Predictions in Banking and Payments for 2016
It’s that time of year when people are asking me what’s going to happen this year. So with a pile of crystal balls here it is.
2016 will see the very blurry lines between online and offline, card present and not, put pressure on proprietary hardware based payment models as software eats the world and puts it in the cloud. This is going to play out in a two ways.
- Hardware War Fizzles Out – Those that have built businesses based on hardware, stand alone or mobile such as Ingenico, Verifone, Square and PayLeven will all spend hundreds of millions of dollars building card mousetraps. This war will leave a lot of bodies washed up on the shore fighting a turf war that was silly
- Software Wins the Point of Sale: Those that shift the battle line to the software that drives merchant and consumer value and do this in a cloud centric way will build loyalty and margin while the hardware guys engage in a tussle on price, as they always have done. This will impact card schemes as crypto currency, off rails and P2P build momentum, deploy production install and elbow their way into payments. The evidence here is Dell – Swallowed by a services machine, no longer able to compete on price as once the bottom was reached there was nowhere to go. We saw more evidence of that playing out in retail in Australia yesterday as a large electronics (hardware) retailer, Dick Smiths, went to the wall.
2016 will begin to see banks grok mobile. We are glued to our phones and spend most of our time there on social, gaming, news, weather and shopping apps; not banking. To be relevant and compete for attention at the thumb requires much more than boring numbers and charts, hoping that customers get it. This will see a bunch of bankers and data geeks with accounting and finance backgrounds design PFMs with charts up the wazzoo. The customer base will respond with “Huh?” In parallel those that understand the demands of the digerati will begin building next generation, retail and commercial mobile banking experiences aimed at helping banks to compete on purpose; that purpose being to help their customers succeed financially. They will move away from advertising price and make a genuine move towards customer centricity. This shift will not happen in Tier one banks who will continue to focus on operationalising the balance sheet and squeezing out the little guys on price. The second tier will therefore be left with the choice between mergers and acquisition to survive or differentiating based on value – helping customers win.