Alistair Newton here. With numerous parts of the global financial services industry suffering at the hands of sub prime, credit crunch and general evaporation of customer confidence, for many their carefully laid strategies and plans are being replaced by short-term tactics focused on survival. So its refreshing to see that amongst this scramble, some financial services institutions are maintaining an eye to the future.
I don’t know if you noticed, however a few weeks back a number of payment providers issued a press release outlining their progress towards cross border collaboration for their Online Banking enabled E-Payment solutions. These E-Payment solutions look to re-use banks’ existing customer authentication systems, combined with the local ACH (Automated Clearing House) systems, to deliver new payment solutions primarily to the b2c market. The group, entitled ICPNO - International Council of Payment Network Operators ( www.icpno.com ), comprises a number of ACH focused payment providers - iDeal, GiroPay, Interac Online, VocaLink and Nacha - focused on developing standards that will ensure the international interoperability of their domestically based payment schemes.
Whilst I would applaud such foresight, especially in today’s difficult market conditions, am I alone in wondering whether focus on such cross-border functionality – especially the global focus – may distract attention from their most obvious opportunity? As the low cross-border volumes for the SEPA direct credit payments applications has shown, demand for a service needs to lead supply, if the benefits are to outweigh the costs. Is there really enough demand for cross-border business to consumer payments to justify building a global scheme at this time? Well PayPal obviously saw a market, but then they weren’t cannibalising their own payment card market ( in Gartner we’ve written extensively around market opportunities for new players such as PayPal – notes such as The Biggest Threats to the Bank Franchise: What Banks Should Do About Them Now and PayPal and Google Checkout Show the Way for Banks’ Payment Operations have outlined man of the issues). Personally I think the short term global opportunity is probably too small to distract from the here and now.
These ACH-based solutions have a strong proposition for consumers, merchants and banks in their own domestic and adjoining markets, if they can get their marketing correct and develop a persuasive business case. iDeal have for example proved in the Dutch market that they can develop a significant market presence, with nearly 28 million transactions through to the end of 2008. However to be truly successful I think today’s conditions demand a lens on the short term. They need to focus on helping banks save costs as they face today’s challenges, such as the transition away from the use of cheques, or the migration to full SEPA deployment. They need to look at helping bank customers and retailers by offering them accessible alternatives to cash.
What do you think ? Do the members of ICPNO have the right idea – or do they need to keep a clear and solitary focus on the short term ?