Banks Payments-Driven Revenues

February 27, 2003

Abstract

New York, NY, USA February 27, 2003

Banks' Payments-Driven Revenues: Why Banks Need Payments Czars

US banks are losing revenues as the check’s popularity wanes. Over the next 5 years, US banks will miss out on US$900m in revenues as a result of electronic payments and check conversion. Celent urges banks to appoint a payments czar with P&L responsibility to stay in control of these changes.

In a new report, "Bank’s Payments-Driven Revenues: Why Banks Need Payments Czars" Celent analyzes the impact of e-payments and check conversion on banks’ revenues. The report scrutinizes the consumer check value chain, reviews the segments where banks’ revenues and profits will be affected, and provides recommendations.

Banks currently derive US$4.2bn in annual fees from consumer checks. Revenues come from checkbook distribution, check deposits by merchants, retail lockbox services, and non-sufficient funds (NSF) fees. However, the lack of integration across payment units makes it very difficult for banks to develop a consistent strategy to preserve and enhance payments revenues.

"As consumers choose e-payments over checks, banks are missing out on revenues,"

comments Gwenn Bézard, Celent Senior Analyst and author of the report. "This trend will persist over the next few years as the check goes away, especially because US banks are overly dependent on non-sufficient funds (NSF) fees. US Banks make significant money from NSF fees. And some e-payment alternatives, such PIN-debit and bank-supplied online bill payment, are NSF foes."

Celent urges banks to appoint a payment czar with profit & loss responsibility for all payments services currently scattered across various business units.

The 34-page report contains 30 figures and tables.

A is available online.

of Celent Communications' Retail Banking and Wholesale Banking research services can download the report electronically by clicking on the icon to the left.  Non-members should contact info@celent.com for more information.

        

Send mail to info@celent.com with questions or comments about this Web site.

 

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
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Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
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Tel.: +81 3 3500 3023

Table of Contents

 

  New York, NY, USA February 27, 2003

Banks' Payments-Driven  Revenues

Return to report Abstract

 

EXECUTIVE SUMMARY 3
INTRODUCTION 4
VALUE CHAIN ANALYSIS 5
  Revenues by Segment 5
  Profit Margins by Segment 10
  Risk Analysis 13
POINT-OF-SALE REVENUES 14
  Check Conversion to ACH 14
  PIN-Debit 17
BILL PAYMENT REVENUES 23
  Conversion at Retail Lockbox 23
  Online Bill Payment and Direct Debit 25
KEY FINDINGS 31
CONCLUSION 33
 

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