“Unprecedented times” is a term that we have heard repeatedly in the last few months. It’s been used by governments, health professionals and businesses from multiple industries and in various media to describe the impact of the pandemic and the complex environment in which we find ourselves.
We certainly believe it is an accurate term not only because of its meaning (“never done or known before”), but also because it contains another truth: that today’s world is not the same as yesterday’s and, therefore, that we live with the need to adapt constantly. But this need to adapt is not new, it is something that the financial industry has been witnessing for some time now.
From a regulatory perspective, the implementation of the Second Payment Services Directive(PSD2), the ISO20022, the SWIFT Gpi, the Libor Transition, the Anti-Money laundering laws, Know-Your-Customer (KYC) and MiFID II, among other standards, produced changes that required a considerable investment of time, money, and resources for many financial entities across different sectors. 1
Many protagonists have changed. Well known non-bank players such as Amazon Pay, Google Pay or Facebook appear ready to revolutionise the world of international payments. They have changed the landscape by positioning themselves as more accessible alternatives, and driven innovation in services formerly offered by banks only. 2
Technological innovation and market demand have left behind old proprietary models and silos. Banks are pushing towards an open-banking model that is flexible to new payment methods, and allows information, products, services and functions to be shared through Application Program interfaces(APIs). 3
At the epicentre of these transformations are consumers, whose behaviour has also changed. Their experience with the digital world has transformed their expectations from banks and payment providers. “Immediate response and execution”, “information transparency”, “free digital services”, “simplicity” and “integrated experience” are some of today’s user standards. 4
It is expected that this demand will continue to grow in the coming years. McKinsey stated that by 2023, the global payments industry will be $2.7T and that it will represent 38% of the profits generated by banks. In the same analysis they projected a volume growth in international payments of 8% per year4. In addition, Accenture predicted that, despite the fall in prices, the total growth in the value of international payments could translate into $100B of the banks’ global profit by 2022. However, given the proliferation of suppliers and methods, most of this growth will not end up being generated by banks. 5
So how can Financial Institutions adapt to changing times and take advantage of this opportunity?
Throughout Western Union’s 160+ year history we have continued to look at new ways to grow, adapt, innovate, and add value for our customers. This search has led us to seek new horizons to expand our business, aim for efficient operational processes, and always set out to establish strong alliances. We believe this is key to the way in which we address today’s challenges, but it is only the starting point to find the answer for our question.
The remaining part of the answer will come with the choice of the right partner and, along with it, in the development of the value proposition to address those changes in regulations, in technologies, in the market and in the client that we mentioned previously. And since we understand that is not a simple decision to make, we developed a Guide for Partnerships in Financial Services, focused on how Financial Institutions can leverage regulatory and technological developments to compete better and grow. Access the guide by clicking the link below.
Guide to Partnerships in Financial Services