Banks need to transform their businesses

Piyush Singh, Managing Director, Financial Services Business, Accenture

We all know that customers are demanding more services, at all times, instantaneously and at the best price — think about how we book transportation or entertainment tickets these days. When it doesn't work, we are annoyed.

At the heart of this digital revolution are payments. Banks were initially playing ostrich: hiding their heads in the sand, not admitting that all these "customers" were "their customers".

Finally, banks are moving out of this denial phase and accepting that everyone who demands a new service is in effect demanding a new banking service too. Payments, after all, are undergoing a major transformation. Mobile commerce sales are growing at a compound annual rate of 25 percent. Accenture forecasts that in Europe and the U.S. alone mobile sales of about US$132 billion will take place in 2015.

That is a sizeable chunk of change that obviously banks want to retain — and make sure their customers are using their services for payments rather than yielding it to competing players such as Alipay in China and Paytm in India.

While these two may be best known, they are by no means the only non-traditional competitors in Asia-Pacific threatening to take a bite out banks' bottom lines. All one needs to do is look at the fintech investments in the region to see emerging competitive threats.

In Japan, Exchange Corporation, a new card-less e-commerce payment service for merchants that allows consumers to purchase products online using only their mobile phone number and email address, raised money to expand its business this year. In India, One MobiKwik Systems, a mobile wallet company; Ezetap, a mobile payments company; and Mswipe Technologies, a payments company; all raised funding this year to build their businesses. Meanwhile, regulators across the region are actually working to blur the lines between the traditional and non-traditional players — the award of payment bank licenses in India is one such move.

But it's more than just new payments providers cutting in on banks' turf that hurts banks. As mobile payments increase, revenue opportunities for banks are decreasing because of reduced use of credit cards. Interchange fees — the fees paid between banks for the acceptance of card-based transactions — are threatened. As much as 30 percent of those fees could be at risk.

As a result, banks are at a point of inflection. They need to think outside of the box to re-invent their businesses. Banks cannot simply look at traditional customer experiences and tweak their processes to address a change here or there; they need to redefine the model itself. If a taxi app can do a payment in one step; at a bare minimum a bank has to be able to do it too. It's no more about look and feel only. It is about redefining the banking experience so it is more in line with the business models of the new ecosystem partners that we're all embracing.

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