Apr 232012
Payments Offer a Unique Opportunity for Community Banks and Credit Unions to Compete and Win

Financial Institutions – particularly Community Banks and Credit Unions – continue to face significant margin pressure, especially post Reg E and Durbin.  Boston Consulting Group (BCG) analysis predicts that Banks can expect a 2% decrease in annual revenues while transaction volumes will increase 9% annually over the next 10 years.  McKinsey & Co predicts that Durbin will result in as much as 50% margin erosion, and Oliver Wyman’s 2011 study shows that Reg E has already resulted in a 45% reduction in income, even for Banks not subject to Durbin. Louis Blatt, SVP of ACI Worldwide, in a BankNews article notes that explosion in demand for payments from Consumers and Small Businesses can be a boom for Community Banks and Credit Unions.  Digital payments offer Financial Institutions (FIs) the opportunity to compete against new entrants (such as PayPal, Square, Isis and others) who are already causing significant market disruption and applying downward pressure on pricing.  Moreover, person-to-person (P2P) transactions and mobile payments offer a unique opportunity for smaller FIs to reassert themselves. Mr. Blatt notes that Yankee Group estimates $1 trillion (that’s with a t) in mobile payments by 2015, while Gartner suggests that mobile transactions will exceed $630 billion.  Regardless [Read More…]

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