By Tommy Wilkes
LONDON, Sept 16 (Reuters) - Banks are set to miss out on as
much as $280 billion in revenue from their payments operations
by 2025, as new start-ups muscle in and more of the business of
sending money to individuals and companies becomes instant and
free, according to a new report.
The global payments business, which covers anything from
card payments to wiring money overseas, is dominated by banks
and this year was worth around $1.5 trillion, professional
services firm Accenture said in a report published on Monday.
That is expected to grow to $2 trillion globally by 2025 but
banks are likely to lose out on $280 billion, or 15% of their
global payments revenues, Accenture estimates.
Banks face rising competition from tech start-ups like
Silicon Valley payment providers Stripe and Square, as well as
technology platform PayPal, and the likes of
London-based TransferWise that offer foreign exchange payments
to retail and small business customers with lower fees.
More payments are becoming instant - removing the need for
credit cards that earn banks revenue - and they will
increasingly be made directly to the end merchant using new
technology, Accenture said. More competition also means a
squeeze on margins and accelerates the trend towards free
payments.
"Rather than being at the forefront of the new wave of the
booming payments market, banks are feeling the heat from new
competition and seeing their margins squeezed," said Gareth
Wilson, head of Accenture's global payments team.
"We face an inevitable world of instant, invisible and free
payments, which spells trouble for banks that don't want to be
relegated to the plumbing of payments."
Accenture said it had examined trends in how consumers pay
and projected changes in the future behaviour of payments
providers, technology and regulation to arrive at its forecasts
on the likely loss of revenue for banks.
It estimated that free payments would put 8% of banks'
payment revenue at risk. A further 3.9% is at risk from non-bank
rivals offering "invisible payments", while instant payments
could take another 2.7% of revenues.
More than two-thirds of banking executives surveyed by
Accenture agreed that payments were becoming free.
"The digital boom will mean banks have to fundamentally
change the way they think about their revenue composition," said
Alan McIntyre, who leads Accenture's banking practice.
"Channels that once made the banks billions of dollars will
cease to exist," McIntyre said, adding that lenders needed to
build new digital business models, with "one-click payments the
new norm."
(Editing by Toby Chopra)