Payments – the impossible dream for Banks?
Payments have been bandied around as the next big thing at Banks, and several large Banks have appointed Payments Heads.
Summary: The payments person is embedded in the technology side of the business, and is restricted to viewing their mnadate from that perspective.
I have been studying reports from Deloitte in their financial services research area. The theme in this quote is agonisingly true about most things in Banks, and certainly in payments.
At most banks, payments processes are separated and siloed by product—credit cards, debit cards, checks, ACH transactions, and wire transfers are each supported by independent databases and back-end settlement networks.
Why are payments important? As I stated earlier, when we look at payments not as technology or standards, but as customer experience it becomes self evident why they matter.
Payments come across as obscure to many, but if we think of them not as SEPA, or as interchange, but as customer experience, the complexity falls away. If ever anything is crying for innovation it has to be payments.
Briefly, my earlier point was that customers have shifted to self service. At a high level, self service allows two types of financial activity … view balances, or move money. Moving money is payments. So why are Banks insisting on putting customers through payment hell! It is about to get worse in Canada when the technology solution of chip cards hits. [Look for 25-50% longer times at the ATM] Certainly something has to be done about the organised crime fraud at ATM’s but this will not improve the customer experience. Where is the opposing benefit that will make me want to have a chip card?
Banks and their credit card affiliates have made the payment mechanisms that customers must use, very complicated, and in fact they are driven by Visa and MasterCard to a large extent.
Yet Paypal shifts billions daily using the same Banking system that Banks provide. Paypal are [ last I heard ] hooked up to the ACH at Wells Fargo, and quietly disintermediating all the Banks using their own systems! I am not sure who Paypal use in Canada, but one of the Banks is likely involved.
Relevance to Bankwatch:
When it comes to payments Banks are giving away the shop yet not levering their own systems themselves. When Paypal moves money using ACH/ EFT those funds are held to 48 hours before being cleared. In Canada, the Banks set up EMT (Electronic Money Transfer using a backend based on email and password methology) and that offerred instant payments. That was a new and additional infrastructure.
Why not lever your own systems, and out Paypal within instant ACH/ EFT? Yes there are regulations and rules, but if Paypal can do it on your own backbone, can’t you improve on it?
Gavin talks about Banks getting left behind