Public endorsement of the British banking system has certainly taken a hit in the last few years. The crisis of 2008 has eroded confidence in the traditional outfits, creating an opportunity for start-ups and traditional players alike to introduce alternative
services to the market. The payments marketplace is currently experiencing a high level of innovation. With mobile and internet becoming leading channels for positive customer experiences, it is unsurprising that banks are broadening their front-end offerings,
especially considering the lucrative rewards gained if these solutions are leveraged in the right way.
It is clear that the payments landscape is undergoing a serious period of inflection, from a technology and regulatory perspective. Regulatory initiatives are playing a significant role in boosting the potential of new market entrants in payments, with innovation
in the financial services sector being shaped by compliance. The stone cold message here is that regulations will not go away, and nor should they, therefore the smartest financial institutions are now using the changes that have been forced by compliance
to drive innovation and improve margins.
What’s more, the numerous technological advancements currently experienced in the payments industry offer endless opportunities for financial players that are keen to offer value-add services to customers. For example, being constantly connected to an online
and mobile banking platform is a thoroughfare of customer service opportunity. The range of services coming to fruition is reflected in daily funding announcements for payment start-ups, such as Stripe, which recently closed a $20 million funding round and
Square which hit a valuation of $3.25 billion following its latest round.
The need to satisfy disloyal customers is increasing as customer expectations are changing. Nowadays, ATM withdrawals and foreign transactions remain some of the few modes of communication which help bolster in-branch visitor numbers. Therefore banks need
additional insight into consumer behaviour from alternative channels – hence payments can take centre-stage - creating opportunities to up-sell and cross-sell to new market segments. For example, banks can use prepaid cards to monitor spending habits – using
data to assign customers into segments which are then used to help shape marketing and advertising strategies for other products and services.
When combined with the opportunity to offer alternative payments as a value-add service, technological and regulatory change can increase customer loyalty, brand awareness and provide a boost to revenues.
The payments space is set to grow dramatically. Keen industry evangelists have their eyes firmly set on making payments more seamless and we are already witnessing these innovations via NFC implementations, for example. What’s more, questions remain as to
what chance the new market entrants have to dominate this market given the monopoly that banks currently have. However, if banks ignore market forces and fail to take advantage of alternative solutions to stay ahead of the game, new market entrants will surely
leave them behind.