Facing substantial revenue loss, banks need to look at retail payments and collectively prepare for further challenges to their payments franchise, according to financial consultants.
Retail payments include credit and debit cards and demand deposit accounts, Novantas.com reports. In order to retain this pivotal line of business, banks face the challenge of boosting volume and sifting the mix of consumer electronic payments, restructuring products and business models, removing infrastructure cost and focusing on customer relationships.
Banks should work collectively to prepare for future legislative challenges to their payments franchise such as merchants’ inevitable forthcoming initiative to extend interchange caps to credit cards, according to experts.
In addition, banks should prepare for the rapid developments in technology along with strategic moves by the traditional card payment networks that are no longer owned by banks, Novantas.com reports.
New regulations will continue to pose challenges for banks as they stand to lose substantial revenue from their Signature Debit product and are forced to cut debit card rewards programs.
In order to remain viable, banks will need integrated strategies to reposition for a very different future, according to Novantas.com.
New approaches to revenue models, infrastructure rationalization, relationship banking, merchant-friendly innovation and collaborative action have all been recommended by financial consultants.
Republicans in Congress have argued that regulating banks with massive amounts of rules without sufficient time to adapt could be detrimental to smaller financial institutions that don’t have the resources or capabilities to adjust to the changing environment.
“It is important to understand that banks do not oppose commonsense regulations,” Sen. Pat Robert (R-Kan.) said during a floor debate on financial regulation. “They are necessary to ensure that banks are doing their jobs and that consumers receive the proper information and disclosures that are beneficial to them. The problem is that unlike bigger financial institutions, our community banks do not have a large staff of attorneys or compliance officers to help them navigate wave after wave of these new regulations.”