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Retail payments innovations and the banking industry

  • Cathy Lemieux
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    This study examines the impact of new payments technologies on the value of banking industry. Chakravorti and Kobor (2003) find that payment providers offer new payments products most often as a bundled service offering in order to retain their customers and with the expectation of increased long-term profits. Rice and Stanton (2003) estimate that payments revenue accounts for approximately 16 percent of operating revenue. According to Rice (2003), payments activities affect the value of the banking franchise and estimates of profit efficiency. A cross-section of bankers surveyed by Kellogg (2003) indicates four key concerns related to emerging payments technologies: changing delivery channels and safeguards, fraud, vendor oversight and operational risk measurement and reporting. Lemieux (2003) identifies network vulnerabilities as having resiliency implications. These five studies highlight how income from payments activities is becoming a significant portion of banks' revenue and show that the lines between banks and nonbanks are becoming increasingly blurred.

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    Article provided by Federal Reserve Bank of Chicago in its journal Emerging Issues.

    Volume (Year): (2003)
    Issue (Month): ()
    Pages:

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    Handle: RePEc:fip:fedhei:y:2003:n:eps-2003-1a
    Contact details of provider: Postal: P.O. Box 834, 230 South LaSalle Street, Chicago, Illinois 60690-0834
    Phone: 312/322-5111
    Fax: 312/322-5515
    Web page: http://www.chicagofed.org/
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    1. Tara Rice, 2003. "The importance of payments-driven revenues to franchise value and in estimating bank performance," Emerging Issues, Federal Reserve Bank of Chicago.
    2. Tara Rice & Kristin Stanton, 2003. "Estimating the volume of payments-driven revenues," Emerging Issues, Federal Reserve Bank of Chicago.
    3. Kenneth N. Kuttner & James J. McAndrews, 2001. "Personal on-line payments," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 35-50.
    4. Paul Kellogg, 2003. "Evolving operational risk management for retail payments," Emerging Issues, Federal Reserve Bank of Chicago.
    5. Sujit Chakravorti & Emery Kobor, 2003. "Why invest in payment innovations?," Emerging Issues, Federal Reserve Bank of Chicago, issue Jun.
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