As Sibos 2020 continues, we look back to some of the predictions and forecasts made in 2010 and pick through what other lessons can be learnt from the post-financial crisis world to inform strategy in the not dissimilar economic environment of today.
Marion King, director of payments at Natwest, tells Finextra Research that before the financial crisis, banks were “striving to be the biggest and they left their customers behind”.
Now, however, she believes customers are placed at the heart of everything banks do, and they have learnt to think and work more creatively in order to serve them.
“If I look at how we reacted to the Covid crisis, we were able to help customers who just rely on cash - be they elderly, be they vulnerable - by partnering with the distribution industry to deliver cash to people’s homes,” she says.
“If I think back ten years ago, a bank just wasn’t agile like that and couldn’t think of creative solutions and quickly implement them, but now we can.” In this series of articles, Finextra Research looks at Capgemini’s 2010 World Payments Report to appraise their accuracy or lack thereof, with insights from expert voices in the payments space.
Prediction - “Banks need to decide to what extent payments are core for their business, since the reality might prompt banks to think far more radically, and perhaps more quickly, than expected, about their payments strategies.”
Ten years ago, according to King, payments were very much a transactional, undifferentiated utility and were mainly a means to an end.
Banks now have a very different position, as shown by the sizeable investments that are made in payments.
She describes payments as “the heartbeat of a bank” as transacting is the one thing that every customer does most days, if not every day.
“We’ve seen payments become high-frequency gateway for propositions to target relationships, data and income,” King says.
“There have been a number of startups that began by offering a pre-paid card, building up their relationship proposition with a smart app, utilising data from that transactional base and then moving forward to banking licences.”
Prediction - “The ‘Wait and See’ approach is passive and could result in the bank progressively losing clients and market share over time. Such an approach could ultimately prove more expensive than making a decision to invest and take proactive governance of this area of business.”
Being passive in the payments area is simply not an option, according to King, with the regulatory agenda alone - Open Banking, PSD2, Confirmation of Payee (CoP), ISO 20022 - demanding a proactive response.
However, banks must avoid being blindsided by regulatory compliance and ensure that significant investment is made in improving the customer experience as well.
“Waiting and seeing will see banks get left behind, as we see new entrants managing the relationship with customers better, which helps sharpen up the focus of the industry,” King says.
“You have to do all the work to remain compliant but, at the same time, utilise that to better serve customers.”
This requires a future-proof infrastructure that embraces the worlds of open banking and new technologies.
Prediction - “Partnerships can support revenue focused strategies, filling the technological gap— and consequently addressing the more onerous customer demands. Insourcing/outsourcing can reduce running and compliance costs, improving efficiency and obtaining scale on specific segments, geographies or services.”
The key to payments is ubiquity, allowing customers to transact seamlessly and safely no matter who they bank with.
In a network industry such as this, banks know that collaborating is a sensible way forward, focusing not only on what needs to be done, but who is best to deliver it. King uses the example of Natwest partnering with Surepay to provide the matching engine for CoP, using skills and experience of firms that had been through the same process in other countries.
“We were able to work with them and introduce them to HMRC to provide the grants needed to respond to Covid,” she says.
“This enabled HMRC to validate who the applicants were far quicker and more securely, making the whole process more seamless, so that’s a great example of how partnerships give you more flexibility in the future.” Natwest CEO Alison Rose is speaking at Sibos 2020 on October 6th. For more info, click here.