‘The Deadly Trifecta’ Is Among Threats Putting $88 Billion in Banks’ Payments Revenue at Risk

While fintechs and other nonbank payments providers continue to carve out more market share for themselves, banks could face losing up to $88 billion in payments revenue to them. That’s the assessment from Accenture, the consulting firm that on Wednesday released its latest report, “5 Big Bets in Retail Payments in North America.”

Of that $88 billion, $82 billion is attributable to U.S. banks and $6 billion to Canadian institutions.

Payments revenue among U.S. and Canadian banks is slowing. According to Accenture, retail-payments revenue will likely grow at a compound annual rate of 4% over the next six years, going from $322 billion in 2019 to $405 billion in 2025. To ensure getting a share of that growth, banks and other payment-industry incumbents need to shift strategies, Accenture says.

The five strategies Accenture recommends are reinvent revenue; move away from legacy technology; collaborate more; tap into data in new ways; and preserve consumer trust.

Reinventing revenue means offering more value-added services that consumers are willing to pay for. “New market realities demand replacement revenue in the form of value-added services and experiences to drive economic performance,” the report notes. “Bank executives identify next-generation reward schemes, data monetization, and embedded payments capabilities as among their priorities for generating new payments revenue.”

Report contributor Kevin Grieve, Accenture managing director-payments lead, says there are multiple ways to do this. “There are several value-added services that could surround the payments transaction either the single transaction or across multiple transactions: personal financial management, point-of-sale lending, trade finance, factoring receivables, customer insights, and improved marketing efficacy,” Grieve says in an email to Digital Transactions News.

Technology companies offering payments services often lack legacy processing systems, which can make them more nimble in getting a product to market. Banks and payments incumbents must adopt digital technologies, the report argues. Accenture suggests integrating consumer-based apps in a modular fashion around the legacy infrastructure.

The third recommendation, embracing collaboration, advises looking for fintech and nonbank payments providers to work with instead of against. 

“Moving forward, incumbents will need to sort out fintech relationships, determining which companies to beat, buy, or join,” the report states. “Regardless of their strategies, banks that do not collaborate in some way with fintechs will likely fall behind in customer experience, innovation, and speed to market—a deadly trifecta.”

Grieve says the fact that banks are subject to more regulation may create opportunities. “Most fintech and big-tech companies don’t want the burden of becoming a regulated financial institution, which creates a window for collaboration between technology firms and regulated institutions,” he says.

Financial institutions can also use the voluminous amount of transaction and consumer data they collect to differentiate themselves. Accenture recommends viewing data as a product, not just as insight into consumers. 

Earning and preserving consumer trust is foundational to electronic payments, the report argues. Accenture says banks must demonstrate they can protect their customers’ interests. “Trust is the essential foundation of customer experience in retail payments,” says Grieve. “Drops in trust create reputational risks, which are deeply problematic and put real revenue at risk.”