payments disrupted open forum discussion€¦ · eu bank revenues form payments, 2015. regulation...

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


Agenda







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


Source: ECB, national central banks, Deloitte analysis

EU bank revenues form payments, 2015

Regulation is acting as a key enabler


Direct impact of regulatory change on payments

revenues is modest, offset by volume growth


Regulatory impact on bank payments-related revenues in seven major EU markets

€bn


Of potentially greater importance are EU regulators’

actions to open up payments to greater competition



Payments leaders are relaxed about the prospect of

more non-bank competition


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


Enabling contactless technology is becoming firmly

established


Number of contactless transactions in the UK

Million, Dec’13 – Jun’15

The rapid growth in remote – or eCommerce –

transactions is forecast to continue


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


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


Banks will face a challenge to grow their payments revenues


Our house view is that software-initiation of retail

payments is likely to become the dominant model


(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


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


Our view is that banks will lose their pre-eminent position

in the payments value chain


UK electronic retail payments initiation

By value, 2015 – 2030F


21

Banks’ revenue pool will be squeezed



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


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separate and independent entity . Please see www.deloitte.co.uk/about f or a detailed description of the legal structure of DTTL and its member f irms.

Deloitte LLP is the United Kingdom member f irm of DTTL.

This publication has been written in general terms and theref ore cannot be relied on to cov er specif ic situations; application of the principles set out will depend upon the particular

circumstances inv olv ed and we recommend that y ou obtain prof essional adv ice bef ore acting or ref raining f rom acting on any of the contents of this publication. Deloitte LLP would be

pleased to adv ise readers on how to apply the principles set out in this publication to their specif ic circumstances. Deloitt e LLP accepts no duty of care or liability f or any loss

occasioned to any person acting or ref raining f rom action as a result of any material in this publication.

© 2015 Deloitte LLP. All rights reserv ed.

Deloitte LLP is a limited liability partnership registered in England and Wales with registered number OC303675 and its regis tered of f ice at 2 New Street Square, London EC4A 3BZ,

United Kingdom. Tel: +44 (0) 20 7936 3000 Fax: +44 (0) 20 7583 1198.


Agenda







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


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


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.


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%


Agenda







17:30 Drinks


Agenda





16:30 Discussion


17:30 Drinks

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payments disrupted open forum discussion€¦ · eu bank revenues form payments, 2015. regulation...

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