Banks' Payments Businesses Are Facing New and Tall Challenges - Seite 2

Retail Payments in Europe. The report says that four transformational forces are affecting the European payments landscape: heterogeneous growth patterns, digital innovation, evolving merchant payments needs, and widespread M&A activity. In addition, regulation continues to take a toll. The cap on interchange rates will have a significant negative impact on issuer economics in Europe, with issuers standing to lose roughly EUR 8 billion per year (beginning in 2015) out of a pool of EUR 60 billion in card revenues. In addition, the revenue challenges facing issuing banks will require them to sharpen their pricing models on both current accounts and payments transactions as part of a broader effort to reshape their strategic priorities. They will also need to review their operating models.

Retail Payments in North America. After several years of being battered by regulatory measures, retail payments revenues in North America (the United States and Canada) rebounded to $222 billion in 2013, up 4 percent from 2012, representing 30 percent of global retail-payments revenues. Transaction revenues accounted for $104 billion, credit-card net interest income and fees accounted for $93 billion, and demand-deposit products represented $25 billion. Retail payments revenues in North America are expected to reach $323 billion in 2023, with account revenues showing the strongest growth (6 percent annually), followed by transaction revenues (5 percent). The report says that the principal opportunities for banks lie in two areas: leveraging new digital technologies to deepen customer relationships by way of the checking or demand deposit account (DDA), and forging new and innovative strategies in credit cards. 

Retail Payments in RDEs. According to the report, despite the high-growth environment and the fact that the payments business is still very profitable in most RDEs -- featuring substantial margins for acquirers, issuers, and card schemes -- the outlook is not all blue skies. Prospects for incumbent players are clouded by falling interest rates, declining merchant discount rates and interchange (in response to regulatory pressure), and the emergence of new competitors. One way that banks and other payment institutions can fight back is by redoubling their efforts to increase customer engagement, achieved by motivating customers to direct-deposit their paychecks and to routinely use their bank's noncash payments products, especially cards.