Integrating customer information is key in order for banks to stay competitive in the consumer payments game, according to Christophe Uzureau, an analyst with Gartner (Stamford, Conn.) who presented at the Gartner Financial Services Technology Summit in late August the results of a study conducted by the firm on how consumers use various payments instruments. The study also examined the nonbank threats that loom in the competitive payments space.
According to Uzureau, despite the "wow" factor attributed to innovations such as mobile payments, the real value in payments is around services. "The long-term differentiator in payments is not just the delivery of payments instruments, but services," he asserts. "How do you create shared services within the bank payments organization?"
The best way to achieve this is to integrate the customer information banks have from payments transactions, Uzureau contends. "Payments are usually the first way [for a bank] to build customer relationships," he explains. However, financial institutions again are challenged by legacy architectures.
Outsiders such as PayPal are buoyed by streamlined, agile infrastructures that allow them to react more quickly to changes demanded by the market, and this makes them a real threat to banks in the payments space, Uzureau asserts. "PayPal [and its ilk] will respond to the requirements of the next generation of consumers," he says, questioning whether banks will be able to respond quickly enough to hold off competitors.
While acknowledging this is a huge challenge for the financial services industry, Uzureau points out that banks do have an advantage over nonbanks. According to Uzureau, participants in the Gartner study preferred payments instruments with robust value-added services, such as rewards programs, fraud resolution and account services. "This is important for banks to note because they are still perceived as the trusted entity," he says. "People don't trust mobile providers for payments as much as banks."
Yet good service requires good information. To harness the wealth of consumer data housed in various silos throughout the organization, banks will need to centralize key applications in the payments area so that they are not reinventing the wheel every time they introduce a new payments instrument. "Payments is usually perceived as a cost center," Uzureau relates. "But when you integrate the information, payments becomes much more strategic in value."