The Silver Lining to the Cloud in the Commoditization of Payments

Published by: TowerGroup

Published: Jan. 12, 2009 - 9 Pages

Table of Contents

Report Coverage

Overview of Commoditization in the Payments Industry

Exhibit 1

Commoditization Defined

Separation of Standardization and Commoditization

Standardization to Create a Business

Exhibit 2

The Silver Lining in Commoditization

The Opportunity, Rather than Threat, of Nontraditional Players

Beyond Retooling

Summary

Abstract

The changes that the Single Euro Payments Area (SEPA) initiative requires of banks are much more fundamental than the introduction of new rules and standards.

Banks in Europe have underinvested in payments technology for many years and are now

facing the consequences.

Many banks believe that the changes SEPA mandates commoditize the payments business

and that commoditization will cause them to lose revenue from payments.

Lessons that banks could learn from other industries suggest that commoditization will be

beneficial over the longer term.

Banks can learn from nontraditional players in other commoditized industries to ensure that

they transform more than just technology.

Some painful changes lie ahead for European bankers; those that are unable or unwilling to adapt will likely be losers, but the others will have an opportunity to shape the future of payments on the continent.

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