1、TWO WAYS TO WIN IN PAYMENTSBanks can add value in the world of Instant,Invisible and Free payments via scale and differentiationAccenture Global Payments Pulse Survey 20192GLOBAL PAYMENTS PULSE SURVEY 2019 TWO WAYS TO WIN IN PAYMENTSWhat the global payments industry is becoming,and could become,cont
2、inues to give incumbent banks reason to worry.Market trends are converging on a future where payments are inevitably becoming instant,invisible and free(IIF).In this new payments world,how will incumbent banks add value and raise their game?What can they do now to reinvent themselves for IIF payment
3、s?How can banks both mitigate and capitalize on the upcoming payments disruption to grow customer loyalty,revenues and profitability?We recently posed these and other payments-related questions to 240 payments executives at banks from 22 countries.Drawing upon our deep experience in the payments ind
4、ustry and findings from the Accenture Global Payments Pulse Survey 2019,we see two complementary,interconnected and interdependent ways on how banks can use innovation to add value in the IIF payments world and win big:via scale and differentiation.3GLOBAL PAYMENTS PULSE SURVEY 2019 TWO WAYS TO WIN
5、IN PAYMENTS$500 BILLION IS UP FOR GRABSWe estimate that global payments revenue is likely to grow at a respectable compound annual growth rate of 5.5 percent to reach US$2 trillion over the next six years(Figure 1).Consumer payments accounts for 58 percent of this total revenue and are expected to g
6、row at 5.1 percent by 2025;corporate payments comprise the rest and are expected to grow at a slightly faster 6.1 percent.1 Non-cash transactions are expected to grow at 5.0 percent over the same period.2 This projected growth is offering banks that operate in the payments industry the chance to gra
7、b US$500 billion in incremental revenue.Figure 1.Global payments revenue Commercial*RoW=Latin America+Middle East and AfricaSource:Accenture Research Global Payments Revenue Model58%42%1,514+5.5%2,09356%44%Consumer201920254GLOBAL PAYMENTS PULSE SURVEY 2019 TWO WAYS TO WIN IN PAYMENTSBUT,SEIZING THIS
8、 OPPORTUNITY WONT BE EASY IN THE NEW WORLD OF IIF PAYMENTS5GLOBAL PAYMENTS PULSE SURVEY 2019 TWO WAYS TO WIN IN PAYMENTSCapturing the revenue growth opportunity of payments wont be easy for those banks which are unable to shift to digital business models,a critical mission for winning in an IIF paym
9、ents world.We see a mix of progressive and disruptive market drivers at work.These include customers and merchants rising expectations for speed and convenience;technical innovations like open APIs,Internet of Things and high-speed mobile connectivity;AI and blockchain;digital and regulator-driven f
10、ee compression;national infrastructure upgrades;and new providers entering the market,such as third-party payment initiation service providers.The combination of all of these trends is what leads us to the conclusion that we are heading towards a new world in which all payments are IIF.Forty percent
11、 of the banking payments executives we polled see payments as already being instant and another 38 percent say that payments will become instant over the next 12 months.More than 90 percent of bankers globally(98 percent in Asia Pacific)agree that payments are becoming more instant for business-to-b
12、usiness transactions.In fact,46 countries now have in place an instant payment solution and 12 more plan to implement one soon.3 UKs Request to Pay,set for launch this year,is a secure messaging service that will be overlaid on existing payments infrastructures as a flexible way to settle bills betw
13、een businesses,organizations and friends.4 PayPal,as another example of this trend,is partnering with banks and card issuers to offer its Instant Transfer capability to individuals and small businesses in North America,giving them quick access to their money.5 Finally,Ripple is using blockchain tech
14、nology to make cross-border payments easier and instant with minimal fees and that,in turn,is stimulating established cross-border payment players,like Swift,to up their innovation game.6 On average,77 percent of respondents agree that payments are generally becoming more invisible as they are progr
15、essively incorporated into third-party apps or devices,such as wearables,digital wallets,IoT devices and smart contracts.Seventy-three percent believe payments are already invisible or will be so over the next 12 months;even more so for consumer-to-consumer(84 percent)and consumer-to-business(83 per
16、cent)payments.Uber is a prime example of a service that takes physical payment options,such as cash,cards and wearables,completely out of the equation.The no-checkout-required Amazon Go retail store is another good example.With its Just Walk Out Shopping experience,shoppers simply use the Amazon Go
17、app to enter the store,take the products they want and leave with no lines and no checkout.76GLOBAL PAYMENTS PULSE SURVEY 2019 TWO WAYS TO WIN IN PAYMENTSSeventy-one percent of bankers and payments executives agree that payments are becoming free.That number is greater in Europe(93 percent)and Asia
18、Pacific(75 percent)where fee income accounts for the lion share of total payments revenue compared to North America(61 percent)where the revenue pool is more diverse.Consider that consumer payments for debit card revenue per transaction dropped 14.6 percent,from$0.34 in 2015 to$0.29 in 2018.8 Credit
19、 card revenue per transaction dropped 11.6 percent,from$1.21 in 2015 to$1.07 in 2018.9 In corporate payments,credit card revenue per transaction dropped 33.3 percent,from$2.76 in 2015 to$1.84 in 2018.10 We are also seeing increased regulatory pressure on fees,including the recent European Central Ba
20、nk restrictions on non-EU card transactions in Europe and the plenty of new entrants,like Revolut,that are building their customer proposition on lower payment fees.The impact of IIF payments will be significant.Based on our analysis,it is likely to decrease the payments revenue pool by 15 percent b
21、y 2025 and may cost complacent banks up to$280 billion in revenue opportunity loss,globally(Figure 2).While the volume/value tradeoff is still driving growth in total payments revenue,our survey results clearly show an acceleration towards IIF.Figure 2.Global payments revenue at risk(US$B)1,5141,393
22、38.5%1,6498.0%3.9%2.7%8.1%Total Payments Revenues 2019Non-bank Payments Revenues 2019Bank Payments Revenues 2025up to 14.5%at risk for banksBank Revenues 2019Bank organic growth 2019-25Card displacement by real time paymentsInstant PaymentsInvisible PaymentsFree PaymentsCompetition from non banks an
23、d digital attackersPricing compressionSource:Accenture Research7GLOBAL PAYMENTS PULSE SURVEY 2019 TWO WAYS TO WIN IN PAYMENTSWe also estimate that IIF payments could push the operating margin for payments down to 4.3 percent by 2025(Figure 3).With such compression,margins may become razor thin and e
24、ven negative for the least-efficient players.Figure 3.Global payments operating margin at risk by 2025Source:Accenture Research on annual reports100%12.7%68.5%4.3%14.5%Bank Payments RevenuesRevenues lossPayment operating costsCost of riskOperating marginTWO WAYS PROVIDERS CAN EXTRACT MORE PAYMENTS V
25、ALUETo protect the economics of their payments businesses,banks will need to define their business and innovation strategies around two approaches that address the challenges of IIF payments.First,scale technology to reimagine how their core payments operations are done to ensure that they continue
26、to benefit from the volume/value tradeoff and second,differentiate themselves by adding value in a low-margin,high-volume business.8GLOBAL PAYMENTS PULSE SURVEY 2019 TWO WAYS TO WIN IN PAYMENTSCREATING SCALE BY REIMAGINING HOW PAYMENTS ARE DONEInnovation in scale is how banks can address new competi
27、tors,market oversupply and maintain differentiation.Theres a host of digital payment solutions available today,many of them powerful and popular.It has created a global environment of undeniable oversupply,despite customers increased demand for instant payments and settlements.Consider that every ye
28、ar the number of unique fintech payments companies(that also receive funding)skyrocketed 97 percent from 2015 to 2018,based on our analysis.11 This is exacerbated by the growing pervasiveness of embedded payments that are being completed via smart assistants or third-party or branded mobile appsaddi
29、ng to the abundance of payments options.Whats driving this invisibility and disintermediation?According to our survey respondents,it is customer experience at 28 percent and efficiency at 27 percent.So,when providers in the IIF payments world lose speed as a distinguishing factor,they will need to s
30、et their sights on leading in price,service and overall quality.Improving any one of these requires the ability to act quickly and with precision.In essence,the must-do play is scale.Being able to quickly develop secure,convenient and completely frictionless payment experiences through digital servi
31、ces and capabilities without any significant increase in costs(including regulatory compliance and IT maintenance/upgrade)isnt just an operational aspiration;its both a matter of survival and ambition.Leaders get it.They are implementing scale initiatives,such as consolidation,to grow quickly and ef
32、ficiently and remain competitive.Fiserv,for example,is buying First Data12 which should enable it to offer a wider range of technology-powered payments and financial servicesfrom card issuer processing to the Clover cloud-based point-of-sale solution.Online payment processor Stripe acquired a laser
33、focus on,first,principles,smart processes and effective hiring to scale its business,growing its employee base to more than 1,400 people and processing billions of dollars for millions of users worldwide.13 Fintechs,in general,are tapping into the customer base and stable capital pools of banks to r
34、each both customer and efficiency scale.9GLOBAL PAYMENTS PULSE SURVEY 2019 TWO WAYS TO WIN IN PAYMENTSPlayers can focus on two key actions to optimize their efforts around scale.2.Obtain the technological abilities,such as intelligent automation,to process payments innovation at scale.In our survey,
35、18 percent of respondents said that building security into the retail payments transaction will be the main priority for banks;22 percent cited artificial intelligence,robotics,machine learning and innovative payments hubs as the key platform technology capabilities that they need in adapting core s
36、ystems to high-speed and continuous payment flows.1.Drive down costs faster than their revenue decrease to ensure that the volume/value tradeoff remains positive.This means establishing greater economies of scale in reaching enough new customers at a pace necessary to justify further investment in d
37、igital innovation and capture moments of scale and growth opportunities.Tactical examples of this include pursuing inorganic growth to increase scale and reduce unit costs,attracting new customers and revenue streams through new value-added services and playing the volume game on price by massively
38、lowering remittance margins in exchange for higher volume.10GLOBAL PAYMENTS PULSE SURVEY 2019 TWO WAYS TO WIN IN PAYMENTSFINDING NEW MARKET DISTINCTION IN THE EYES OF CUSTOMERS In the IIF payments world,differentiation will go to whomever owns the customer relationship.Rather than become the dumb-fu
39、nding platforms for other companies information-rich payments businesses,banks must find new ways to add value to customers,make money and grow.That being said,a piece of banking that is making lots of money and growing is transaction services.Revenues at the 10 largest global transaction banks hit
40、an eight-year high in 2018 due in large part to a cash management surge and stabilization in traditional trade finance.14 Important opportunities still exist in certain payment areas,such as FX.For example,the flow of money between individuals across national boundaries totaled$689 billion in 2018,b
41、enefitting companies such as Western Union and Moneygram15 but also creating an attractive market opportunity for new entrants,like Transferwise.11GLOBAL PAYMENTS PULSE SURVEY 2019 TWO WAYS TO WIN IN PAYMENTS1.Customer-centric value-added servicesFocus on customer-centric and value-added services,ev
42、en if the payment itself is free.This might include building an aggregator role in the online,mobile and instant payment segments,and developing cross-channel payment platforms(for example,PoS,APIs and microservices).Or,establish digitalized and differentiated customer experiences for priority segme
43、nts,such as tailoring service packages for commercial payments.Stripe,for example,offers online payment processing for e-commerce businesses of all sizes through a suite of payment APIs.16 BBVA and other banks are launching apps for ordering ahead and paying through the app.The apps automate payment
44、s but also lets customers reserve a table,order food,pick it up,check the bill,pay the bill and so on without waiting in line.17 These types of integrated payments are now becoming standard in many quick service restaurant chains around the world,helping improve the dining experience.To build off th
45、at money-making momentum,banks can draw on three tactics to better differentiate their payments business and increase revenue and profitability.2.Open Banking for corporatesBorrow from the retail business as a model and zero-in on providing the last-mile of connectivity to offer solutions to corpora
46、te customers as part of Open Banking ecosystems,even if it is invisible to the end customer.For 17 percent of the survey respondents,establishing internal start-up incubation units that are isolated from legacy processes to boost innovation will be the main priority for banks.3.Data monetizationFocu
47、s on monetizing data flowsselling raw data or delivering actionable insightsarising from payments activity to compensate for core payments becoming free,even if data plays are still early in their maturity cycle.Modern data analytics enables new levels of target segmentation where banks and their co
48、rporate clients can plan and execute more relevant products and services based on much broader consumer insight,far beyond the typical of income,gender,marital status and location.Based on our research,69 percent of banks aspire to sell raw data within three years.Already 20 percent of banks monetiz
49、e data delivering actionable insights and 75 percent aspire to do so in the next three years.However,customers data protection concerns(14 percent)and operational complexity(13 percent)are the top barriers to monetizing customers data.Fraud management is a good example of a data-driven service.Other
50、 forms of data monetization,such as offer presentment and redemption,are far less developed.The potential for data monetization remains strong but will evolve over the long term with services more loosely aligned to core processing while other data monetization services progress more slowly from con
