Empowering transactions: from bank regulation to customer-centric innovation
Regulation has the potential to accelerate the payments innovation sparked by the evolution of internet and mobile technologies. By giving customers the reassurance that payments can be made safely and efficiently, regulation allows providers to develop new and exciting ways to serve customers, writes Marion King, Director of Payments at RBS.
The UK is leading the way. While the Payment Services Directive 2 has yet to be implemented in Europe, the country has already established a Payment Systems Regulator (PSR), introduced on 1 April this year. It means the UK is the only country with an economic regulator for payments, ensuring payments are transparently and securely managed across the whole industry, for new and old players alike.
The PSR will operate in a fertile environment. UK consumers are some of the most open in the world to new ideas. According to research from Enders Analysis and EY, they spent nearly £2,000 a head on e-commerce in 2013, the highest amount in the world. Their total spend of £120 billion represents about a third of the European market.
This means they are also open to new entrants — and the regulators are keen to promote greater competition. Well-known technology giants are all looking to leverage the huge scale of their customer bases by providing payments services and, potentially, generating a new revenue stream.
Banks therefore need to consider the bigger picture as enablers for customers with one major competitive advantage over non-banks: the bank account and the resulting customer relationships.
The bank account is the point where payments come together, from the physical point of sale to direct debits and standing orders. Tech heavyweights such as Apple, Google, Amazon and Alibaba, do not provide bank accounts and they do not provide financial services. They are, however, embedding themselves into the value chain.
Banks will continue to help their customers manage their money and transactions as effectively as possible. The basic principles should be based on flexibility and transparency.
One way forward for banks is to build on the success of frictionless payments, such as one-click, electronic wallets on mobile phones and contactless cards. Customers like these quick and efficient tap-and-go technologies. And they could go further into the realm of real-time financial management — something the tech companies do not currently provide.
The distinction between credit and debit cards will likely become less relevant with new technology. Instead, customers could be given the choice of whether to pay now, pay later or even pay by instalments, be it via a mobile phone, thumbprint or other device.
Their decision should be supported by the provision of real-time financial data to allow them to manage their finances in real time.
To ensure they can make the most of what they offer, banks need to look at the world differently. Payments, alongside advice and lending, are one of the three key things banks do. It is no longer just about providing the plumbing, the back office networks and moving money around, but pulling all three components together to provide customers with the best service as quickly and efficiently as possible.
