N26 has significant funding for its #mobile–#first #banking app that already has one million in users. Backed by Allianz and Tencent, it is #headed for the U.S. by year’s end.
Financial Technology
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.
The EU’s Second Payment Services Directive (#PSD2)—and the #European Banking Authority’s related Regulatory Technical Standards (RTS) on Strong Customer Authentication (SCA) and Secure Open Standards of Communication—represent a turning point for existing business models in #payments in Europe. PSD2 and RTS open up #banks’ systems to third-party payments services providers (TPPs) for account information, payment initiation and confirmation of funds via an access interface such as application programming interfaces (#APIs).
The final RTS published on 13 March 2018 specifies only the technical framework conditions and not interface standards. To help fill this gap, the Berlin Group—consisting of almost 40 banks, associations and PSPs from across the EU—has defined a common API framework called “NextGenPSD2” (current version 1.1) for the use cases specified in PSD2.
Payment initiation opens up: For payment initiation, the NextGenPSD2 framework offers, amongst others, SEPA #Instant Payments (SCTInst) as a payment instrument. The combination of PSD2 and SCTInst has huge potential to disrupt existing business models, depending on the level of API standardization and penetration of SCTinst in the EU.
Impacts on the cards business: TPPs such as merchants, #technology giants and PSPs could use the PSD2 APIs to make instant payments directly from customer accounts to the TPP bank account, bypassing card schemes and fees.
Frictionless instant payments with PSD2: Customer experience is key in payments. Friction and slowness can reduce acceptance of the payment instrument on both the customer and merchant sides, leading to higher cancellation rates in eCommerce checkout processes and longer queues in the store.
But there are issues with SCA—PSD2 APIs require banks to perform SCA on every transaction. This could lead to friction in the user experience at the point of sale (POS) and in eCommerce. PSD2 provides a convenient way to solve the issue of SCA through inherence and biometrics-based SCA methods. As innovation in this area continues, there will be a huge push towards creating RTS-compliant biometrics authentication methods.
TPPs such as tech giants and fintechs are not the only ones that could profit from PSD2 and instant payments—banks could also play an important role. Access to accounts and instant payments become commodity services with low or almost no margin for banks. New revenue opportunities will be in the value-added services and the platform ecosystems around these commodity services. “Going beyond PSD2” will include opportunities to monetize additional data and services combined with instant payments.
Read my complete article at InstaPay for more insights and share your views.
The post Will PSD2 APIs and instant payments change the game in European payments? appeared first on Accenture Banking Blog.
#Innovation for the sake of problem-solving (rather than for its own sake) is the way U.S. Bank’s Dominic Venturo approaches his role of chief innovation officer. The bank has a comprehensive outlook on investing and researching emerging #technology trends through its innovation team, Venturo said. The bank approaches its innovation plan by looking for “interesting […]
Bank Innovation
INV #Fintech, this site’s sister accelerator, announced today the three associate members of its fifth cohort of startups. INV #associates undergo a more lightweight program than full #class members. They do not have regularly scheduled meetings with the INV team and Fiserv, the accelerator&8217;s #technology partner. They do have access to INV&8217;s mentor network and […]
Bank Innovation
Location matters. Even in #fintech. It turns out nations beyond America today are increasingly generating more significant financial #technology #innovation, especially in artificial intelligence. Canada is an example. “Smart, early-stage investment in AI and fintech have helped Canada become a research leader in machine learning and deep learning setting the stage for industry 4.0,” said […]
Bank Innovation
#Voice #banking has been touted as the #technology to watch in 2018 (#even on this very site), but two developments this week show the new technology has significant challenges to overcome. Whether or not consumers choose to engage in “voice banking,” the risks are growing. Juniper Research predicts that half of American households will contain a […]
Bank Innovation
For years, as financial services became increasingly digital, #credit scoring remained stubbornly unchanged, but there are indications, #from the regulators on down to startups, that this is finally changing. From machine-learning-based underwriting to #blockchain-based identity solutions, new #technology is transforming the business of borrowing money. New companies in the credit-scoring space are using AI and […]
Bank Innovation
Customer experience is the grand basis of competition in today’s business world. Unfortunately, most financial services institutions remain mired in manual, bespoke, paper-based processes—often siloed by customer, channel and product groups within a #bank. That is beginning to change.
RPA can reduce time to perform tasks by up to 90% and lower costs by up to 80%
A key theme from Accenture’s recent survey of 80 bank COOs in North America is the need for back-office #operations to become more digital and to act as the new front office. The survey report highlights several opportunities for #banks to improve their operations—such as re-skilling back-office workers, creating agility through digital decoupling and robotics process automation (RPA). Sixteen percent of bank COOs we polled are using RPA, while 63 percent plan to use it over the next year or are piloting the #technology. Half of those surveyed are looking towards straight-through processing and almost 75 percent have or plan to use analytics and data automation to truly unlock latent value in operations data.
This presents a unique opportunity for banks to accelerate the use of modern automation techniques given their fundamental ability to enhance the customer and employee experience.
Intelligent automation has the power to impact operations. Here are five key reasons why:
Banks should start their automation journey with the goal to look beyond cost savings. Five keys for success:
The power of RPA to invigorate bank operations is real—reducing time to perform tasks by up to 90 percent and lowering costs by up to 80 percent, by Accenture estimations. Before jumping on the bandwagon, however, business and IT must join together to strategically plan an optimal journey to an agile bank future.
Read our 2018 North America Banking Operations Survey for more insights.
The post Automating bank operations? Keep eyes wide open appeared first on Accenture Banking Blog.
The #payments #technology space just keeps getting hotter. Last week, U.S. payments business PayPal bought iZettle, while today Dutch payments platform #Adyen confirmed its plans to go public. These significant moves confirm that the large players in the space are getting larger. Today, Adyen confirmed plans for an initial public offering (IPO) as early as […]
Bank Innovation
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