Payments Disrupted Open forum discussion. Amsterdam, 23 rd September 2015

Transcription

1 Payments Disrupted Open forum discussion Amsterdam, 23 rd September 2015

2 Agenda Open forum discussion 15:15 Welcome bytimo Span 15:25 Presentation Payments Disrupted report by Ian Foottit, partner Deloitte UK 16:00 Response by Eric Tak, Global Head of Card Solutions, ING Commercial Banking 16:30 Discussion, facilitated by Roeland Assenberg van Eysden and Edgar Mendelsohn 17:25 Wrap up by Timo Span 17:30 Drinks 1 Pay ments disrupted The emerging challenge f or European retail banks 2015 Deloitte The Netherlands

3 Agenda 15:15 Welcome bytimo Span 15:25 Presentation Payments Disrupted report by Ian Foottit, partner Deloitte UK 16:00 Response by Eric Tak, Global Head of Card Solutions, ING Commercial Banking 16:30 Discussion, facilitated by Roeland Assenberg van Eysden and Edgar Mendelsohn 17:25 Wrap up by Timo Span 17:30 Drinks 2 Pay ments disrupted The emerging challenge f or European retail banks 2015 Deloitte The Netherlands

4 Payments disrupted The emerging challenge for European retail banks September 2015 Private and confidential

5 Key messages 1. The status quo is under threat 2. Regulation is acting as a key enabler 3. The market is primed for a wave of technology-enabled innovation 4. Banks will face a challenge to grow their payments revenues Payments disrupted The emerging challenge for European retail banks

6 The status quo is under threat 5Payments disrupted The emerging challenge for European retail banks

7 Forces disrupting European banks are most acute in payments, threatening banks hegemony Source: Deloitte analysis Payments disrupted The emerging challenge for European retail banks 6

8 Payments are a key revenue stream retail payments expected to generate c. 128bn in 2015 EU bank revenues form payments, 2015 Source: ECB, national central banks, Deloitte analysis Payments disrupted The emerging challenge for European retail banks 7

9 Regulation is acting as a key enabler 8Payments disrupted The emerging challenge for European retail banks

10 Direct impact of regulatory change on payments revenues is modest, offset by volume growth Regulatory impact on bank payments-related revenues in seven major EU markets bn Source: Deloitte analysis Payments disrupted The emerging challenge for European retail banks 9

11 Of potentially greater importance are EU regulators actions to open up payments to greater competition Source: Deloitte analysis Payments disrupted The emerging challenge for European retail banks 10

12 Payments leaders are relaxed about the prospect of more non-bank competition Expected impact of increased competition on banks payments revenues Percentage of respondents choosing a level of impact Source: Deloitte analysis, Interviews with 24 European payments experts, March to May 2015 Payments disrupted The emerging challenge for European retail banks 11

13 The market is primed for a wave of technology-enabled innovation 12Payments disrupted The emerging challenge for European retail banks

14 Enabling contactless technology is becoming firmly established Number of contactless transactions in the UK Million, Dec 13 Jun 15 Payments disrupted The emerging challenge for European retail banks 13

15 The rapid growth in remote or ecommerce transactions is forecast to continue UK online retail sales bn, F Source: Mintel Drivers of future growth: convenience Click and collect Smartphones enabling on-the-go shopping In-app purchases Etc. Payments disrupted The emerging challenge for European retail banks 14

16 Fintech investment is forecast to grow massively Total fintech investment $bn, F Source: Deloitte analysis, MarketResearch.com Payments disrupted The emerging challenge for European retail banks 15

17 Historically, payments have been the most popular destination Share of global fintech deal volumes by category Source: Deloitte analysis, Information Venture Partners Payments disrupted The emerging challenge for European retail banks 16

18 Banks will face a challenge to grow their payments revenues 17Payments disrupted The emerging challenge for European retail banks

19 Our house view is that software-initiation of retail payments is likely to become the dominant model UK retail payments by initiation method bn, F (1) Spend value is total electronic payments market Source: Deloitte analysis Payments disrupted The emerging challenge for European retail banks 18

20 Impact on banks depends on customer appetite to adopt non-bank models and regulatory willingness to enforce openness Alternative emerging payments landscapes Payments disrupted The emerging challenge for European retail banks 19

21 Banks are pursuing a variety of responses industry collaboration is the dominant strategy Preferred strategic responses for banks in the face of increased non-bank competition % of respondents choosing each strategic option Note: Respondents could choose more than one option Source: Deloitte analysis, Interviews with 24 European payments experts, March to May 2015 Payments disrupted The emerging challenge for European retail banks 20

22 Our view is that banks will lose their pre-eminent position in the payments value chain UK electronic retail payments initiation By value, F Source: Deloitte analysis Payments disrupted The emerging challenge for European retail banks 21

23 Banks revenue pool will be squeezed Projected EU banks payments revenue pool disruption bn Source: Deloitte analysis Payments disrupted The emerging challenge for European retail banks 22

24 Banks face a significant challenge to capture the underlying growth in the payments market 1 Innovate to stay in the game 2 Drive YoY cost efficiencies to protect ROE 3 Decide on strategic stance: block or participate in disruption Payments disrupted The emerging challenge for European retail banks 23

25 Deloitte ref ers to one or more of Deloitte Touche Tohmatsu Limited ( DTTL ), a UK priv ate company limited by guarantee, and its network of member f irms, each of which is a legally separate and independent entity. Please see f or a detailed description of the legal structure of DTTL and its member f irms. Deloitte LLP is the United Kingdom member f irm of DTTL. This publication has been written in general terms and theref ore cannot be relied on to cov er specif ic situations; application of the principles set out will depend upon the particular circumstances inv olv ed and we recommend that y ou obtain prof essional adv ice bef ore acting or ref raining f rom acting on any of the contents of this publication. Deloitte LLP would be pleased to adv ise readers on how to apply the principles set out in this publication to their specif ic circumstances. Deloitt e LLP accepts no duty of care or liability f or any loss occasioned to any person acting or ref raining f rom action as a result of any material in this publication Deloitte LLP. All rights reserv ed. Deloitte LLP is a limited liability partnership registered in England and Wales with registered number OC and its regis tered of f ice at 2 New Street Square, London EC4A 3BZ, United Kingdom. Tel: +44 (0) Fax: +44 (0)

26 Agenda 15:15 Welcome bytimo Span 15:25 Presentation Payments Disrupted report by Ian Foottit, partner Deloitte UK 16:00 Response by Eric Tak, Global Head of Card Solutions, ING Commercial Banking 16:30 Discussion, facilitated by Roeland Assenberg van Eysden and Edgar Mendelsohn 17:25 Wrap up by Timo Span 17:30 Drinks 25 Pay ments disrupted The emerging challenge f or European retail banks 2015 Deloitte The Netherlands

27 Agenda 15:15 Welcome bytimo Span 15:25 Presentation Payments Disrupted report by Ian Foottit, partner Deloitte UK 16:00 Response by Eric Tak, Global Head of Card Solutions, ING Commercial Banking 16:30 Discussion, facilitated by Roeland Assenberg van Eysden and Edgar Mendelsohn 17:25 Wrap up by Timo Span 17:30 Drinks 26 Pay ments disrupted The emerging challenge f or European retail banks 2015 Deloitte The Netherlands

28 1. What impact do you expect on payment revenues from opening up of payment initiation to alternate service providers? 40% A. Very low (0-5%) B. Low (5-10%) C. Medium (10-15%) D. High (15-20%) E. Very high (>20%) 27% 20% 7% 7% 27 Pay ments disrupted The emerging challenge f or European retail banks Very low (0-5%) Low (5-10%) Medium (10-15%) High (15-20%) Very high (>20%)

29 2. What impact do you expect on broader client relationship from the rise of Fintech? A. No significant change B. For payments this might change but overall relationship will be unchanged C. Relationship will change significantly in all products D. Banks will be fully disintermediated E. Banks will not exist in current form anymore in 10+ years 28 Pay ments disrupted The emerging challenge f or European retail banks No significant change 0% Relationship will change signifi... For payments this might change... 54% 15% 15% 15% Banks will be fully disintermedi... Banks will not exist in current fo..

30 3. Which development will disrupt payments the most in the coming 5 years? A. Blockchain B. Instant Payments C. PSD2 D. Ancillary services like data and identity 57% 14% 14% 14% 29 Pay ments disrupted The emerging challenge f or European retail banks Blockchain Instant Payments PSD2 Ancillary services like data and...

31 4. Assuming that the status quo where payment systems are run by and for major banks will not survive, which of the three new scenarios do you rate as most likely? A. New oligopoly: Non-bank new comers will be restricted to a handful of big players with brand and scale B. Utility model: Both banks and non-banks will increasingly offer payments applications that run on payment rails C. Parallel payments infrastructure: Complete new methods of payment take hold bypassing central banks, traditional currencies and centralised CSM. 30 Pay ments disrupted The emerging challenge f or European retail banks 60% 20% 20% New oligopoly: Non-bank new... Utility model: Both banks and... Parallel payments infrastructur..

32 5. Which one of the four strategic options for banks (or incumbent payments companies) responding to this new wider set of payment initiators makes most sense to you? A. Producer: In-house investor in and developer of payment propositions for own bank and industry B. Distributor: Industry collaborator, working alongside other banks and market participants C. Operator: Platform provider for digital developers: open API D. Outsource to utility providers 31 Pay ments disrupted The emerging challenge f or European retail banks 27% 7% 33% 33% Producer: In-house investor in... Distributor: Industry collaborat... Operator: Platform provider for... Outsource to utility providers

33 Agenda 15:15 Welcome bytimo Span 15:25 Presentation Payments Disrupted report by Ian Foottit, partner Deloitte UK 16:00 Response by Eric Tak, Global Head of Card Solutions, ING Commercial Banking 16:30 Discussion, facilitated by Roeland Assenberg van Eysden and Edgar Mendelsohn 17:25 Wrap up by Timo Span 17:30 Drinks 32 Pay ments disrupted The emerging challenge f or European retail banks 2015 Deloitte The Netherlands

34 Agenda 15:15 Welcome bytimo Span 15:25 Presentation Payments Disrupted report by Ian Foottit, partner Deloitte UK 16:00 Response by Eric Tak, Global Head of Card Solutions, ING Commercial Banking 16:30 Discussion 17:25 Wrap up by Timo Span 17:30 Drinks 33 Pay ments disrupted The emerging challenge f or European retail banks 2015 Deloitte The Netherlands

35 Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ( DTTL ), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as Deloitte Global )does not provide services to clients. Please see for a more detailed description of DTTL and its member firms. Deloitte provides audit, consulting, financial advisory, risk management, tax and related services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries and territories, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte s more than 210,000 professionals are committed to becoming the standard of excellence. This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the Deloitte network ) is, by means of this communication, rendering professional advice or services. No entity in the Deloitte network shall be responsible for any loss whatsoever sustained by any person who relies on this communication Deloitte The Netherlands