IBS Journal October 2017 EDITOR’S NOTE PAYMENTS IN A WORLD THAT IS ALL ABOUT SPEED


IN THIS ISSUE WE LOOK AT THE FAST-DEVELOPING PAYMENT TECHNOLOGY, WHICH IS BEING LED BY CONSUMER DEMAND. WE ASK HOW BANKS CAN KEEP UP WITH THE TECH GIANTS AND IF THE GAME IS ALMOST OVER FOR CASH


Bill Boyle Senior Editor


billb@ibsintelligence.com


05


E


very society on Earth has become addicted to speed. In the words of the song “I Want it Now”, which I imagine pounding into the ears of the masses listening to their smartphones on their way to work every morning – I want it now but I don’t know what it is.


Our need for speed is now cross-cultural because of the ubiquity of the smartphone. As Bruce Jennings of FIS tells us in The Big Interview on page 38 – the lack of legacy infrastructure in countries such as Africa has leapfrogged the development of telecoms networks; mobile payments and the ability of non-banks to become accepted as long as they have associations with strong brand values. The value of a good brand seems to be becoming stronger in this new era of super-fast technological innovation.


While some brands such as Apple and Samsung have, despite glitches along the way, kept an amazingly loyal following – to the extent that Samsung can survive an exploding phone and Apple can launch a $1,000 smartphone – others flounder. Probably the best example is Uber which, despite a tremendously loyal following, is fire-fighting attempts to regulate its spread in major cities including London. As Jennings said to me – when banks decide to partner with fintechs to extend their services to the speed-obsessed customer they will need to partner with care.


This will become an increasingly vital part of keeping the customer as we move forward into a world where, because of ease of use, the customer will decide on who can provide them with great service on the payments front based, not on which bank they are, but based on how fast they can provide their payments services and how broad and deep their offerings are.


So as Open Banking becomes a reality, with Citibank, Close and Maybank launching their mobile wallets, while a US


consortia of big banks has collaborated to launch its own system ClearXchange, all of these banks need to carefully monitor which partners provide the extended services that the customers are greedily demanding.


A mistake in choosing the correct partner, as we also move even faster into the realms of a new cyber-security threat to mass mobile banking, could deal a bank a huge blow to its credibility. And it will only be a matter of time before a major loss takes place through a partner that has not been vetted properly or an API that is badly designed.


But, as our Cash and ATMs feature on page 24 points out, cash is not yet dead and there appear to be interesting but stark regional variations. Physical cash in circulation, as we point out, is actually growing in the US. And it’s not just the high-denomination notes beloved of crooks and fraudsters everywhere – it’s the small denominations such as $1, $5 and $10 bills.


Meanwhile, in Sweden, only one-fifth of all purchases are made in cash and an astonishing 95% of all retail purchases made are electronic. Even the beggars in Sweden use hand-held electronic payment devices.


So what are the fabled Over The Top (OTT) players planning to slice into the bank’s hold on payments? On page 12 we analyse the likely outcomes. According to a survey, 36% of Economist Intelligence Unit (EIU) respondents said that established technology companies were the main threats to banks, rather than challenger banks.


But don’t think that our only hope is the slow movement now expanding across the planet. By the time that movement is big enough who knows what the banking landscape will look like?


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