Tuesday, 04 February 2020 10:35

Banks risk loss of US$3 billion in payments revenue to digital payments growth, non-bank competitors Featured

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Australian banks are at risk of losing US$3 billion in payments revenue by 2025 due to the growth of digital payments and competition from non-banks, according to a new research report.

The new research by professional services firm Accenture reveals that up to 13.7% of payments revenue could be lost, with payments revenue in Australia likely grow at an annual rate of 3.7% by 2025 (from US$18.7 billion in 2019 to more than US$23 billion by 2025) - and “only the banks that change their business models and adopt the latest technologies and focus on providing added value services will capture a share of this growth”.

The research is complemented by a survey of 240 payments executives at banks across 22 countries to determine how they plan to mitigate and capitalise on the disruption in payments to grow customer loyalty, revenues and profitability, including in Australia.

The report is based on a revenue risk analysis model that Accenture says it developed to measure trends in how consumers pay and projected changes in merchant behaviour, technology and regulation.

The Australian research also highlights that:

  • Free payments will put 8.3% of payments revenue at risk in Australia
  • Competition from non-banks in invisible payments — where payments are completed in a ‘virtual wallet’ on a mobile app or device — will put 4.8% of bank revenues at risk
  • Card displacement by instant payments, where funds are settled and transferred in real-time and banks make little to no interest, is projected to put an additional 0.6% of payment revenues at risk.

Alex Trott, who leads Accenture’s banking practice in Australia and New Zealandsaid: “The world of instant, invisible and free payments is here to stay, squeezing margins further on a business that was already feeling a lot of pressure from new competition”.

“The payments market is booming and there’s a multi-billion-dollar opportunity for those willing to invest in new technologies and business models based on the new digital landscape ahead. Banks lagging behind risk being relegated to the plumbing of payments,” Trott said.

“The digital transformation underway in payments will have a deep impact on all industry players and banks will have to fundamentally change how they think about their revenue in this area.

“The billions of dollars banks previously earned from some of these channels will dry up, so they’ll need to develop new digital business models to compete in this new era.

”These models must be developed with security, trust and governance at the core, bringing together human and machine to ensure the integrity and safety of high speed and continuous payment flows.”

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Peter Dinham

Peter Dinham - retired and is a "volunteer" writer for iTWire. He is a veteran journalist and corporate communications consultant. He has worked as a journalist in all forms of media – newspapers/magazines, radio, television, press agency and now, online – including with the Canberra Times, The Examiner (Tasmania), the ABC and AAP-Reuters. As a freelance journalist he also had articles published in Australian and overseas magazines. He worked in the corporate communications/public relations sector, in-house with an airline, and as a senior executive in Australia of the world’s largest communications consultancy, Burson-Marsteller. He also ran his own communications consultancy and was a co-founder in Australia of the global photographic agency, the Image Bank (now Getty Images).

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