During the final day of IPS, ZOPA, a lending and borrowing exchange that lets people sidestep the banks, once again brought about discussions on the floor around new entrants into the payment space. While some, such as PayPal and Tesco, have been widely documented and observed , others such as Facebook which is introducing its own payment system to allow users to purchase Facebook ‘credits’ to buy virtual goods, now want their share of the pie too.
This is becoming an issue for the banks. The core business that banks make money on, such as through lending, is offered by players such as ZOPA that are able to offer more attractive rates than the banks. That way, these payment providers not only give the banks a run for their money, they are also in a better position to meets needs of their borrowers, having reinvented the payments business with the consumer in mind. It seems to be a win/win situation for everyone. With the banks and their standard policies not involved in the process, it might seem that all the banks will be left with is the core commodity of moving money – a business that is not very profitable.
And this is where regulation seems to hinder progress. Banks are left being highly regulated whereas the new Payment Institutions do not have to adhere to the same level of regulatory requirements, and banks have to jump through hoops to maintain their revenue margins.
Therefore, it is no surprise that the biggest concern for banks is overregulation. While we all agree that regulation post-credit crunch is necessary, there is a fine line between protecting banks and consumers and hindering innovation and progress. Unfortunately, banks seem to be the easy targets at the moment.
Bob Mackman
Head of Business Services (Wholesale)
ACI Enterprise Payments Platform 