Payments relationships ‘set for further evolution’

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As banking and commerce continue to evolve, the eventual industry leaders will be those that reimagine relationships with their customers and partners, claims a newly-published report written by Celent, the research and advisory firm owned by the Oliver Wyman Group, part of Marsh & McLennan.

The Celent report, which was commissioned by electronic payments services group ACI Worldwide, suggests that banks, retailers and financial technology (fintech) companies need to acknowledge the value each brings to the payments relationship and that taking on a collaborative attitude will benefit all parties.

The three-part report explores how payments relationships can be reimagined, focusing on the drivers of the payments ecosystem; namely retailers, banks and fintech players.

The report’s authors note that fintech companies, attracted by revenue and opportunities to work with merchants, have made huge inroads into payments, and, in fact, are now “attacking all payment flows”. Banks have responded to the challenge by deploying a range of strategies, from transformation and industry collaboration to an ‘if you can’t beat them, join them’ approach.

“The good news is that fintech players increasingly appreciate that banks still have a lot to offer, and despite their shortcomings can be valuable partners,” says Zilvinas Bareisis, senior analyst with Celent and co-author of the report.

While retail banks have been responsible for most of the payment instruments issued to consumers and used at the merchant tills, it is corporate banks that have the main relationship with retailers, the report observes. Although both sides may belong to the same universal bank, they often operate in silos.

Retailers are increasingly asserting their power and encroaching on bank territory, and regulators seem to be siding with merchants. The pace of change in retailing has meant that merchants have often evolved far quicker than banks, which comes with significant consequences for banking.

“Now is a pivotal moment to re-define the bank-retailer relationship for the better, as retailers are unlikely to need those banks which aren’t able to change,” says Gareth Lodge, senior analyst with Celent and report co-author.

“We believe that now is the time to reimagine the payments relationships between banks, retailers and Fintech,” adds Paul Thomalla, senior vice president (SVP) global corporate relations and development at ACI Worldwide. “Banks need to enter into a new era of cooperation with retailers and the new players entering the market.

“They need to understand that the requirements and interactions with consumers and businesses are changing. Rather than seeing the regulators and the new fintech players as a threat, banks should embrace the opportunities that the new payments landscape will bring. Only by combining the best aspects of both worlds can they offer today’s savvy customers the services they want.”

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