Amsterdam, 23rd September 2015
Payments Disrupted
Open forum discussion
© 2015 Deloitte The Netherlands
Open forum discussion
Agenda
Pay ments disrupted | The emerging challenge f or European retail banks1
15:15 Welcome by Timo Span
15:25 Presentation Payments Disrupted report by Ian Foottit, partner Deloitte UK
16:00 Response by Eric Tak, Global Head of Card Solutions, ING Commercial Banking
16:30 Discussion, facilitated by Roeland Assenberg van Eysden and Edgar Mendelsohn
17:25 Wrap up by Timo Span
17:30 Drinks
© 2015 Deloitte The Netherlands
Agenda
Pay ments disrupted | The emerging challenge f or European retail banks2
15:15 Welcome by Timo Span
15:25 Presentation Payments Disrupted report by Ian Foottit, partner Deloitte UK
16:00 Response by Eric Tak, Global Head of Card Solutions, ING Commercial Banking
16:30 Discussion, facilitated by Roeland Assenberg van Eysden and Edgar Mendelsohn
17:25 Wrap up by Timo Span
17:30 Drinks
Payments disrupted
The emerging
challenge for
European retail
banks
Private and confidential
September 2015
1. The status quo is under threat
2. Regulation is acting as a key enabler
3. The market is primed for a wave of technology-enabled
innovation
4. Banks will face a challenge to grow their payments revenues
Key messages
Payments disrupted | The emerging challenge for European retail banks
The status quo is under threat
Payments disrupted | The emerging challenge for European retail banks5
Forces disrupting European banks are most acute in
payments, threatening banks’ hegemony
Payments disrupted | The emerging challenge for European retail banks 6
Source: Deloitte analysis
Payments are a key revenue stream – retail payments
expected to generate c.€128bn in 2015
Payments disrupted | The emerging challenge for European retail banks 7
Source: ECB, national central banks, Deloitte analysis
EU bank revenues form payments, 2015
Regulation is acting as a key enabler
Payments disrupted | The emerging challenge for European retail banks8
Direct impact of regulatory change on payments
revenues is modest, offset by volume growth
Payments disrupted | The emerging challenge for European retail banks 9
Regulatory impact on bank payments-related revenues in seven major EU markets
€bn
Source: Deloitte analysis
Of potentially greater importance are EU regulators’
actions to open up payments to greater competition
Payments disrupted | The emerging challenge for European retail banks 10
Source: Deloitte analysis
Payments leaders are relaxed about the prospect of
more non-bank competition
Payments disrupted | The emerging challenge for European retail banks 11
Expected impact of increased competition on banks’ payments revenues
Percentage of respondents choosing a level of impact
Source: Deloitte analysis, Interviews with 24 European payments experts, March to May 2015
The market is primed for a wave of technology-enabled innovation
Payments disrupted | The emerging challenge for European retail banks12
Enabling contactless technology is becoming firmly
established
Payments disrupted | The emerging challenge for European retail banks 13
Number of contactless transactions in the UK
Million, Dec’13 – Jun’15
The rapid growth in remote – or eCommerce –
transactions is forecast to continue
Payments disrupted | The emerging challenge for European retail banks 14
UK online retail sales
£bn, 2009 – 2019F
• Click and collect
• Smartphones enabling on-the-go shopping
• In-app purchases
• Etc.
Drivers of future growth: convenience
Source: Mintel
Fintech investment is forecast to grow massively
Payments disrupted | The emerging challenge for European retail banks 15
Total fintech investment
$bn, 2008 – 2020F
Source: Deloitte analysis, MarketResearch.com
Historically, payments have been the most popular
destination
16
Share of global fintech deal volumes by category
2008 – 2013
Source: Deloitte analysis, Information Venture Partners
Payments disrupted | The emerging challenge for European retail banks
Banks will face a challenge to grow their payments revenues
Payments disrupted | The emerging challenge for European retail banks17
Our house view is that software-initiation of retail
payments is likely to become the dominant model
Payments disrupted | The emerging challenge for European retail banks 18
(1) Spend value is total electronic payments marketSource: Deloitte analysis
UK retail payments by initiation method
£bn, 2015 – 2030F
Impact on banks depends on customer appetite to adopt
non-bank models and regulatory willingness to enforce
openness
Payments disrupted | The emerging challenge for European retail banks 19
Alternative emerging payments landscapes
Banks are pursuing a variety of responses – industry
collaboration is the dominant strategy
20
Preferred strategic responses for banks in the face of increased non-bank competition
% of respondents choosing each strategic option
Note: Respondents could choose more than one optionSource: Deloitte analysis, Interviews with 24 European payments experts, March to May 2015
Payments disrupted | The emerging challenge for European retail banks
Our view is that banks will lose their pre-eminent position
in the payments value chain
Payments disrupted | The emerging challenge for European retail banks
UK electronic retail payments initiation
By value, 2015 – 2030F
Source: Deloitte analysis
21
Banks’ revenue pool will be squeezed
Payments disrupted | The emerging challenge for European retail banks 22
Source: Deloitte analysis
Projected EU banks’ payments revenue pool disruption
€bn 2015 – 30
Banks face a significant challenge to capture the
underlying growth in the payments market
Drive YoY cost efficiencies to protect ROE
Decide on strategic stance: block or participate in disruption
Innovate to stay in the game1
2
3
Payments disrupted | The emerging challenge for European retail banks 23
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© 2015 Deloitte The Netherlands
Agenda
Pay ments disrupted | The emerging challenge f or European retail banks25
15:15 Welcome by Timo Span
15:25 Presentation Payments Disrupted report by Ian Foottit, partner Deloitte UK
16:00 Response by Eric Tak, Global Head of Card Solutions, ING Commercial Banking
16:30 Discussion, facilitated by Roeland Assenberg van Eysden and Edgar Mendelsohn
17:25 Wrap up by Timo Span
17:30 Drinks
© 2015 Deloitte The Netherlands
Agenda
Pay ments disrupted | The emerging challenge f or European retail banks26
15:15 Welcome by Timo Span
15:25 Presentation Payments Disrupted report by Ian Foottit, partner Deloitte UK
16:00 Response by Eric Tak, Global Head of Card Solutions, ING Commercial Banking
16:30 Discussion, facilitated by Roeland Assenberg van Eysden and Edgar Mendelsohn
17:25 Wrap up by Timo Span
17:30 Drinks
1. What impact do you expect on payment revenues from opening
up of payment initiation to alternate service providers?
A. Very low (0-5%)
B. Low (5-10%)
C. Medium (10-15%)
D. High (15-20%)
E. Very high (>20%)
27 Pay ments disrupted | The emerging challenge f or European retail banks
Very l
ow (0
-5%
)
Low
(5-1
0%)
Mediu
m (1
0-15%
)
High (1
5-20%
)
Very h
igh (>
20%
)
7% 7%
20%
27%
40%
2. What impact do you expect on broader client relationship from
the rise of Fintech?
A. No significant change
B. For payments this might
change but overall
relationship will be
unchanged
C. Relationship will change
significantly in all products
D. Banks will be fully
disintermediated
E. Banks will not exist in current
form anymore in 10+ years
28 Pay ments disrupted | The emerging challenge f or European retail banks
No sign
ifica
nt chan
ge
For p
aym
ents th
is m
ight c
hange
...
Relatio
nship
will
change
signifi
...
Banks w
ill b
e fully
disi
nterm
edi..
.
Banks w
ill n
ot exi
st in
curr
ent f
o..
0%
15% 15%15%
54%
3. Which development will disrupt payments the most in the
coming 5 years?
A. Blockchain
B. Instant Payments
C. PSD2
D. Ancillary services like data
and identity
29 Pay ments disrupted | The emerging challenge f or European retail banks
Block
chai
n
Inst
ant Paym
ents
PSD2
Ancilla
ry se
rvice
s lik
e dat
a and ..
.
14% 14%
57%
14%
4. Assuming that the status quo where payment systems are run
by and for major banks will not survive, which of the three new
scenarios do you rate as most likely?
A. New oligopoly: Non-bank new comers will be restricted to a handful of big players with brand and scale
B. Utility model: Both banks and non-banks will increasingly offer payments applications that run on payment ‘rails’
C. Parallel payments infrastructure: Complete new methods of payment take hold bypassing central banks, traditional currencies and centralised CSM.
30 Pay ments disrupted | The emerging challenge f or European retail banks
New o
ligopoly
: Non-b
ank
new...
Utility
model:
Both b
anks a
nd ...
Paral
lel p
aymen
ts in
frast
ruct
ur..
20% 20%
60%
5. Which one of the four strategic options for banks (or incumbent
payments companies) responding to this new wider set of payment
initiators makes most sense to you?
A. Producer: In-house investor
in and developer of payment
propositions for own bank
and industry
B. Distributor: Industry
collaborator, working
alongside other banks and
market participants
C. Operator: Platform provider
for digital developers: “open
API”
D. Outsource to utility providers
31 Pay ments disrupted | The emerging challenge f or European retail banksPro
ducer:
In-h
ouse in
vest
or in ..
.
Distrib
utor:
Indust
ry co
llabora
t...
Operato
r: Pla
tform
pro
vider
for..
.
Outsourc
e to u
tility
pro
viders
7%
33%33%
27%
© 2015 Deloitte The Netherlands
Agenda
Pay ments disrupted | The emerging challenge f or European retail banks32
15:15 Welcome by Timo Span
15:25 Presentation Payments Disrupted report by Ian Foottit, partner Deloitte UK
16:00 Response by Eric Tak, Global Head of Card Solutions, ING Commercial Banking
16:30 Discussion, facilitated by Roeland Assenberg van Eysden and Edgar Mendelsohn
17:25 Wrap up by Timo Span
17:30 Drinks
© 2015 Deloitte The Netherlands
Agenda
Pay ments disrupted | The emerging challenge f or European retail banks33
15:15 Welcome by Timo Span
15:25 Presentation Payments Disrupted report by Ian Foottit, partner Deloitte UK
16:00 Response by Eric Tak, Global Head of Card Solutions, ING Commercial Banking
16:30 Discussion
17:25 Wrap up by Timo Span
17:30 Drinks
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities . DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”)does not provide services to clients. Please see www.deloitte.nl/about for a more detailed description of DTTL and its member firms.
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© 2015 Deloitte The Netherlands