Borderless banking: How banks can meet the challenges of regulation and payments commoditisation through increased cooperation

In Europe, the payments services offered by banks are going through a period of transition that affects both domestic and international services. This paper looks at the impact that these changes are having on current and future services, and the potential effects on the international banking industry as a whole. In particular, the paper considers the impact of increased regulation, notably SEPA, Basel II and MiFID. It looks at the interplay between the regulatory environment and the increased levels of globalisation in both the banking industry and its customer base, and examines the challenges presented by the increased commoditisation of homogenised, mass-process services and the need for greater investment in technology and other support services to meet corresponding changes in customer demand. The paper then examines the alternative methods for meeting these conflicting demands and the new environment in which banks now operate, and presents the view that significant, often radical, change is required in the way banks work with each other. It puts forward the idea that a model of ‘coopetition’ that requires a greater degree of interoperability and cooperation among previously competing institutions is required, and presents examples of where these models have already been successfully deployed. Finally, the paper offers the reader a critical assessment of the various forms that these collaborative relationships can consider adopting, including the correspondent model, partnerships, joint ventures, white labelling agreements, and shared infrastructure solutions.