I was drawn to a story on the Bank Systems & Technology website claiming that real-time payments offer financial institutions the chance to build customer loyalty. It claimed that consumers are not only interested in real-time payments, but they’d prefer their primary financial institution to be their real-time payments provider.
That would seem to fly in the face of what the telecoms industry thinks. After all, it ‘invented’ real-time charging and payments, didn’t it?
The article referred to two recent surveys highlighting that today’s digital age consumers expect the ability for their payments to be processed in real-time.
The survey, conducted on behalf of a banking technology provider found that 80 per cent of customers who use overseas money transfer believe it’s important for the recipient to be able to use the transferred funds immediately. Also, 58 per cent of customers who make account-to-account transfers and 41 per cent of P2P payments users desire immediate access of their funds.
They obviously didn’t survey the millions of mobile phone customers that have been enjoying exactly the same features via their mobile operators. Countries like the Philippines and India have been nurturing real-time payments systems and money transfers via mobiles for years and already have a massive loyal following. Their workers are located all over the world and remittance transfers via mobiles have already become the favoured means of getting funds to family members at home.
What many people may not know is that any international payments all have to go through the banking system at some stage to comply with stringent laws around international money movements and anti-money laundering. So, here at least, the banks and telcos are working together, more probably out of necessity than choice. Intra-national real-time transfers, free from these restraints, firmly put the advantage on the telcos side with their existing network of pre-paid minute sellers and dealers.
Surprisingly, the article went further in saying that consumer demand for real-time payments affords an opportunity for banks to gain customer loyalty, as the survey results suggest that consumers prefer their bank to be their provider of real-time payments over a card company or an alternative payments provider. Among the survey respondents 55 per cent said they want their primary financial institution to be their real-time payments provider. Really?
“Going forward that opportunity in real-time payments seems particularly enticing to younger consumers if banks can offer real-time payments through the mobile device, the survey suggested. Among Gen Y respondents who use P2P payments surveyed, nearly as many said they prefer to make real-time payments with their mobile phones rather than with their laptops or desktops. Overall 40 per cent of the respondents who use foreign money transfers and P2P payments said they want to make real-time payments through their mobile phones.”
Without wishing to downplay the survey, it does raise some concern as to its survey audience and demographic. Banks and financial institutions worldwide will admit that they were left behind in the real-time stakes when telcos introduced pre-paid accounts. Card issuers have only recently found favour in offering pre-paid debit cards to those with no credit rankings around the globe. Sure, the telcos had the advantage of a communications link between the phone and their systems allowing real real-time interaction, but the others are catching up, and they have their merchant networks already tied in.
However, having a monopoly on all sectors of the payments chain may be beyond either industry for the time being, but combined, they would be an insurmountable force to fend off the likes of Google Wallet trying, rather poorly, to get into the space.
How long will it be before sensibility takes over and we see banks and telcos really working together and benefiting from the technology both are investing so heavily in and achieving the economies of scale both aspire to? Or will it be a third party ‘trusted partner’ that appears without warning and disrupts by offering software, platforms and infrastructure as a service to both?