“Traditional players tend to be fast followers or slow followers as opposed to inventing something new and driving it,” says Drew Luca, a Principal in PWC’s Banking Strategy Technology and Operations practice and co-leader of PwC’s U.S. Payments Practice. He notes that the up-and-comers are the ones creating new ways of doing things in payments.
Kathleen McDowell, a director in PwC's Financial Services Payments Advisory Practice, says that technology is driving the innovation. Social commerce has fundamentally changed consumer behavior, even in terms of payments.
These phenomena are creating the opportunity for disintermediation of traditional players in the payments arena.
In Luca’s opinion, traditional players are going to struggle to move fast enough to remain relevant. “They’re at an inflection point, which says they either have to determine that they’re going to become much more innovative and much more rapid than they historically have moved,” he notes.
He believes that the idea of being able to plan for a long horizon is what will cause the traditionals to struggle to remain relevant. “If they can’t, they likely will be relegated to utility status, which is not what they want to be,” Luca says.
Both McDowell and Luca caution traditional players to be careful, and to continue to leverage an important competitive advantage they hold: trust.
“A lot of their brands and success is trust and reliability,” he says. “Treating the emerging the same as the core business, it’s a recipe for failure and disintermediation. Having the ability to move faster and be innovative and relevant while still maintaining reliability and trust is a big component.”
“You have to innovate but if you move too quickly or recklessly, you’re losing your competitive advantage,” echos McDowell. “People still look at the traditional players as a secure way to transact.”
Among the macro trends in payments is in R&D. While innovation used to be corporate driven and top down, it now is bottom up, and is driven by consumers.
McDowell notes that traditional players must figure out how to find social advocates, how to engage with consumers where they want to, and who their partners should be.
Traditional players and some new up and comers will convene at CARTES 2012, Paris, Nov. 6-8.
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