Payments: refurnish or rebuild?

Results from research within the MasterCard Chair ‘Transforming for the future’

Essentials
The financial services sector is facing its most radical change in decades. At the origin we find increased regulation, changing customer behaviour and technological innovation. Moreover, both small start-ups as well as large established tech companies are challenging incumbent organisations. 
If you want to prepare for the future you need to master four capabilities: 
< Design superior customer experiences
< Set-up data-driven experiments
< Build multi-party collaborations
< Provide platform-based solutions

The financial services sector is facing its most radical change in decades. At the origin we find at least four societal change drivers: increased regulation, changing customer behaviour, technological innovation and new entrants in the sector. The sector is confronted with increased competition both from large established tech companies such as Apple, Google, Amazon, Facebook, and small fintech start-ups which move into the financial services space.

From a sector perspective we identified two distinct types of trends: the ones enhancing the existing system and the ones trying to rebuild a new financial services system. It is clear that a lot of the innovations focus on disintermediating the incumbent organisations.

There is a clear move towards more decentralisation and peer-to-peer (P2P) collaboration. Blockchain technology enables value transfers through a decentralised, P2P consensus process. International money transfers are drastically improved using P2P operating models. Technological innovation is making it easier for people to connect, exchange value and pay without the need of a traditional financial institution. We are witnessing a new wave of democratisation of financial services, giving easy access to a group of consumers to services which before were out of reach. New start-ups are attempting to enter these markets by offering better and simplified access to more convenient and secure financial services at lower costs, and with increased transparency.

Those are all the ingredients of a good disruption. Yet, contrary to what many believe, disruption does not necessarily mean the end of existing financial services organisations. Yet, many of the current trends are forcing them to go beyond the status quo: from Single Euro Payments Area (SEPA), with a focus on increased efficiency at lower prices for customers to Payment Service Directive (PSD) II with Open Application Programming Interfaces (APIs) for increased competition, innovation & transparency.

The change drivers at societal level drive the various trends we see at payments sector level. But how can organisations deal with these changes? Based on our research there are four capabilities organisations should focus on to remain relevant:

  • Design superior customer experiences
  • Set-up data-driven experiments
  • Build multi-party collaborations
  • Provide platform-based solutions

Based on our experience in working with organisations, these are four crucial capabilities for them to master in an increasingly turbulent environment like the payments sector. It is impossible for organisations to predict what will happen. But by investing in these four capabilities they will be better prepared for the road ahead.

Download the research report

Accreditations
& Rankings

Equis Association of MBAs AACSB Financial Times