Customers are undoubtedly vital to a bank's business as losing customers means losing the potential business they could have brought. As such, banks should look at ways to attract and retain customers, such as offering real-time payment services.
"Banks are at risk of losing the customer relationship if they do not step up their game by offering more real-time payment services," said Massimo Proverbio, Senior Managing Director of Accenture Payment Services and the Global Banking Lead, in an interview at Sibos 2015 in Singapore on Tuesday (13 October 2015).
The dangers are on multiple fronts. As mobile payments increase, revenue opportunities for banks are decreasing. For instance, as much as 30 percent of the revenue from interchange fees - the fee paid between banks for the acceptance of card based transactions -- are threatened by consumers' increasing use of mobile payments, said Proverbio. However, if the customers are using the bank's mobile payment platform, the banks would have at least retained the customer relationship, he added.
Another threat that banks' face is the host of non-traditional competitors that are taking their mobile banking business. Mobile commerce sales are growing at a compound annual rate of 25 percent, with about US$132 billion worth of sales set to take place this year, said Proverbio. While banks would like to capitalise on this by offering their own mobile payment services, consumers are increasingly turning to non-bank apps to pay for their purchases. "[This means that] banks are losing customer interaction, customer insights and branding to third parties, which is dangerous as it will cut into other parts of the banks' potential business opportunities," Proverbio explained.
So what can banks do? "They need to take three steps to defend payments," advised Proverbio. "The first two steps need to be done today -- or yesterday to be honest. They need to become more efficient, which could offset some of the losses on the interchange fee front. They also need to make fundamental changes to their core processes to ensure they can be online, doing real-time payments 24/7, 365 days of the year."
"The third step is that they need to innovate - work with Ripple, for example, to offer new payment options. Or they could provide merchant-base offers and discounts," added Proverbio. These could include incentives such as a price discount if a bank uses a certain phone for payment or a product discount if a customer buys a product at a shop using the bank's mobile payment processes.
Proverbio concluded that at the end of the day, if the banks want to keep their clients, they need to keep their customers happy.