More than 90% of at-risk payments revenue
attributable to U.S. banks
TORONTO, Nov. 27, 2019 /CNW/ - As much as 15% of North
American banks' payments revenue — $88 billion — is likely to
be displaced by the growth of digital payments and competition from
non-banks, as payments become more instant, invisible and free,
according to a new report from Accenture (NYSE: ACN). Of the
$88 billion, approximately
$82 billion is attributable to U.S.
banks and $6 billion to Canadian banks.
Titled "5 Big Bets in Retail Payments in North America," the report is based on a
revenue-risk analysis model that Accenture developed to measure
trends in how consumers pay and projected changes in merchant
behavior, technology and regulation. The research is complemented
by a survey of payments executives at the 50 largest U.S. and
Canadian banks by revenue to determine how they plan to mitigate
and capitalize on the disruption in payments to grow customer
loyalty, revenues and profitability.
The report found that while payments revenue among North
American banks is slowing, it will likely grow at a compound annual
rate of 4% over the next half-dozen years — from $322 billion
in 2019 to $405 billion in 2025 for retail payments (see
Figure 1), and from $505 billion in 2019 to $653 billion
in 2025 for retail and commercial payments combined. Only banks
that change their business models to adopt the latest technologies
and transform the customer experience will capture a share of the
nearly $150 billion in incremental revenue growth, according
to the report.
"As retail payments facilitation become increasingly
commoditized, customer experience is the new driver of brand value
and competitiveness," said Andrew
McFarlane, Managing Director – Payments and Global Open
Banking, at Accenture in Canada.
"With new entrants introducing instant and invisible payment
options, combined with pricing compression, banks that are unable
to shift to new business models and continually innovate face a
future of revenue loss and diminishing relevancy."
The research confirmed industry awareness of the threats posed
by new players in payments. Six in 10 (60%) of the banking
executives surveyed believe they will lose up to 15% of payments
revenue in the next three years to non-banks, fintechs and other
competitors. When asked to identify the primary challenge to their
business, nearly two out of five (38%) respondents cited
competition from big technology companies, and one-third (34%)
cited competition from fintechs. Payments fintechs in North America attracted nearly $11 billion through more than 800 deals between
2016 and 2018 alone, according to the report.
The surveyed executives also acknowledged the challenges brought
on by new technologies in payments. Six in 10 (61%) said they
believe that payments are becoming free; nearly three-quarters
(73%) believe that most payments are already invisible or will
become so over the next 12 months; and even more (78%) said that
payments are either already instant or will become instant over the
next 12 months.
The report notes that the impact of consumer demand for rewards
has squeezed payments revenue, with spending in loyalty and rewards
by the top five U.S. card issuers jumping from $11 billion in 2010 to $31
billion in 2018. Pressure on traditional revenue models,
eroding fees and increased competition will force banks to invest
in value-added services to drive economic performance. Bank
executives cite next-generation reward schemes and embedded
payments capabilities among their priorities for generating new
payment revenue, according to the report.
"Payments is North America's
largest fintech segment, and while banks continue to ponder whether
fintechs are friends or foes in retail payments, in most cases the
answer is both," McFarlane said. "Banks need to determine which
fintechs they want to beat, buy or join. Banks that don't
collaborate with fintechs will likely fall behind in customer
experience, innovation and agility."
Hampered by legacy systems, bank executives understand that
implementing digital technologies will be essential to support
innovation and efficiency. One-quarter (24%) of respondents cited
artificial intelligence, robotics, machine learning and innovative
payments hubs as the key platform technology capabilities they need
to adapt their core systems in order to shift to high-speed and
continuous payment flows.
About the Accenture 2019 Global Payments Survey
As
part of a broader online survey of 240 payments executives in
nearly two dozen countries, Accenture queried 50 retail and
corporate payments executives at the 50 largest U.S. and Canadian
banks by revenue. The survey was conducted between Feb. 14 and March 10, 2019. The overall
margin of error is +/- 1.55 percentage points at the midpoint of
the 95th percentile confidence level.
About Accenture
Accenture is a leading global
professional services company, providing a broad range of services
and solutions in strategy, consulting, digital, technology and
operations. Combining unmatched experience and specialized skills
across more than 40 industries and all business functions —
underpinned by the world's largest delivery network — Accenture
works at the intersection of business and technology to help
clients improve their performance and create sustainable value for
their stakeholders. With 492,000 people serving clients in more
than 120 countries, Accenture drives innovation to improve the way
the world works and lives. Visit us at www.accenture.com.
SOURCE Accenture