The opportunity to capitalize on the explosive growth in payments as the industry steadily moves to electronic and mobile platforms is attracting many new players and business models, but the winners ultimately will be those who can leverage payments on a massive scale, according to Citigroup Inc.’s top enterprise executive.
In the keynote speech on April 28 at the 23rd Annual Card Forum and Expo sponsored by PaymentsSource and the American Banker, Paul Galant, Citi’s chief executive officer for global enterprise payments, told attendees that succeeding in the rapidly changing ecosystem of digital payments is “not a niche play,” despite the plethora of startups and new entrants touting new mobile and alternative payment technologies.
For every 1% of transactions that move from cash and checks to electronic platforms such as cards, online or mobile payments, forecasts show that the revenue pool available to existing U.S. banks could increase by some $30 billion, Galant said. “That is revenue that will disproportionately go to larger companies that have the scale to take advantage of that shift,” he added.
In order to capture that growth, payments industry players must heed three major transformative forces: ubiquitous connectivity among consumers, networks and merchants through Internet and mobile devices; the opportunity to engage customers on a personal level within an expanding array of payments options, and massive global economic growth, including in emerging economies within the U.S. and abroad, Galant said.
These factors will drive banks within the next few years to adopt radically different business models than the ones used today, Galant said.
But even banks that are succeeding today with large-scale operations “cannot go it alone” in the future payments marketplace, Galant said, adding that banks must form strategic partnerships with software-platform developers, hardware manufacturers and other types of consumer-services networks to help them engage customers on a more personal level.
“Companies like Apple, Google and Facebook are really gifted at engaging with consumers, and some of those same consumers want to engage with (banks),” Galant said. “But we (banks) have a long way to go; our rules of the road do not resemble those that consumers are most excited about,” he added, alluding to banks’ rigid structures, fees and requirements to adhere to banking regulations.
Choosing the right partners for software-development and access to consumer networks will be far more important than betting on specific types of payment hardware options, Galant also suggested.
“There are many different business models (being considered). I don’t care if payments data is stored in a cloud, on a SIM card or on some other device... I don’t care if (a payment is initiated via) NFC, short-message code or another type of bar code. We should make every one of these available. Hardware is not going to drive consumer payments,” Galant said.
Regardless of the specific payments technology used, the goal for industry players will be to enable a consumer to walk into a store or go online and make shopping and payment choices around individual preferences “as easily as changing a channel or making a phone call,” so that the payments process delivers “something that gives (the consumer) instant gratification and saves them real money,” Galant said.
When payments industry players succeed at providing such a customized, flexible payments experience to consumers on a mass scale, “adoption is likely going to be faster than anything we’ve seen before,” he said.
What do you think about this? Send us your feedback.
