In April 2019, The Barton Partnership hosted a roundtable for senior Strategy stakeholders within the Payments space. The evening was a great success, with attendees from companies such as Visa, Mastercard, TSB, Barclays and American Express. We have summarised the key topics that were discussed throughout the evening below.
- Consulting firms will certainly have a part to play, but depth of knowledge from people within internal strategy teams in the payments industry is irreplaceable.
- It was deemed strategy teams are best developed in-house, with people joining based on their core skills and attributes, while learning the industry at the coal face.
- Independent consulting has proved to be a useful resource as functions grow. There has been a sharp uptake in the need for consultants with additional industry skills who can support projects in periods of surge. This model allows the business to adopt a more nimble resourcing model.
- Apple, Facebook and various new fintech businesses will all impact aspects of the ecosystem as they create new competition.
- But Amazon were generally perceived as the biggest threat to the industry. This was put down to their ability to impact every stage of the payments value chain.
- It was also noted that fintechs are able to release a far higher number of new initiatives in a given year compared to a large bank. But despite the large number of fintech initiatives a high percentage are likely to fail with just a few creating a lasting impact.
- A lot was discussed around interchange and why, given it accounts for 5-7% revenue, it was given too large a focus.
- There was a consensus that Asia, ahead of the UK, US and Europe is now the benchmark for understanding customer journey. This was deemed in part due to a need to evolve in response to AliPay. The ability to understand customer journey and alleviate pain points has set them apart from the rest of the World.
Security and Fraud
- Improved customer authentication could reduce the need for the insurance component of a large card issuer. It will be hard for these businesses to justify their processing expenses.
- In some parts of the World (such as The Netherlands) there are already local based systems with improved verification and reduced costs to merchants.
- The relevance for insurance on day-to-day transactions for products that change hand instantly was also debated.
- It was also discussed that Authentication will never go to 100% as fraudsters will always find a weak link somewhere due to sophisticated and innovative methods.
- There was a general acceptance that 0% fraud was also unattractive, as it would imply no new growth or innovation.
- Moral hazard is also becoming an increasing issue for a number of businesses, as public policy is increasingly absolving customers of any liability in fraud cases.
- Cards are not going anyway in the immediate future, they are too engrained in our lives at the moment. It was also noted that Apple’s first move into the space is indeed, a card!
- There were numerous points that the real value add for companies should be around business liquidity. The ability to have more working capital through T+0, T+1 etc has a huge impact on businesses. A working example given was the speed Uber gets payments to its drivers which allows them to buy fuel less frequently and perform more journeys.