New Entrants to be Driving Force Behind Payments Innovation in 2011
Ixaris, an electronic payments company, has released a report that identifies the most significant innovations that will change the payments landscape in 2011. The report, ‘Payments Innovation 2011 – The Global Jury Decides’, brings together the expertise of 22 banking innovators and experts from around the globe, drawn from 14 countries across five continents. It focuses on understanding the challenges facing the payments industry and their impact on innovation in the next 12 months.
In 2011, the jury forecasts that new players from diverse industry sectors will have the greatest impact on the payments market, with companies such as Facebook, Apple and telecoms organisations posing a threat to the incumbents. In stark contrast, retail banks are identified as least likely to drive innovation, and are described by one member of the jury as “prisoners of the status quo”.
Pressure from competitors is the number one driver of innovation, compared to other factors such as cost reduction and customer retention. However, the inability to guarantee customer uptake is seen as the biggest barrier to innovation today. In fact, as one juror noted, “the barriers that are set by many banks are impossible to surmount, not even their existing business lines would pass these tests.” As traditional financial institutions are often unwilling to invest in something that doesn’t have a proven business case, this clearly illustrates why new market entrants and technology providers are driving innovation.
John Chaplin, president at Ixaris and chair of the global innovation jury, said: “This report highlights that the tough economic climate has not stifled payments innovation. In fact, there are several notable developments that are rapidly advancing in the industry, from the explosion in mobile applications to the growing focus on open payment platforms. However, increasing competitive pressures mean that organisations with a heritage in payments are now in a precarious position as they attempt to compete with non-traditional payments companies keen to snap up a share of the market.
“Looking ahead, traditional financial institutions cannot afford to rest on their laurels when it comes to innovation. Where possible, they should aim to work with the new wave of entrepreneurs to deliver really meaningful innovation whilst minimising their own reputational risk. In 2011, I expect we’ll start to see more partnerships between financial institutions and new entrants in order to bring innovative new services and products to market,” he added.