Continued improvements in credit quality and the underlying employment numbers have furthered optimism for the payments industry. A shift from addressing compliance and risk weaknesses back onto the growth agenda is clearly taking place. The focus on growth has also been accompanied by an increase in payments innovation. And along with further uncertainty for the traditional industry leaders.
As plastic gives way to mobile payments, expectations by merchants, and the roles played by the incumbent payments companies, is beginning to change. It is anticipated that the willingness to pay traditional interchange fees to the credit card industry will be further challenged by merchant exchanges and other nontraditional joint ventures currently on the drawing boards.
At the same time, the consumer experience will be significantly enhanced, led by the major brands across the hospitality and travel industries. As promising as these new solutions are for consumers, they threaten to add cost to the issuers, and be accompanied by envelopment of their brand and product into someone else's brand and experience.
While traditional banking institutions should consider participating in solutions such as the new wallets and apps managed by others, they should not allow these solutions to become the only transaction channel to the customer, or a significant loss of customer relationship and relevance will likely occur. The traditional players should turn to solutions that focus on helping merchants grow sales, offer instant credit to qualified consumers, and exploit the availability of predictive, real-time analytics using payment and bank-owned data.
By working more closely with merchants, this role offers banks an alternative path to achieve sustainable consumer engagement. The new path creates significant opportunities for banks to partner with merchants and merchant consortiums that may welcome not only a more cost effective solution, but also the opportunity to safely use consumer data to create strong value propositions through analytics. To that end, banks must evolve to serve this new era and capitalize on the opportunity to develop stronger merchant and consumer value propositions.
Download the Payments Radar 10th edition to get an overview of Deloitte's key payments offerings that can help you improve the speed, cost, and efficiency of your payments organization and develop stronger value propositions for your customers:
1. Payments strategy and organizational design
2. B2B, vertical, and cross-industry growth
3. Digital wallets and payments experiences
4. Modernized and faster payments platforms
5. Payments innovation, blockchain, and AI
6. Loyalty, rewards, and trade promotion
7. Financial advisory for payments
8. Tax for payments
9. Audit for payments
Deloitte’s Faster Payments Sandbox offers financial institutions a light weight payments services platform, essentially a “sandbox” environment for banks that want to test their interfaces (send & receive), and for merchants and other players that would like to simulate their use cases. The sandbox enables companies to test enhanced ISO 20022 messaging and understand customers’ demands for value-add products and determine effective pricing strategies.