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The future of European payments: Strategic choices for banks — McKinsey & Company

The future of European payments: Strategic choices for banks — McKinsey & Company

This paper is based on research and analysis undertaken by McKinsey & Company and the Euro Banking Association between November 2019 and November 2020.

Payments and accounts services are at the core of banks’ offering to customers. They contributed about a third of European banks’ total revenues in 2019, and represent banks’ leading source of customer interactions.

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Description

Banks’ payments revenues have grown steadily at about 3 percent per year over the past six years. However, some specialist payments providers—processors, acquirers, schemes, and others—have achieved double-digit growth rates over the same period. This suggests that banks’ traditional role at the centre of the payments ecosystem may be coming under challenge.

High ambitions, significant challenges Almost two-thirds of the executives and experts who were surveyed as part of the research for this paper believe that banks will continue to be the leading players in European payments over the next five years.

However, survey respondents and interviewees identified a number of challenges faced by banks. These included increasing competition (especially from tech companies and fintechs), the rise of technologies that could allow other payments providers to come between banks and their customer relationships, the lack of flexibility in banks’ operating models, the constrained revenue environment, rising customer expectations, and the complex regulatory outlook. Executives also identified gaps in the capabilities and practices needed to grow their payments business, especially in technology, organisational agility, and monetisation models.

Additional information

Language

English

Pages

23

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