The world of banking and payments is changing fast and 2020 will likely see the pace of change ramp up yet again. And, according to Capgemini Executive Vice President of banking and capital markets, Sankar Krishnan, the retail payments space will be further disrupted by big tech.
However, the increased interest shown by the likes of Google and Apple in the payments space will likely see banks cement their place as industrial utilities.
“I think we are going to see in 2020 more big tech involvement in banking and payments. And banks will continue to be industrial utilities like they always have been,” Krishnan said. “Their status as industry and utilities leaders is getting even more prominent as the front-end customer experience models are all going to be run by big tech, because of the fact that they have better technology, better personalisation in terms of what works for each consumer.
“Because someone like Google, like Apple has got a track record in terms of customer preferences, customer likes on the App Store, I think we are going to see more personalisation of payments.”
Down with the kids
Krishnan believed Big tech firms’ interest in banking stemmed from being part of the “ecosystem of everybody”, wanting to take advantage of their uniquely strong position with younger customers in particular.
“They are seeing hundreds of millions of people who are going to be banking customers soon, in the next three to five years. All of them are using some type of GAFA [Google, Apple, Facebook, Amazon] product. That GAFA product use has given them a huge strategic advantage to personalise the experience.”
Capgemini’s executive VP also suggested this was part of a move to monetise the data big tech firms had managed to amass.
“I think their ability to harness data and process it and personalise it is a thing of the past. I think they’re going to monetise what they have already built,” he said.
In addition, Krishnan saw a lot of similarities between the current scenario and the rise of telecommunications firms in 1980’s and 1990’s.
“This is very similar to the telco’s who were saying ‘look, I have hundreds of millions of customers, now why the hell should the customer cross the road and go to a bank for a different transaction?’ That’s what they used to say in the 80’s and 90’s and now it’s all mobile wallets.
“So, just like telecoms’ forays into banking, I think big tech is getting the feeling that they want a share of the pie,” Krishnan said.
Whereas in the past, big tech moves into banking had limited success due to a number of regulatory issues, Krishnan believed they now had developed a suitable collaboration with banks to make it work.
“Now they have come up with a hybrid model where the personalisation, the data, the better tech experience is going to be done by the big techs. But everything else that involves regulation – AML, KYC, limit monitoring, card processing – all of those traditional banking back-office services are going to be done by banks.
“I think it’s a win-win for everyone. Consumers get a better product, consumers get a cheaper product, big tech is able to get some serious revenues based on the billions of dollars’ worth of customers, and banks are strengthening their roles as an industrial utility,” he added.
Open Banking to mean everyone wins
Krishnan also predicted that Open Banking would begin to make the sort of impact that has long been expected of it in 2020. However, he said that it was not necessarily about making money but about providing better solutions.
“In the old days before Open Banking became relevant, everyone had to go and reinvent themselves and spend billions of dollars on technology to get to a better place.
“But the good thing with Open Banking (with APIs for example) is that through this, one is able to leverage technologies better and get to a better state, spending a lot less. Because you can look around, you can look for the best product. Then using APIs, you’re able to configure it, whereas before a lot of the traditional banks were built on monolithic code,” he said.
The “victory”, according to Krishnan, was not just for the banks who could save money on the cost of implementing new technology, but for the consumer as prices begin to drop, while companies that were utilising things like API technology were developing a new business line.
Ultimately though, Krishnan saw Open Banking as a tool that will “ensure a lot more collaboration happens” throughout the payments sector.
2020 then, looks set to see more collaboration and a lot more of big tech.