ABA Banking Journal asked a number of analysts their opinions of what banks need to do to not only cope with the rapidly changing payments environment, but figure out how to best participate.
John Jones, president, DCI: "That whole side of the industry is changing so rapidly. There are a lot of things coming up. It looks like something that is going to last a long time, and then it flashes and it's gone. Banks are really struggling, trying to decide where they want to invest. Where do they believe the payment industry is going?...
They have to understand that in some cases they may just become a conduit. It comes back on them as to what is the future of banking, what will your bank look like? Where does your revenue stream come from? It's not going to come from the traditional types of loans that you've provided in the past. So where is it going to come from? How are you going to continue to participate? That's really what is key."
Randy Roth, CEO, Vitex: "Bankers used to control the payment system. They don't any more. They've lost control over it. Now, to some degree, that's not quite as strategically important as people may think. It's much more important that we understand the relationship that we have with the customer. Know when they want to move money. Know when they want to invest. Know when they want to borrow. Having the relationship with the customer is much more important than the actual payment transaction...
"We're going to have a lot of people trying to compete for the payment business and charge fees for it, because that happens to be one of the areas that we can charge fees for. So we do need to have our vendors provide tools for us, to provide those services. From a strategy standpoint, I don't get too hung up over it other than the fact that we can't get too far behind. We have to stay pretty close to what's happening in the prepaid market, the custom credit cards, and the smart cards, all that kind of stuff."
Andrew Tilbury, chief marketing officer, Bluepoint Solutions: "[Banks] are in danger of being leapfrogged out of the payment stream. But the biggest asset that banks have with customers is the level of trust people have with their financial institution that they don't necessarily have with a mobile wallet provider that maybe started in business last year. That's the biggest area where they can focus on...They need to be very aggressive about partnering with wallet providers.
Nicholas Brewer, senior analyst, Aite Group: "Banks are always involved in payments. People still need to make payments through their bank. People still keep most of their money in their checking account. That's where it comes from and largely where it goes. Banks have to keep a presence. People forget that however much you do in all these other payment channels, underneath it is a set of bank accounts...Maybe banks understand they don't own the front end channel of payments, but there's still quite a large role to be played in providing the underlying wholesale transaction processes."