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Most banks don't have the IT infrastructure to support the flood of payments data that will come with mobile payments, analyst Brian Riley warned at a conference today.
May 23
Payments is an ecosystem. If banks don't make friends with digital partners, they'll be in danger of losing their cards business, say analysts at a conference this week.
"If they get displaced, it's their own fault," says Andy Schmidt, a research director in the commercial banking and payments practice at CEB TowerGroup. "The signs have been there for years, because people want to use their mobile devices more and more."
Alternative payments companies are already offering consumers a way to circumvent traditional payments networks, says Schmidt, who spoke with American Banker ahead of TowerGroup's annual conference in Boston.
Banks need to protect their cards business first. But they also need to begin partnering with non-traditional players in order to better reach their existing customers.
"The card networks aren't going to let their issuing banks get disintermediated, but the banks have to do everything they can to get that card to the top of wallet, otherwise they'll be turned into a dumb pipe, used just as a payment source instead of a payment provider," Schmidt says.
Imagine a bank's credit card being used in a mobile wallet, such as PayPal's (EBAY). That card becomes interchangeable with a number of others in the wallet.
Some banks and credit card companies, however, are getting involved.
Most recently, American Express (AXP) has partnered with Zynga (ZNGA)
Discover has a similar card with the social games company.
"Shaping the behavior, that's where I'm seeing a lot of the analysis focusing," says Schmidt. "It's the patterns that people use to buy that banks need to be following, not the age of the person or the income bracket. Those are important influencers, but they are not the driver for why peole buy what they do."
Schmidt will be talking later today during a session entitled: Harnessing Innovation to Grow Your Payments Business.
You can follow me on twitter,@SeanSposito, or follow the hashtag, #CEBTG12, for more news coming out of the TowerGroup Conference.
