A joint white paper produced by Boston Consulting Group (BCG) and SWIFT has examined the forces in international payments that are driving profound changes to the banking industry as a whole and specifically to mid-sized banks. The white paper, called 'International Payments: Accelerating Banks’ Transformation', reviews the forces reshaping the international payments landscape, including the emergence of fintech competition, globalisation of trade, digitalisation of interfaces, client expectations for more transparency, increasing regulatory activism, new technologies like open APIs, and cybersecurity.
The paper concludes that banks will have to change their business models significantly. Global transaction banks, though well-positioned to address change because of their size and scale, still need to ensure successful integration of new technologies. Smaller banks will need to continue to maximise their close relationships with preferred customers while outsourcing their subscale international payments operations to larger players. The situation of mid-sized banks is the most problematic. As banking becomes more automated and regulated, their costly branch networks and lack of scale is putting them at a serious disadvantage. These banks may perhaps need to consolidate and transform their business models in order to maintain relevancy in tomorrow's international payment landscape.
Other findings in the report include that cross-border payments, FX transactions and trade services delivered revenues of US$145bn in 2016 and this revenue is expected to grow at a rate of 6% per annum until 2022. However, as banks face increasing competition, an alignment of international payments on domestic price levels could generate a 60% revenue loss, as international payments account for 5% of transactions in volume but represent 12% of the revenues banks derive from payments.