ôEvery time PayPal takes a credit card payment across the internet, we lose out,ö says Francesco Vanni dÆArchirafi, CEO of global transaction services at Citigroup for Europe, Middle East and Africa. ôThese non-bank intermediaries and technology vendors are able to innovate without the risk management and capital adequacy constraints that banks face.ö
Speaking at a well-attended industry group session at Sibos, Vanni and his payments counterparts from JPMorgan, Deutsche Bank and Westpac, agreed that the threat posed by new competitors should change the way banks run their cash operations.
ôThese days, consumers of payments services want convenience, mobility, control and immediacy. Corporate clients want straight through processing and paperless workflows,ö says Vanni, admitting that banks have a long way to go to meet these needs.
Werner Steinmueller, head of global transaction banking at Deutsche Bank, reckons there is more consolidation in the payments industry ahead. He says the industry is being pushed towards efficiency and consoldation by regulations like SEPA in Europe. ôIt is clear to me that the one thing you need to survive in todayÆs banking market is scale,ö says Steinmueller.
Vanni says scale can be achieved and new entrants can be outwitted by collaborating. ôBanks still worry too much about competition and they are being left behind. System fragmentation is killing us.ö He says banks should borrow technology from each other rather than propping up antiquated proprietary systems. ôThe time has come to stop differentiating ourselves via our technology offerings. We should collaborate in this area and focus on client service, delivery and product innovation as points of differentiation.ö
Mark Garvin, chairman of JPMorgan Europe, called for greater co-operation through industry-wide infrastructure. ôIndustry infrastructure is a powerful tool for beating the competition,ö he says, pointing to the establishment of continuous linked settlement system which is now celebrating its tenth birthday. ôCLS is one example were collaborative infrastructure works, and although it is difficult to achieve because of the vested interests, it is necessary for lowering processing costs and streamlining services.ö
Garvin says sharing the cost of infrastructure is the only real way for big banks to survive. ôSadly, large institutions have to put up the most cash to put these infrastructures in place and usually suffer from the heavier hand of government regulation.ö He called for a global governance body to bring together the banking community. ôIf we are to thrive, our collaborative space must be well governed,ö says Garvin.
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