A new report from UK-based Logica and economist Roger Bootle finds that the existing payments infrastructure is failing to keep pace with technological innovation, resulting in a significant brake on economic growth, and opening the way for new competitors to move in on banks' core payments territory.
"The existing payments infrastructure is unnecessarily slow, expensive and inflexible. Improvements to the speed and efficiency of the current system could unlock value to the tune of a staggering 1 to 1.5 per cent of GDP," says Eddy Collier, chief executive officer, Logica Consulting, the management consultancy arm of Logica.
Domestic and international payment infrastructures are not able to support the low cost, fast, innovative services demanded in today's markets, states the report. Unless reform is forthcoming, banks will lose a part of their core revenues to new entrants. New competitors include mobile operators set on securing as much of the mobile commerce value chain as possible.
Furthermore, the report notes that lengthy delays in the payments business no longer need be the norm. The new systems will allow ground breaking developments such as interest accrual by the hour or minute and instantaneous trading and settlement.
The study acknowledges that there will be a growing role for payment users to exploit fully digital monies that could become the universally accepted means of exchange. However, such currencies will not pose a threat to national currencies, says Roger Bootle, managing director of independent economic consultancy Capital Economics. "While a number of new currencies may exist to allow consumers to make small-value online payments, these currencies will remain fully backed by government money, and prices and contracts throughout the economy will continue to be quoted in the existing national currencies," he asserts.
"Our intention in embarking on this research was to see whether the tide was turning in favour of users of payment systems", says Collier. "We have found that heightened competition, new technology advances and legislative pressure is providing the conditions where change will happen swiftly and decisively. Although the route may be tortuous, consumers and corporations will enjoy a wave of reform in the speed and cost of moving money."