Banks and fintechs are global leaders in payments innovation - study

The index is a global cross value chain view of the factors that drive success across the banking, intermediary, merchant and corporate sectors.It identifies five types of organisations, as defined by their approach to innovation and business transformation - Laggards, Emerging, Tech-led, Advanced and Trailblazers – and provides an interactive self-assessment tool to benchmark organisations against peers and competitors.

The research breveals that retail banking and fintechs are the leading sectors when it comes to payments innovation, with regulation playing a key part in forcing industry change. The merchants and corporates that are their customers are less successful in balancing cultural, organisational and technology drivers to achieve digital transformation.

According to the Index, real-time payments are a significant driver of innovation among financial institutions, while merchants and corporates are focused on new payment options (especially mobile), with payment security a continuing concern. In addition, trailblazers across the sectors plan to move mission-critical workloads into public cloud infrastructure either this year or into 2020.

Key findings:

Banks and Intermediaries

Real-time is a key driver of and enabler for innovation

• 96% of retail banks, 94% of corporate banks and 92% of intermediaries globally report that they will develop new and innovative services on top of their investment in RTP in 2019/20

Mission-critical workloads, including payments, can and should move to the cloud

• 82% of corporate banks, 74% of retail banks and 79% of intermediaries (84% of fintechs) globally plan to move mission-critical workloads into public cloud infrastructure in 2019/20

Capitalising on potential of open payments is the biggest competitive differentiator

• 91% state that the move to open banking has helped change the way they approach delivering new products and services, with 89% actively exploring a platform strategy

Merchants

The merchant segments (telecoms, retail, digital goods and hospitality) featured in the Culture of Innovation Index are spread across the Laggard, Emerging and Tech-led categories, placing them behind fintech, retail and corporate banking in the overall ranking.

There are significant regional differences in terms of innovation

• In Europe, 35% of all merchants are classified as Laggards, compared to 30% globally. European retailers particularly fall behind their global peers, with 43% in the Laggard category, reflecting the challenges that many have faced as a result of the rapid shift in customer habits toward ecommerce

• In contrast, merchants in Asia are highly focused on investing in technology; 32% fall into the Tech-led group, with 26% in the Advanced category; only 19% are Laggards 

• Merchants in the US are polarised, with 34% falling into the Laggards and 16% into the Trailblazers category, reflecting the growing gap between more traditional merchants and many of the more digital native businesses

Customer experience is key

• Innovation in payments is focused on areas that enhance customer experience – new payment options, a focus on mobile (especially in-store), and a stronger, more seamless cross-channel payment experience

• Security initiatives like PSD2 and SCA are driving the need for technology innovation in order to balance fraud prevention with maximising conversion rates; regulatory requirements may drive merchants to close the innovation gap relative to banks

Corporates

Most corporates are Laggards, with higher education, healthcare and utilities leading the sector

• Security remains a top concern for corporates with 50% t experiencing theft of payment data (up from 22% in last year’s study)

• Investments in value-added services like mobile-optimised billing and digital customer experience will improve customer loyalty while driving innovation; 60% of Advanced and Trailblazer corporates already offer mobile-optimised billing and 57% currently offer personalised communications to collect payments 

• Among the corporates segment (consumer finance, government, healthcare, higher education, insurance and utilities), 18% are in the Advanced and 4% qualify as Trailblazers, while 33% are in the Laggard category; at the sector level, higher education is among the leaders, with 29% of organisations in the Advanced category.