If one were to look closely at PayPal’s success story, from its early outset through its monumental growth, there are two areas where their business model has excelled in delivering big ROIs. First, the e-commerce giant has been driving product portfolio development closely aligned with evolving needs of customers. Second, the company places strong emphasis on tapping new growth opportunities in latest technologies and emerging markets to balance downward pressure on margins and fees.
Incidentally, the 2013 World Payments Report also highlights these two approaches as key drivers for banks and financial services providers, if they are to gain a competitive edge in the fast evolving payments market. So what lessons can the banking industry draw from PayPal? What insights and knowledge can banks derive from the company’s steady pace of growth to redefine their approach to truly differentiate themselves? Let’s take a look at four aspects:
Changing customer expectations and shrinking profit margins are forcing banks to strengthen their focus on innovation and achieve customer-centricity to truly differentiate themselves. Some banks are already taking a leaf out of PayPal’s book and looking at innovation and customer focus as a strategic differentiator in the payments business. For example, clearXchange is one such P2P payment network in the U.S. where three major banks – JPMorgan Chase, Bank of America and Wells Fargo & Co. – have collaborated to create a new P2P cash transfer product, which allows users to transfer funds through a web-based system. Another such payment provider is Paylib, where three banks in France have launched a web-based payment system that allows users to make payments using login details and password instead of having to enter their credit or debit card details.
While these developments are undoubtedly driving a shift in the mindset of major banks, it’s time they make swift efforts to leverage new technologies and improve customer experience, without compromising security and compliance.
Tags- e-commerce Innovation Mobile wallet Mobility Online payment Payments market Security