UK banks could be poised to lose up to 43% of their retail payments based revenues by 2020 as the revised Payment Services Directive accelerates advancements in e-commerce and contactless technology, according to data compiled by Accenture.
Set for introduction in early 2018, the revised Directive, PSD2, will usher in new forms of payment institutions, introduce new interaction models, and mandate the opening of banks’ payment and bank account systems through application programming interfaces (APIs) to third parties.
With retailers demanding alternatives to the card networks and e-commerce and contactless transactions set to shoot up from 18% of the market to cover approximately half of all UK shopping spend, the nation's banks are being pushed to a "decision tipping point", says Accenture.
Those that choose merely to opt for minimum compliance with the new rules and seek to monetise their investment in API access stand to lose the most, says Accenture.
The consultancy estimates that the new new breed of payment initiation service providers will erode 33% of online debit card transaction volumes and 10% of online credit card transaction volumes resulting in a total market share of 16% of online retail payment volume by 2020. Taking the UK as an example, this would result in the loss of over £1.45bn of card transaction revenues between 2017 and 2020 - money that was previously captured by the banks and card networks.
Banks must think strategically if they are to see off this threat - which accounts for two-three percent of total industry revenue - by embracing the changes as an opportunity to provide new products and services and expand the payments ecosystem and aggregation of value, states the consultancy.