Traditional payment platforms could face competition from Google and Apple

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Traditional payment platforms could face competition from Google and Apple

Karl Flinders

Secure mobile internet and regulation will force traditional payment platforms to change as competition grows in the European payments.

Companies such as Apple and Google might eat into the business of traditional payment processors by completing payments themselves.

The systems used by banks to process payments face a decade of change as a result of regulatory changes, technology advancements and consolidation, according to a study carried out by think tank The Financial Services Club and IT service provider Cognizant.

Over 300 banking and finance executives across the globe were questioned in the survey.

"The current payments infrastructure, while being fit for purpose today and with an enviable track-record of essential payment continuity, is not flexible enough to adapt easily to regulatory changes in payments," said the report. A total of 63% of the participants said the payments infrastructure will require significant changes.

A massive 96% of the retail banks cited the internet and 82% pointed to mobile technologies as either the most important change or one of the important changes to payments systems.

Chris Skinner, chairman at the Financial Services Club, said a combination of regulation and technology advancement will drive massive changes in the European payments sector.

He said bank-owned payment processors such as Swift and EBA Clearing will face stiff competition from private companies to become a European hub. Private service providers include Vocalink, Equens and STET, but the likes of Google and Apple might start processing payments themselves.

Chris Skinner questioned the future role of legacy payments platforms. "In the days of secure mobile internet, do we need these old bank infrastructures?"

Regulation in Europe, in the form of the Single Euro Payments Area (SEPA) and Payment Services Directive (PSD), mean payment platforms might find they have new competitors. "Regulation might mean that all national systems are becoming regional and are competing with each other," said Skinner.

"Private companies are becoming more competitive and there will be a big battle to be the European hub," added Skinner.

This goes hand-in-hand with anticipated consolidation. A total of 40% of the organisations surveyed said they will use just two to three key payments platforms in ten years' time. Currently banks use as many as nine payments platforms.

Barriers to entry to the market are lowering as technology becomes more commoditised. When Swift was set up in the 1970s, it was to be at the cutting edge to be able to complete cross-border payments quickly and securely, said Gareth Lodge, analyst at Celent. "But now with the internet and other technology, businesses can send data and payment files themselves."

Gareth Lodge said companies such as Google and Apple might move into the payments space. "Apple's iTunes has more credit card details than any other website in the world. Companies like Apple rely on banks to process payments, but there might come a point when they build one or buy one."


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