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For many businesses within the payments industry, the dawn of 2018 may see them suffering from an identity crisis.

The new wave of integration, which has seen former competitors, become partners will mean for many companies, the need to reassess both their place and future offering in the value chain.

Excuse me? I hear you say. Yes, foes have become friends. Even more than that, they have become dependent on one another.

If you are not still in shock, read on, as we look at why collaboration will be the key to the future of banking.

Who are you?

Understanding your unique proposition to your customer, your strengths and gaining focus are words we have heard from marketing gurus for decades. However, carving out your identity and purpose in the new payments ecosystem is mission priority.

Never before have we seen a congregation of banks, acquirers, PSPs, ISOs and payment networks alike merge to create the ultimate customer-centric experience. As we talked about in our recent post, The New Payment Ecosystem, each independent party will now work as a conglomerate, a sophisticated matrix, which combined will continue to establish and move within this new wave of technology. Each will play their distinct role, reliant on each other for success and survival.

Now, this could sound a lot like a nature documentary but think about it. We are for the first time seeing the disruption of one of the most well established, entrenched institutions. No longer will each party aim to deliver the complete package, instead harnessing their individual strengths, which combined are greater than what they could achieve on their own – you got it, the payments ecosystem.

Driving change

Where banks have traditionally held the monopoly, the PSD2 will see this change. Financial institutions have to date played most comfortably with legacy systems and have been slow to embrace and invest in technological advancements. This will no longer be the case.

In fact, in a study reported by Evry, “37% of European consumers say they would change their bank if it did not offer them up-to-date technology.”  So how will they adapt?

No longer will banks try to reinvent themselves, working within their rigid confinements to deliver a heightened customer experience and value-add solutions.

As positively noted in the World Retail Banking Report 2017, “an overwhelming 91.3% of banks said they need to collaborate with Fintechs.”

This overwhelming response certainly seems like the signal of change. And with global digital payments volumes on the rise, predicted to increase on average by 10.9 percent through to 2020, it can’t come soon enough.

Anirban Bose, Head of Global Banking and Capital Markets for Capgemini commented, “Within this new and dynamic ecosystem, payments industry participants must strategically reassess their roles. Banks must embrace this opportunity to enhance their offerings in collaboration with FinTechs and third-party developers. Breakthrough technologies and significant industry advances, such as Open APIs, instant payments, blockchain, and regulatory standardisation, will encourage collaboration.”

How will it take shape?

With PSD2 opening up the market for non-banks through the sharing of financial institutions APIs, they will bring with them their innovation and fresh thinking as to how the banking customer experience can be redefined and enhanced. One of the significant benefits of non-banks is that they are not restricted by labouring compliance and the substantial infrastructure that traditional banks are required to both adhere to and maintain.

But this won’t rule out the significance of banks. It will merely redefine their role.

Consumers, for example, will be able to manage their money and pay their bills through third-party providers such as Google or social media, while still having their funds securely placed with their financial institution of choice.

The bank retains the customer, regains their loyalty and opens up new markets through delivering improved solutions to everyday banking.

Where historically consumers have been hesitant regarding their adoption to e-commerce, the flexibility and convenience the collaboration between providers will deliver is set to far out-weigh any preconceived doubts regarding data sharing and security. In fact, it is predicted to be the tipping point to motivate consumers to consider both the ways they pay and where they shop, giving an increased opportunity for overseas businesses to enter the market as confidence grows.

We are already seeing a shift in behaviour, as shown in a recent report from Shopify, “57% of online shoppers made an online purchase in the last six months from an overseas retailer,” and these numbers are only set to grow.

Driving change

While it may seem that banks have been on the not so complimentary end of all of this, perceptions are likely to shift.

With the focus to date being on consumers driving the changing payments landscape, financial institutions will now sit firmly alongside them in addition to merchants and business, as a primary stakeholder dictating the requirements in order to grow their offering, retain customers and increase revenue through third-party value-add solutions.

It is certainly one thing to promote change; now it will be up to fintechs, PSPs and ISOs to deliver.

So, play nicely everybody, and perhaps the financial industry will lead by example and potentially transform the way traditional business in other sectors also takes place.

Watch this space.

If you have any questions about the changing payments landscape and what this could mean for your business, speak to one of our experienced team. You can call us on +1833 245 5776 or send us an email via our website

We hope you found this blog post of value and we genuinely welcome your feedback. You can send us your comments via the content box below. We love hearing your thoughts and suggestions, and both read and respond to them all.


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