Company insight Achieving peak F


rom a customer perspective, the payments space is vastly different to how it was just a few years back. Cash payments are far less common, and the market is defined by a proliferation of banks and fintechs providing payment services. In the digital payments arena, choice is the buzzword. This brings many opportunities for every kind of service provider. “When you talk about financial institutions it is important that you break it into two worlds: banks and non-banks,” says Vincent Kilcoyne, executive vice- president for product management at SmartStream. “It may be unpopular to say it, but payments are a very high- performing segment for banking but not necessarily for banks.”


“If you look at where the lion’s share of payments is happening now, you are seeing a huge amount of growth in the non-bank area, with the likes of GoCardless and Worldpay,” Kilcoyne continues. “Payments is a bifurcated market – it touches the front office, which captures and processes payments, and the back office, which handles compliance and other functions. But the question is, who handles other areas like fraud surveillance and customer intelligence?” The world of fintechs and non-banks is changing fast, and consolidation is the driving force. Back in 2019, international financial services technology and outsourcing services provider Fidelity National Information Services (FIS) acquired Worldpay, a leading global e-commerce and payment technology company. The deal created a company with more than $12bn in revenue, making it one of the major providers of technology and


Future Banking / www.nsbanking.com


Vincent Kilcoyne, executive


vice-president for product management, SmartStream


solutions for merchants, banks and capital markets.


In 2020, meanwhile, French payments


Worldline completed an $8.6bn acquisition of Ingenico to create the biggest merchant acquirer and payments processor in Europe. It followed that in 2021 with the acquisition of Cardlink, a major network services provider in Greece, and then with a deal for Handelsbanken’s card acquiring activities in the Nordic region, as part of an ongoing consolidation strategy across Europe.


performance in payments


As margins erode and new, more agile challengers enter the payments market, banks are facing some difficult decisions about how to compete. Future Banking talks to Vincent Kilcoyne, executive vice-president for product management at SmartStream, about how AI and machine learning can help both banks and their new competitors to make the most of a fast-changing market.


payments space to new players is the impact on their bottom lines. “The revenue profile from payments was very nice, especially in international payments,” says Kilcoyne. “But now cross-border payment providers are diversifying across borders to eliminate the cost dynamic, eroding bank revenue stream for cross-border transactions at an alarming rate.”


Customers, after all, now have more choice than ever before. They can shun their traditional banking partners and simply switch to one of the relatively new market entrants that offer cheaper or more convenient services, be it Monzo, Starling, Atom or any other, while still using their old bank for other services. Customers have more freedom to decide where and how they do business, and where, how and with whom they spend money. Inevitably,


“The revenue profile from payments were very nice, especially in international payments. But now, cross-border payment providers are diversifying across borders to eliminate the cost dynamic, eroding bank revenue stream for cross-border transactions at an alarming rate.”


Whether in Europe, the US or Asia, the payments landscape is changing fast, and this consolidation brings challenges not only for banks, but also for the non-banks and fintechs that are growing rapidly in both size and reach through these mergers.


Size brings challenges


For banks, the big difficulty of a rapidly evolving market and the opening up of the


many jump to a non-bank that offers lower prices and better services.


In short, is it inevitable that banks will lose out to new, more agile players who are not encumbered by the legacy systems architecture in which banks have invested millions of dollars and on which they still rely heavily.


“Payments are seen as a commodity,” Kilcoyne stresses. “And that is predicated


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SmartStream


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