With Faster Payments
going live on 27th May, the question the banks are really struggling with is how
to make money.
FPS means that banks no longer make money on their float, as we are talking
D. Not D+1, 2 or 3 or more. Just D, as in Just Do It and Do It Now. FPS means that payments are processed in fifteen
seconds by the processor, and the end-to-end cycle to process a
payment from origination to receipt and confirmation will average around
two hours.
Like SEPA, it means a massive investment for
negative returns for most banks. The reason I say that it is like SEPA is that
Eurozone banks will no longer be making margin on cross-border processing.
Then there was the news yesterday that UK banks have lost
their test case on overdraft charging. It is already estimated that UK banks
have returned over £750 million in “unfair charges” to retail customers. This
announcement may not only result in billions more being returned, but also
fundamentally challenges the fee structures for UK banking.
Add on to this the fact that banks no longer claim to be making money from
the spread of buy and sell prices due to MiFID’s transparency of trade reporting
and best execution*, and you have to ask yourself: how is a bank to make money
these days?
Maybe through diversification?
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...
