Breaking the Payments Dam: External Forces Transforming the Payments Ecosystem

by Gareth Lodge, November 5, 2015
Industry Trends


The first in a series of reports commissioned by HSBC and written by Celent highlights the external impacts that are likely to be catalysts for major changes in payments over the next few years.

Celent has released a new report with HSBC titled Breaking the Payments Dam: External Forces Transforming the Payments Ecosystem. The report is authored by Gareth Lodge, a senior analyst with Celent’s banking practice.

Most people can think of industries that started out as exciting but became commoditized. Rarely, though, has a commoditized utility emerged to become sexy and take centre stage. Payments are perhaps that so-called overnight success that has taken decades to happen. Pent-up demand for modernization has built to the point where the dam holding back change is under enormous pressure. New entrants and new ways to pay have moved payments from being a dull (but necessary) backwater to a space that has more startups and more investment than almost all other areas of banking put together.

Several factors, not least technology, are driving this dramatic shift. Thirty years ago, banks were at the leading edge. However, in the last decade bank IT has remained static, while customers have accelerated away. In effect, there has been a technological seesaw. This has manifested itself in a number of ways. On the demand side, corporates seek more sophisticated solutions that align with their processes. On the supply side a new breed of suppliers, FinTechs, are entering the market.

The net result is that these FinTechs are starting to make inroads into what has traditionally been a bank-only market, making the corporate payments ecosystem a rapidly evolving space. Yet it’s not clear quite how the forces will affect this complex and finely tuned ecosystem, and how it might evolve in response.

“Some commentators have suggested that banking is facing its ‘Kodak moment,’ that if it doesn’t evolve quickly enough, it is going to be replaced by FinTech firms,” says Lodge. “Celent’s conclusion is somewhat different. Our assertion is that banking will change, but banks themselves will not disappear, at least not all banks. While there are new challenger banks entering many markets, Celent believes there will ultimately be fewer banks. Furthermore, we believe FinTechs and customers should hope that banks don’t disappear because it could be disastrous for both.”

There will undoubtedly be tension among the corporates, banks, and FinTechs because their starting points, strategies, and goals differ. Ultimately, because banks have the most to change, the financial institutions able to adapt most quickly and completely will be those that reap the greatest rewards. However, as the payment dam bursts, every player in the payments ecosystem will need a set of robust strategies and partners to navigate the ensuing rapids.

This report is part of the HSBC Corporate Insights Program which includes reports, webinars and videos. You can learn more by visiting the HSBC program website.

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].

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Table of Contents

The Payments Dam Bursts



Key Research Questions


Today Is Different


Forces Shaping the Future

















The Path Forward



The Banks



The Corporates



The FinTechs



All in This Together


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