I have met several of the leading financial institutions over the past few weeks. Talk often turns to Money and Payments and how rapidly the landscape is changing.
There are many factors for consideration some of which I have included hereunder, there are likely to be winners and losers over the coming years.
Marketplace – EU regulation via PSD2 will come on board in early 2018. Banks and authorised entities are working hard to be compliant but some will struggle to transform this into an opportunity. The use of API’s is commonplace as are the connecting platforms but the promise of Open Banking is the panacea for many and that will determine how market segmentation will operate in the future.
Infrastructure – Clearing and settlement systems currently provide operational stability and efficiency. Expect monumental change to post execution services when common open ledger (blockchain) standards are adopted across the region and smart contracts and cryptography are better understood.
New market entrants N26, Atom and Starling are changing our view of finance whilst providers Circle and Fire have already successfully launched instant payments. Consumers will be spoiled for choice.
Markets – Consumer sentiment and a willingness to embrace new technologies means that people and not just millennials are more demanding. Increased use of mobile through apps and platforms continues to rise and customers make quicker decisions. Increased speed of payment and money transfers will resonate with buyers and this opens the door for new and more opportunistic bank players.
Financial institutions have no option but to keep on top of these factors, in summary they need to:
- Understand the scope of market obligation
- Review the broader digital marketplace
- Look at client behaviour and consumer sentiment for future success
Stephen Sheehan is a graduate of MIT Future Commerce and Fintech and is an international banking specialist assisting Fintech companies through his company www.digitalstate.ie