Thin margins a perennial concern for banks in the payments business. Was then, is now.
Back in February 1995, International Treasurer wrote about how the future of banks in the payments business was bleak.
“Banks may no longer be able to profitably continue their traditional role in the transmission of money. This will have a tremendous effect on the world’s banking systems,” International Treasurer wrote in the February 20 issue of the newsletter.
Twenty years later it’s still a tough business, a loss leader for most if not all banks, with lots of non-bank providers added to the mix. Nonetheless, banks can still continue in the business, perhaps offsetting a portion of the losses generated. According to consultancy Celent, banks will need to think more radically about the payments business, and look for ways to differentiate themselves from the pack. This includes leveraging technology (the cloud particularly) and outsourcing some of the business – as anathema as that may be to some banks.
“Payments have traditionally focused on operational efficiency, yet if everyone focuses on the same thing, it is even harder to differentiate,” wrote Gareth Lodge, Senior Analyst with Celent’s Banking Group and author of a 2013 report on bank payments. “Focusing on a different value discipline may give a bank an edge over other banks.”
This wasn’t too far off the mark of what we wrote in 1995, which indicates what vendors overall should consider: “The opportunities for new [payment] solutions, improving service quality in accounting, and risk management and the changing ownership or control of the services are all fundamental issues, which corporate treasurers would do well to follow closely.”