Payments: Bank’s Revenues Fall 7%
- According to a study conducted by the BCG, bank revenues derived from retail payments dropped 7% per year on average between end 2008 and end 2010 worldwide. It accounts for a third to a half of their overall revenues.
- In Europe, this figure fell from 173 to 136 billion dollars. However, Eastern European countries still retain a growth potential likely to provide for the adjustments required by increasing competition in the Western part.
- In the United States, 2011 revenues should increase but still remain 6% below their 2007 record level. This situation illustrates the impact of regulatory evolutions in 2010: Credit Card Accountability, Responsibility, and Disclosure Act in May, DURBIN Amendment in July (See previous watches). The BCG deems that 25 billion dollars would eventually be regulated away. Customers should be significantly put back at the heart of the current account relation and card strategy be rethought. Banks ought to keep up with cutting edge online financial services.
- In Asia Pacific, highly profitable perspectives are sustained by the emergence of a digital economy derived from the growing urbanisation.
- By 2020, the retail payment market could generate 492 billion dollars annual sales. In addition, wholesale payments would contribute to the growth of world banking revenues at 9% per year, with an assessed total of 119 billion dollars in 2020. In order to achieve this, transaction banking activities must more and more be considered as a whole.
- According to this study, the Europe of payments will absorb a 21% decrease in annual sales. Competition having intensified with deregulation and the launch of SEPA, a fall in revenues was expected –and had, indeed, been predicted as early as the mid 2000s. It is however mostly due to a drawback in consumption, consequent to the 2008 crisis, as well as to the commercial aggressiveness of new entrants’.
- Not surprisingly, the BCG analysis locates the largest growth potentials in developing economies. Technological and commercial innovations make it possible to bring transactions that used to be informal into the financial system. These evolutions explain why vigilant players should focus on innovation in the field of mobile communications and on recent partnerships in this industry. Telecom more and more matters in payments.
- In the United States, a contrasted impact results from the regulatory hardening in the card industry. The regulator, which used to be very liberal before 2010, is now more interventionist than its European counterparts –a seldom situation indeed. Nevertheless, revenues decreased only of a total 6% in the US over four years, when they fell three times more in Europe.
- To conclude, a marketing alternative already exists for prepaid solutions: see “Prepaid solutions pushed by the Durbin Amendment” in the Regulatory section.
See May and July 2010 Indights as well as our reports on Nokia and Microsoft and on prepaid solutions in this issue