The long-established payments infrastructures of the world are immensely powerful beasts and seem to have got their strategy right. As a platform they appear to be designed to stem any immediate threat from new entrants by being both awkward and costly to work with. These infrastructure players have a formidable arsenal of weapons to protect their domain, ranging from the huge customer bases they possess, through to very powerful positions politically at country, if not regional levels.
Even with all this there are still threats to their business but, if life starts to get tough as a last resort the big guys can simply buy most of the new entrants, and they do!
On the Banking side, the reality is that banks are far more vulnerable than their infrastructure siblings. They have severely struggled these last few years to survive but in the main they have made it through. However, they didn’t survive because they were winning businesses, they survived because the global financial system around the world had to survive! The Banking system is so huge, so complex, so inter-twined that nobody had any idea what would happen if it failed. This frightened everybody to death and was borne out by the multilateral government and international fund interventions to avert Bank failures.
In the new era of Banking regulation it is conceivable that any ‘threatened’ traditional banks might lobby for close regulatory scrutiny of new players to avoid any further financial market pressures, thereby slowing down their progress.
Whether you believe the new guys are capable of breaking through these barriers facing them or not, it is my observation that the bigger banks are now firmly getting back on track and focusing on expanding and operating their core business, rather than continuing to be distracted by the threats of these new market entrants.
Of course the technologies and consumer behaviours are changing and the momentum here will continue, but the better banks will adapt and absorb/actively respond to these demands. I just don’t believe it will be ‘a fast revolution’ with all-change on the players. You only have to look at the EMV ‘payments revolution’ – circa 15 years and counting, to see that we work in an industry that has a very measured approach.
The good news, new and old will co-exist for a good time yet and that will keep us all very busy in the years ahead.