28 Mar 2015
(a partial inventory for Issuers)
Payments are normally a very sleepy business which changes at a glacial pace. Rule of thumb has been it takes 20 years for anything truly new to develop (Debit Cards, ATM, NFC, …). All this has changed … as identity, authentication, trust, acceptance, value, regulation, infrastructure, cost of issuance, speed of issuance, consumer mobile preferences, consortiums, standards, bitcoin .. ALL are shifting rapidly. I covered much of this in my January blog Structural Changes in Payments and 4 years ago in Banks Will Win in Payments! … But Which Ones?. With the top 5 structural changes:
- Risk and Identity (Authentication and Authorization)
- Data/Commerce Value
- Consumer Behavior/Trust/Acceptance
- Issuance/Customer Acquisition/HCE
- Regulatory/Rates/Rules (Fees)
- Mobile/Payment in the OS
It’s not just payments that are changing, bank branch footprint and the core deposit account are under threat. Not just pre-paid… companies like TMobile, Wirecard, Vodafone, and even Google are thinking of offering direct deposit and bill pay (See this week’s Recode and Future of Retail Banking: Prepaid?, T-Mobile – Great Move into Banking, )
Before we get into an arcane list of initiatives, let me tell you a few stories on just how bad the situation is.
12 months ago, Chase shows up at Amazon to present their new secret creation: ChaseWallet. The Amazon guys didn’t know before hand what JPM wanted to talk about…. On hearing the opening of the JPM pitch Amazon thinks its some kind of joke (…. listening for the punch line). But Chase was serious..!! the Amazon team is almost rolling in laughter/pity. As opposed to telling them how silly the idea is (Amazon has a little One Click button with 400M+ consumers registered) they ask how this is different than the initiative that Chase Payment Tech is leading to enroll merchants in One Click.. The Chase Senior Exec (consumer side) is silent.. “I’m not aware of that”. Can you believe that largest bank, shows up at the largest online merchant to pitch an idea for a wallet to the company that invented it!? Sorry Chase, but you deserved that… What was once the nation’s leading payment team is now a bit of a joke in the valley. (Chase went to Google with same idea following week).
Jamie Dimon was quoted saying that Google, Apple, … all want to “eat our lunch” in this metaphor I guess consumers are on the menu. As much as I respect Jamie as the best banker on the planet, he continues to miss the consumer view… we are not owned, we migrate to where value is provided. Rather than working to specialize in delivering value to consumer, Consumer Banks tend to work to build higher walls and create rules which work against the specialization. These walls will become their own jail if they fail to focus on value, knowing your customer and specialized risk management.
A flip side story.. ApplePay was a closely held secret (other than my blog). Apple only allowed 9 companies into the tent: 5 Banks, FirstData (and Star), Visa, MA, Amex. Within those companies employees had to sign a strict confidentiality agreement and only 5-15 employees could be made aware (within issuers). I was with 20 of the bank fraud heads 20 days after launch of ApplePay, the guys were telling me how bad the binding process (enrollment fraud) was going to be. Apple wouldn’t respond to banks, networks or anyone.. not by phone, mail. It was a take it or leave it. Thank goodness for Money2020.. helped get bank fraud guys together with Apple Product.. but the path for collaboration was just abysmal (Apple’s fault)
Inventory of Payment Decisions (Bank Issuer)
- Bank/IssuerDebit Card
- Credit Card
- Debit Card
- Token Vaulting
- Private Label
- Private Label
- Bit Coin
- ATM/PIN Debit
- Network Services
- Cross Border
- Money Transfer
- Rules/Rule Changes
- CNP Liability Shift
- Virtual Card
- Digital Wallets
- Debit Processing
- Digital Wallets
- Card Provisioning
- Early Warning
- The Clearing House
- New Initiatives
- Fed Faster Payments
- Structure and Organizational
What is a Bank to do?
How do you Prioritize or Organize in this Chaos?
Step 1 – Admit you have a problem! Then find people that know about it. Look around your organization and find the 5 people that can give an informed view of 50% of the above. If you don’t have them.. you should go get them.
Step 2 – Create Structure. Where Bank enterprise payment strategy is discussed, with a senior exec champion. You need some young payment techies and some old hands in the mix. My blog Need for Bank Payment Counsils provided an overview of the structure and objectives of such an org. CEO should be involved to show importance.
Step 3 – Assess your situation
1) Where is your Revenue today?
2) How do you deliver value in top 5?
3) What are your core Assets? How competitive?
4) What revenue is most at risk?
5) Is there a clear path to win or uncertain future?
Step 4 – Prioritize and create a plan of Action
Step 5 – Assess Partnerships and Assess Impacts. Payments is a networked business. No one can go it alone for long (message to JPM).
Step 6 – Act Quickly. Both Strategically and Opportunistically.
Step 7 – Measure and Adjust. We are moving from 20 year cycles to 12 months. Banks have not run this way before. They must find a way of adapting to the environment.