functionality is not just a nice-to-have for them.
In fact, software developers are realizing that payments is where the real economic value lies. In many cases, they can double their revenue as a result, according to Accenture estimates. Developers can achieve this revenue growth through different approaches. These include referring merchants to traditional acquirers or becoming ISOs or payment facilitators that are more centrally involved in payments processing. Private equity firms are often agents of change here. They are targeting developers before monetization of payments, leading them through the process, and exiting on the strength of the improved economics.
A look at the software mergers and acquisitions (M&A) market reveals how common this approach is among private equity firms. The market has about 500 to 600 deals per quarter, many are payments focused.1 Some 30 to 40 percent of these transactions have been completed by private equity firms or their portfolio companies in recent quarters.2 In addition, more than half of companies being purchased are in dynamic acceptance verticals like healthcare, education, hospitality and real estate.3
These changes are creating new competitive dynamics for traditional acquirers. Software developers are emerging both as a new distribution channel for acquirers and as a new and formidable category of competitors.
Most acquirers recognize the complexity of this friend-and-foe relationship. In response, many are investing to create integration environments hospitable to software developers to attract these new referral sources. Sometimes, this investment involves pursuing acquisitions to add capabilities. Accenture estimates that in the past three years, there has been more than $ 6 billion in acquisitions with an integrated payments business thesis.4
To keep pace, traditional acquirers must take stock of what all this means to the future of integrated payments. Here is what the landscape will likely look like:
As software developers set the new rules of acquiring, there will be more share shifts between traditional and #technology-enabled channels. Already, growth in the independent software vendor channel (35 percent) is outpacing growth in the overall acquiring industry (8 percent), according to Accenture estimates.5
The road to acceptance product enablement will increasingly run through software at the POS. This results in a powerful gatekeeper role for software developers. Just like they did for near field communication and Apple Pay, acquirers must prepare to modify their solutions for the next generation of acceptance products.
Sales and marketing will never be the same with developers in the value chain. While acquirers have long relied on third-party sales partners, the dynamics will be different with developers in the mix. Acquirers should start to prepare for non-traditional sales partnerships with developers.
Acquirers will become developers in key verticals, either through building internal software innovation capabilities or through M&A activity. Vantiv Inc.’s acquisition of Paymetric and Global Payment’s acquisition of Active Networks are among several examples of this trend.
Software developers have the ambition and ability to capture a good share of the payments acceptance business. Traditional acquirers must act to avoid disintermediation, and software developers that have yet to get involved are missing significant revenue potential.
This is a fight-or-flight moment that calls to mind e-commerce in 1995. At the time, an emerging business model was taking off. There were a few dominant players and a handful of specialized players. But many acquirers stood still. There is every indication that integrated payments will evolve on a similar trajectory. Now is the time for acquirers to lean into the growth.
1 Software Equity Group, “SEG Snapshot: 3Q17 SaaS M&A Update,” October 20, 2017, retrieved on April 3, 2018
2 Ibid
3 Ibid
4 Accenture Payments research conducted March 2018
5 Ibid
Marc Abbey, Managing Director, Payments
The post CHANGING THE GAME: Integrated payments in acquiring appeared first on Accenture Banking Blog.
Application programming interfaces (#APIs) open up a rich world of data exchange to #banks, #fintech startups, and consumers. Large banks such as #Wells #Fargo are operating with a growing number of APIs for third parties to connect with, and it’s #changing the way customers interact with the bank. There is also a growing ecosystem of […]
Bank Innovation
For years pundits have warned #banks will lose in the billpay game. Spoiler: They were right. Way back in 2013, Ron Shevlin, now director of research at Cornerstone Advisors, said banks were losing billpay for several reasons: Billers have made it easier to pay #bills (via email and other notifications) An aversion to banks among […]
Bank Innovation
#Credit #Suisse has released a #report on the Swiss financial center in which it points out the key #trends and #technologies that are #changing #banking.
The report, entitled ‘Swiss Financial Center 2016,’ addresses the ongoing changes occurring in the financial service industry worldwide.
The Internet is changing the behavior of bank clients. Meanwhile innovative startups are coming up with new business models and cutting-edge technologies to change the way we manage our money.
During the past two years, interest in #fintech has increased massively, becoming a dominant buzzword in the financial industry.
“Digitalization in the financial sector will change banking,” the report says. Notably, digital transfers and payments transactions provide an attractive alternative to cash payments as they can be generated via smartphone apps.
In retail banking, online processing of banking activities is providing greater convenience and flexibility to clients.
Personal financial management (PFM) applications give clients an overview of their personal assets, current income and spending. They generate analysis and recommendations for personal budgeting.
Trading and advisory platforms enable users to access stock exchange trading. These platforms also analyze client portfolios using algorithms and generate automated investment recommendations. #Robo-advisors are also used in private banking, complementing the work of client advisors.
Robo-advisors are increasing in popularity in the private banking segment, and their advantages are clear: they are low-cost, can be used in a multitude of areas, have access to huge databases and are on call 24 hours a day.
In credit operations and capital markets, new products are enabling users to avoid financial intermediaries. On these platforms investors and borrowers come into direct contact with one another. These platforms are for instance crowdfunding and peer-to-peer lendings platforms.
Virtual currencies are an alternative means of payment to national currencies. #Bitcoin for instance enables users to make payments directly to one another, without using the services of a bank or other middleman.
Digital support, also known as regtech, promotes the implementation of regulations and helps ensure that risk analysis of unstructured data, scenario analysis and monitoring activities are organized more efficiently.
&8220;The new technologies in the financial arena will lead to a rationalization of processes in the banking sector in the years ahead and due to the strengthening of the client&8217;s position are set to alter the client/bank relationship on a lasting basis,&8221; the report says.
Another #technology that plays a significant role within fintech is #blockchain technology, which the report claims has &8220;the potential to fundamentally change the financial industry.&8221;
It details:
&8220;Blockchain gained recognition above all thanks to the #cryptocurrency Bitcoin. However, its area of use is not just confined to digital currencies.
&8220;Indeed in principle the technology can be applied to a very wide range of areas: For example, the US Nasdaq stock exchange has introduced a trading platform based on blockchain.
&8220;It is conceivable that blockchain technology will replace clearing houses in securities trading. But in the art and diamond trade too, blockchain has the potential to make forgeries and the sale of stolen goods more difficult.&8221;
The report points out the conditions for the successful integration of digitalization into the business world. First, there must be a state-of-the-art communications infrastructure that meets current requirements. Then, the growing importance of the MINT (mathematics, IT, natural sciences and technology) subject must be addressed in order to ensure that businesses located in Switzerland can recruit the specialist personnel they need. Finally, overall regulatory conditions must be adapted to the new requirements.
It further advises on the formation of clusters of various different economic sectors, citing the example of Silicon Valley.
&8220;Switzerland is well placed with economic centers that are located in close proximity to one another such as Zurich (financial services, industry), Basel (pharmaceuticals, chemicals) and Geneva (financial services, commodities),&8221; the report notes.
For Switzerland to keep its position as a world leading financial center, there much be a number of actions to be undertaken by the public sector and the private sector. It suggests regular reviews and modification of existing overall regulatory conditions to facilitate new business models, as well as the creation of a recognized &8220;Digital Switzerland&8221; umbrella brand to improve external perceptions. Other ideas include launching sector initiative to encourage digitalization, adapting existing business models and services to the digital reality, as well as networking with other sectors to achieve scale effects.
Featured image by everything possible, via Shutterstock.com.
The post Credit Suisse Report Names Technologies Trends Changing Banking appeared first on Fintech Schweiz Digital Finance News – FintechNewsCH.
#Auto #Insurance is growing fast in emerging markets as people get their first car. Telematics can create a more personalised risk premium. Claims processing is in transformation as auto body shops and consumers form into networks through maps and mobile phones. Meanwhile consensus is emerging that greater adoption of driverRead More
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