“Banks are afraid of Google & Co,” wrote “Die Welt” in July 2013. Francisco Gonzalez, Chairman and CEO of BBVA Group, goes a step further, saying in December 2013: “Banks must become like Google & Co.” (Financial Times). Where do such statements come from? And what about them?
With regard to payment traffic, it is undisputed that banking and competition are in a state of upheaval. “The rapid development of web-based technologies poses major challenges for traditional banks, especially in the areas of deposits and payment transactions,” Deutsche Bank Research noted last year. But what does this mean for banks and their payment transactions? How vulnerable is the existing business model? What is the right payment transaction strategy? And which technologies will have to be supported in the future to meet the increasing pressure?
Just creating new products is not enough as an answer. The considerations must go deeper and take into account technical possibilities as well as changed user behaviour. Tighter regulation of payment traffic must also be taken into account. But what demands does this place on strategic orientation and implementation in IT, organisation and processes?
KPMG helps banks engaging in payment transactions with the core issues of today and tomorrow:
- Business model and organisation: Payment transactions today are subject to various influences: Innovation push through mobile payments, new market participants and changes in customer behaviour. The monopoly of the banks is beginning to crumble. The challenge is to develop new business models and sustainable concepts to strengthen the future competitive position.
- Early regulatory indication and implementation: Regulation of payment transactions has increased in the recent past and will continue to influence the development of the market in the coming years. In view of the multitude of regulatory requirements, banks should keep an eye on issues such as future product and service offerings and IT strategy.
- Choosing the right platform strategy: Payment transactions are in a state of technological upheaval. When developing new customer services or new products, the question arises as to how these are integrated on the system side. Banks that further develop their payment transaction processes through efficient and cost-effective IT solutions ensure the long-term success of their business model.
- Payment transaction system and provider selection: Outsourcing or insourcing? IT provider or business process provider? Self-development or standard software? No matter which business and IT strategy is chosen for payment transactions, the right choice of system and provider is an essential success factor for achieving the set goals.
- Implementation of payment transaction solutions: Unclear requirements, insufficient project planning and a lack of project management experience often lead to projects failing. In order to successfully introduce a payment system, market-tested tools and methods of requirement, testing and project management must be used across the board.
- Intraday liquidity risk and timing of payments: With BCBS 248, the exact timing of payment execution is moving into the focus of bank supervisors. The number of time-critical payments, also due to the increased use of central counterparties, is rising continuously. As a result, the timing of payments significantly influences liquidity risk, operational risk and the costs of executing payments and holding liquidity buffers.
Partner, Financial Services
KPMG AG Wirtschaftsprüfungsgesellschaft