The world of payments remains in constant flux, reflecting an ongoing rebalancing of power among incumbent banks, digital giants, financial technology (fintech) startups, card networks, and, of course, consumers and merchants. At the top of the collective agenda is the digitization of payments. Although the momentum brought about by fintechs is strong, there is still uncertainty as to whether they—either in collaboration or in competition with digital giants and banking incumbents—will drive a true shift in competitive dynamics.
What can banking incumbents do in the face of these developments? First, they need to forge a digital strategy that enables them not only to survive meaningful incursions by nonbanks but also to thrive and take control of their own digital destinies. They must deliver compelling end-to-end customer experiences that maximize security, minimize complexity, and add value beyond pure payments. Ultimately, with payments revenues expected to reach nearly $2 trillion in 2025—driven largely by emerging markets—it is imperative that payments stakeholders understand revenue trends and the factors that are driving shifts in the landscape.
It is also critical for incumbent banks to map out diverse scenarios with some key questions in mind. How will customers’ payments behavior change over the next decade? How will control of customer engagement and brand image diminish as the Internet of Things evolves, as so-called open banking grows, and as commercial customers interface with more third-party providers? The winners will be those that learn how best to compete in truly open seas populated by highly diverse players.
Stefan Dab on Adapting and Winning in a Shifting Landscape