payments – reloaded! spending priorities & innovation in payments
TRANSCRIPT
Payments – Reloaded!
Spending Priorities & Innovation in Payments
© IDC Financial Insights Page 2
Payments - Reloaded!
© IDC Financial Insights Page 3
Agenda
Payments Business – Strategic Relevance• CXO Discussion Highlights• Financial Insights WW Spending Guide (Payments)
Innovation in Payments• “Disruptive” Innovation• Innovation in Payments
Payments Business – Strategic Relevance
CXO Discussion Highlights
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How are IT Budgets beingDeployed ?
Channels & Distribution28%
Business Process
Re-engineering12%
Core
Refresh 28%
EnterpriseData Management14%
Administration &
Reporting5%
Enterprise
Payments13%
Australia
US$4 Billion
Singapore (regional)
US$6 Billion
India
US$4 Billion
China
US$3 Billion
Malaysia, Indonesia, and Thailand are all in excess of
US$1 Billion
Overall IT Budget
N=162 CXOs
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Payments remains a Major Operational Challenge
Human Capital
Management (COO) 15%
Cost & Performance
Management (CFO/COO) 12%
Prioritization &
Management of
IT projects (CIO/CFO) 17%
Cards, Payments & Lending (CIO/CFO/COO) 29%
Regulation & Compliance (CRO) 10%
Innovation & Market Responsiveness
10% (CIO/COO)
Business Process Improvements (CIO) 7%
N=162 CXOs
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Tier 1
, NA
Tier 1
, NA
Tier 1
, NA
Tier 1
, NA
Tier 1
, NA
Tier 2
, NA
Tier 3
, NA
Tier 3
, NA
Tier 1
, AP
Tier 1
, AP
Tier 2
, AP
Avera
ge0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Other
Clearing And Settlement
Exception Processing
Fraud Management
Payment Instruction Generation And Validation
How is Payments Spend being Allocated, Functionally?
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Financial Messaging
IT Payments Infrastructure
POS Channel
Debit card fraud management
Enterprise payments reporting and business intelligence – that is, cross-product reporting
Compliance in AML
ACH fraud management
Credit card processing
Online banking – consumer
Online banking fraud management
0% 2% 4% 6% 8% 10% 12% 14%
1%4%4%5%5%5%
5%6%
6%6%6%
7%7%
8%9%
10%10%
11%12%
Average Percentage Increase in Spending
What is the Fastest Growing Area of Payments Spend?
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Influence RatingRegulatory requirements 1.1
Customer requests for new products/features 1.6
Fraud rates 1.7
Need to match competitive offerings 1.8
Vendor support ending for software application 1.9
Cost Reduction (hardware, software, FTE) 2.1
Globalization of Payment systems 2.1
Consolidation of bank systems due to M&A activity 2.1
Adoption of mobile technologies 2.2
Merger integration 2.2
New software version 2.3
Macroeconomic conditions 2.5
New hardware available 2.6
Default/charge-off rates 2.8
Interest rates 2.8
Silo Convergence – Middle Office Integration 3.0
Exchange rates 3.1
What are the Key Drivers for Payments Spend?
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Function RatingMerchant card processing 2.1 Debit or prepaid card processing 2.4 Credit or charge card processing 2.4 Credit or charge card fraud management 2.5 Debit or prepaid card fraud management 2.5 ACH processing 2.8 POS Channel 2.8 Enterprise payments reporting 2.9 Mobile Payments 3.0 Mobile Banking 3.1 ACH fraud management 3.1 Online banking – consumer 3.2 ATM Channel 3.3 Wire Fraud 3.3 RTGS Processing 3.3 Payments Intelligence 3.3 Online Banking Fraud 3.4 Online banking - business 3.4 Payments IT Infrastructure 3.5 Messaging 3.6 Compliance in AML 3.9 SWIFT Processing 4.1
Appetite for Payments Outsourcing?
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Less risk
Higher revenues
Lower exception rates
Improved customer satisfaction / loyalty
Other: Lack of expertise and scale in-house
Higher quality service to the bank customer
Greater accountability
Quicker time to market
Access to otherwise unavailable functionality
Lower costs
Better operational efficiency
1
1
1
1.6
1.6
1.92.7
3.1
3.1
3.4
3.9
Benefits of Outsourcing in Payments
What are the Drivers of Payments Outsourcing?
Payments Business – Strategic Relevance
Financial Insights WW Spending Guide (Payments)
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Payments Spend (Overall)
+12%
+12%
+8%
+8%
+9%+4%
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Payments Spend (by Solution Element)
+12%
+12%
+8%
+8%
+9%+4%
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Payments Spend (by Region)
+12%
+12%
+8%
+8%
+9%+4%
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Payments Spend (North America)
+9%
+9%
+5%
+6%
+7%+0%
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Payments Spend (Europe)
+13%
+16%
+9%
+9%
+11%+7%
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Payments Spend (Asia/Pacific)
+12%
+12%
+9%
+10%
+9%+10%
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Payments Spend (Transactions)
+10%
+10%
+6%
+7%
+8%+3%
Innovation in Payments
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“Disruptive” Innovation?
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Innovation in Payments requires:
Innovation-friendly legal and regulatory environment
Harmonization of the payments ecosystem
Market maturity and social acceptance
Successful integration into existing value chain
E-micropayments?
International remittances?
P2P payments?
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Innovation in Payment (Products / Services)
Users select payment instruments depending on Place, Timing, & Amount – the key is CHOICE!
E-Money & Stored Value products
• Various form factors
• Prepaid – targeted acceptance
Cards 2.0 – driven by:
• Security – Authentication at the point-of-sale
• Service – Payment choice at the point-of-sale
Merchant offerings
• Cost-efficient & integrated offerings
• “Mobilized” merchant acceptance & social mobile payments
Free-form, contactless payment devices
• Locational intelligence; proximity; real-time decisioning
• Mobile retail marketing tools
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Innovation in Payments (Delivery Channels)
Channel innovation based on Convenience, Interaction, (low) Cost, and Security
“Mobilizing” Payments• Mobile has become a key component in any medium-term payments roadmap
• Mobile payments gaining traction across emerging markets; evident in initial acceptance rates, scale, and ambition
• New fund transfer mechanisms targeting demand for convenience and privacy
• Mobile technologies driving merchant acceptance
• Governments also initiating mobile payments innovation
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Predicting the Future of Payments?• Explosion of debit and prepaid card products
• E-micropayments will gain traction, driven by mobile, prepaid, contactless, biometrics technologies
• Growing prominence of non-bank PSPs will threaten disintermediation of the payments value chain
• Mobile devices become established money transfer instruments
• Increasing challenge of balancing regulations with new market dynamics
• New forms of risks – “closed” settlements; interoperability creating interdependency, emerging security risks
© IDC Financial Insights Page 26
Shawn Yip
Asia/Pacific Analyst
IDC Financial Insights
Email: [email protected]
Tel: +65 6829 7523