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Bob Mackman

Bob Mackman

Bob Mackman - Mackman Associates

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Day three at the International Payments Summit

11 March 2010  |  2081 views  |  1

This year’s International Payments Summit had a clear theme running through the various debates and discussions around the event: how regulation is stifling progress….but mainly for the banks.

During the final day of IPS, ZOPA, a lending and borrowing exchange that lets people sidestep the banks, once again brought about discussions on the floor around new entrants into the payment space.  While some, such as PayPal and Tesco, have been widely documented and observed , others such as Facebook which is introducing its own payment system to allow users to purchase Facebook ‘credits’ to buy virtual goods, now want their share of the pie too.
This is becoming an issue for the banks. The core business that banks make money on, such as through lending, is offered by players such as ZOPA that are able to offer more attractive rates than the banks. That way, these payment providers not only give the banks a run for their money, they are also in a better position to meets needs of their borrowers, having reinvented the payments business with the consumer in mind. It seems to be a win/win situation for everyone. With the banks and their standard policies not involved in the process, it might seem that all the banks will be left with is the core commodity of moving money – a business that is not very profitable.
And this is where regulation seems to hinder progress. Banks are left being highly regulated whereas the new Payment Institutions do not have to adhere to the same level of regulatory requirements, and banks have to jump through hoops to maintain their revenue margins.
Therefore, it is no surprise that the biggest concern for banks is overregulation. While we all agree that regulation post-credit crunch is necessary, there is a fine line between protecting banks and consumers and hindering innovation and progress. Unfortunately, banks seem to be the easy targets at the moment.


Comments: (2)

Giles Andrews
Giles Andrews - Zopa - London 12 March, 2010, 12:56

I'm Zopa's CEO and am not sure if you are suggesting that Zopa is underregulated? If so, I would disagree and so, I think, would the UK regulator. If it's that banks are in danger of being overregulated, that's an interesting question, but I don't think one related to their ability (or inablility in fact) to innovate. That is more related to their sheer scale, inertia, legacy systems and particularly their "monoculture". Furthermore, the drastic loss of consumers' trust over the last two years makes it more difficult for them to sell new propositions to their customers. I often hear bank executives saying that all they need to do is rebuild their balance sheets (and lobby regulators about not making that task more difficult) while what they really need to do is restore trust.

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Bob Mackman
Bob Mackman - Mackman Associates - Alderley Edge 16 March, 2010, 11:22

It is important to clarify that we are talking about three types of financial institutions that will be looked at by the various regulatory bodies: the traditional banks, the new Payment Institutions as defined by the PSD (such as Voice Commerce) and the new lending organisations such as ZOPA. While it certainly seems true that banks will progress at a slower rate than these new competitors due to their scale, complexity and their legacy systems as mentioned in your comment, rather than suggesting that PIs and lending providers such as ZOPA are under-regulated or otherwise, it’s important to observe that all three payment and lending providers are regulated differently, and this will unavoidably impact on their ability to innovate.

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