Assessing the impact of non-banks on the payments business: The challenge to safety, efficiency, customer loyalty and payment revenue streams

This paper explores the impact of non-banks in the payments/transactional banking arena and some of the business models they use. These non-traditional bank competitors include: retailers, mobile phone operators, beneficiary service providers, payment service providers, system operators, direct debit and other bureaus, payroll service providers, money transfer service providers, etc. A high level overview of each of these ‘new’ competitors is given and then a brief synopsis of some of the risks inherent in the services provided. The impact these competitors are having on banks, the financial services industry and other stakeholders and other issues need to be considered, namely the needs they have identified and are fulfilling where banks have not played or cannot easily play; more specifically, the unlevel playing field they compete in with banks, due to little or no regulation and/or regulatory oversight of these players and the effects on the risk, safety and efficiency of the payment system. How can the services they offer be fulfilled in a more appropriate risk-based manner, what can these competitors learn from each other and how could regulators possibly address the issues to enable the non-banks to fulfil the identified needs but ensure risks are adequately addressed?