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New customer offerings such as digital wallets or payment gateways have established themselves alongside conventional payments services such as cash management, cards, and point-of-sale (POS) acquiring. Customers have switched an increasing share of their spending from cash to digital payments. Technological advances such as APIs and PaaS have enabled more connectivity across systems and organisations. A proliferation in payments solutions, supporting services, and standards has broadened customer choice and improved user experience and security, but it has also increased the complexity of providing payments services.
The COVID-19 pandemic has intensified a number of trends already evident in the sector. It has accelerated the shift to digital, reshaped customer behaviour, and increased the pressures on banks’ traditional position in the payments business. Banks have strived to respond to these trends, but it is difficult to predict how they will fare if pressures increase still further. The next few years could bring them opportunities to hold and even regain ground in their historical stronghold of payments—or the prospect of losing share to a growing field of competitors providing a wide range of payments products and services for consumers and businesses.
This paper is based on research jointly conducted by the Euro Banking Association (EBA) and McKinsey & Company. It draws on the collective experience of both organisations, along with interviews with industry leaders and representatives from banks and payments specialists. It focuses on three main topics: how banks’ role in the European payments landscape is evolving, what strategic role banks aspire to play in the mid-term future of the industry, and how they could secure the market positioning they seek.
The paper aims to prompt a constructive debate on the future of banks in European payments, act as food for thought on the direction of the sector, and ultimately launch a call for action on industry change. We hope you find it thought-provoking and informative.
