Payments: Disruption impact scale


Payments: Key questions for consideration

What is the best way to respond to payments disintermediation and retain a central role in payments?

What strategies are needed to accelerate transformation to digital payments?

What are the new pricing models in digital payments?

How should incumbents respond to merchants’ digital apps that control customers’ payment experience and are  able to harvest richer customer data?

Upgrading operational infrastructure is an opportunity for reinvention and long-term growth

Although the threat of disintermediation is real, frictionless payments will allow incumbents to assert dominance.

Industry dynamics

Incumbents are reinventing  themselves to defend their status  in the payment value chain.

Magnitude: 4

Timing: 4

The payments industry will become much more  competitive and fragmented in the medium term,  with nontraditional firms gaining a greater share

FINTECHS and nonfinancial players are  challenging traditional payment firms’  intermediary role by offering direct,  faster, cheaper, and near real-time  settlement capabilities.

Payment firms can counter FINTECHS’ growing  clout by exploiting the ecosystem while leverag-  ing their brand, distribution, and data.

Legacy and disparate  systems create the biggest  roadblock in payment firms’  efforts to provide innovative  digital payment solutions.

Visa launched Visa Developer, an open payment  platform, and unbundled its offerings to provide open  access to software application developers, ensuring  Visa remains central to their new, innovative designs.

Call to action

Acquire smaller fintechs that can help  banks build a competitive edge and  scale in niche product categories and  market/customer segments.

Connect with other payment ecosystem  players to increase overall efficiencies  and broaden market reach.


Integrated and value-added  offerings will gain prominence  over facilitating transactions.

Magnitude: 4

Timing: 4

Disintermediation could make some of the  traditional payment offerings less relevant over  the next few years.

Recent innovations in mobile wallets and  crypto-currencies will eventually reduce  the reliance on cards, but the transition  to a fully digital world of payments will take time. Value-added services  like real-time personalized offers and  rewards will be key to differentiation.

To stay relevant, integrated and digital payment  solutions that coexist with alternative solutions  should become an immediate priority.

Blockchain also has the potential  to offer frictionless payments at significantly lower transaction costs,  so active exploration of this evolving  technology is critical.

Stripe provides application performance  interfaces (API) that enable businesses  to build payment platforms for their  customers.

Call to action

Align with technology vendors that  support open API development to  quickly build digital/mobile offerings.

Leverage customer and fraud  analytics solutions to differentiate  from startups, which may not have  these tools in their portfolio.


Smartphones will enable mobile  payments to dominate, but the  proliferation of products and  channels will be a challenge.

Magnitude: 4

Timing: 4

Digital- and mobile-based payments are likely  to overtake traditional card-based payments in  the next several years, particularly in-app and  micro payments.

The shift in customers’ interaction preferences from  physical to digital and the popularity of digital wallets are  likely to make some of the traditional channels (ATMs)  and point of sale (POS) terminals redundant.

linked2pay's Bank Centric PaymentsTM helps banks  provide their merchants with various digital payment  options including online, mobile, and email.

Social media-based platforms are gaining  prominence, especially among Millennials.

Call to action

Connect with both technology  vendors and merchants to quickly  integrate payment solutions on  various digital platforms to expand  reach and drive usage.

Create a firm-specific ecosystem that allows both traditional and alternate payment solutions to coexist.

Customer experience

As mobile payments  experience becomes the  norm, incumbents will lose  control of the relationship.

Magnitude: 4

Timing: 4

The ability to influence customer behavior will  decline meaningfully.

As with an increasing number of mobile apps, payment  transactions will become invisible to the customer and  recede into the background

Incumbents have the advantage of providing  access to transaction data—so consumers gain  insight for budgeting purposes and merchants  reap opportunities for targeting and promotions

Increased visibility into  customer data is likely  to help incumbents  customize offerings.

U.S. Bank’s mobile  app Deal Local (pilot)  lets local merchants  load deals on the app,  which are presented  at the POS based on  customer data.

Call to action

Integrating data from consumers and merchants will  enable better control over the customer experience.

Creating value-based segmentation  will go a long way in delivering an  appropriate level of customization  and service.


By connecting consumers  and merchants, incumbents  differentiate themselves by  making payments seamless  and frictionless.

Magnitude: 4

Timing: 3

Agility would be key to payment firms’ transformation efforts.

Flexible, hybrid, and open platforms that can quickly  integrate emerging technologies, endpoints, channels, and  alternate currencies will be important. For instance, one  provider’s white-label open payment platform connects with  300+ alternative payment methods and card acquirers in  160+ countries.

Interplay with the mushrooming alternate  providers is likely to test incumbents’ ability to  secure data.

In 2019, nearly 90 million  consumers are expected  to use mobile wallets in  the US. But, with 112,000  wallets hacked in 2015,  banks face considerable  reputational risk.

Tokenization and  biometrics could be  the weapon of choice  for incumbents in their  quest for security.

Call to action

Consider joining with technology vendors  offering open platforms and plug and  play technologies to springboard digital  transformation.

Create secure platforms and have strong  third-party/vendor agreements to control  potential breach issues.

Business economics

New value-added and cost  reduction strategies are needed  to combat eroding transaction  margins.

Magnitude: 3

Timing: 3

With alternate players disintermediating the  value chain, payment firms are slowly losing  their pricing power.

Once mobile  commerce and digital  wallets become main-  stream, brand equity  and differentiation are  likely to erode.

Instead, value-added  offerings to merchants,  such as reporting and  analytics, are likely to  drive long-term returns.  However, in the interim,  investments in these  capabilities might hurt  margins.

Blockchain-driven payments infrastructure—as  well as digital payments more broadly—will  reduce processing costs.

Globally, remittances cost consumers  an average of 7.53 percent of the  transaction amount, and even a 5  percent reduction in this cost could  save $16 billion annually.

Call to action

Acquire FINTECH players that offer low-cost alternate payment solutions. Create customized and tiered pricing  models to remain competitive and  maximize profitability.