09 March 2016
Should the old and new worlds compete or cooperate?
To compete or to cooperate? That is the main question of these challenging times for banks and fintechs, where innovation is constantly and radically reshaping the payments industry. It seems that the market is roughly divided by the two forces, but I think that a change of scope is needed to answer the first question. The real question is: how can banks and fintechs deliver better value for customers?
The needs and requirements of the European, but overall global payments market are rapidly evolving. In the payments industry, the market can be roughly divided in two streams.
On the one hand, efficiency, security and stability in the payment industry are more important than ever. These requirements will remain crucial with the next step towards 24/7 instant payments, that need to be embedded in both the back office and the Clearing and Settlement Mechanism (CSM). This is where the more traditional players, who are dealing with the bulk of the transactions, have proven their capability to deal with large-scale processing at the highest possible performance.
A serious competitive threat
On the other hand, the market requires seamless innovations for initiating and accepting transactions with e-payments, e-mandates, e-identity, mobile payments, omni-channel acceptance and XS2A. This is the battlefield where traditional financial institutions are faced with increasing competition from new entrants, who are eager to seize new opportunities. As they don’t have to deal with legacy systems, they are in a better position to quickly respond to shifting needs and can facilitate shorter time to market, thus posing a serious competitive threat for the more traditional players.
The time is now to look at how to combine the strengths of the traditional/old and the new world. The more traditional players have earned the trust of the market, but in many cases lack the flexibility needed to adequately respond to innovative developments. And for the non-bank institutions it’s exactly the opposite. So the question is: where to compete, and where to cooperate?
Accomplish more by working together
In my opinion, traditional payment providers and fintechs can accomplish more when they are cooperating instead of competing. Fintechs can collaborate with banks and payment providers to help them successfully move into the digital payments market. In turn, the traditional players can offer the fintech companies additional security through their key infrastructure and regulation, offering added peace of mind to their customers, while dragging the payments process into the future.
- Business developments