BANKS DOMINATE PAYMENTS — THAT NEEDS TO CHANGE

For decades, banks have held a firm grip on the payments landscape. Opinion: E-money issuers should have the ability to convert your tokens to cash without relying on traditional banks. Cointelegraph on LinkedIn: Banks dominate payments That needs to changeThey’ve been the gatekeepers, the intermediaries, and the institutions that have dictated how money moves from one entity to another.This dominance, while historically necessary, is increasingly becoming a hindrance to innovation, financial inclusion, and overall efficiency.The digital age demands a more agile, accessible, and democratized payments ecosystem.As customer expectations evolve and technology advances, the traditional banking model is struggling to keep pace. As those changes occur, pay-by-bank options, also known as account-to-account payments, are likely to get more attention. A2A payments will soar in 2025, partly because of increased interest from stakeholders such as central banks, consumers and commercial banks, analysts at S P Global Market Intelligence predicted in a report last month.We're seeing a surge in alternative payment methods, from digital wallets to account-to-account (A2A) transfers, and the rise of non-bank payment providers who are eager to disrupt the status quo.The future of finance hinges on dismantling the barriers that banks have erected, fostering a more competitive environment, and empowering consumers and businesses with greater choice and control. Banks dominate payments That needs to change. The case for non-bank access to central bank settlement accounts in the EU is stronger than ever.It's time to explore why this shift is crucial, how it's unfolding, and what the future holds for a payment landscape less reliant on traditional banking institutions. Banks dominate payments That needs to change Making accounts at Europe s central banks accessible to payment companies such as stablecoin issuers would be a boon to financial stability.This article will delve into the reasons behind the need for change, the emerging trends shaping the future of payments, and the potential benefits of a more open and accessible system.

The Case for Payment System Diversification

The argument for moving away from bank-dominated payments isn't about dismantling banks entirely, but rather about creating a more level playing field where innovation can thrive. The case for non-bank access to central bank settlement accounts in the EU is stronger than ever. There is a broad consensus in the EU Parliament that such a Banks dominate payments That needs to changeSeveral key factors contribute to the urgency of this change:

• Innovation stagnation: Banks, often burdened by legacy systems and regulatory constraints, can be slow to adopt new technologies.This can stifle innovation and prevent consumers and businesses from benefiting from more efficient and user-friendly payment solutions.
• Limited access: Traditional banking services aren't always accessible to everyone.Underbanked and unbanked populations often face significant hurdles in accessing basic financial services, including the ability to make and receive payments.A more diverse payments ecosystem can help bridge this gap.
• High costs: Bank fees and transaction costs can be a significant burden, especially for small businesses and low-income individuals. AI has killed the industry : EasyTranslate boss on adapting to change. SeptemAlternative payment methods can offer lower fees and more transparent pricing.
• Lack of competition: The dominance of a few large banks limits competition and reduces consumer choice. other digital payments more frequently as checks move toward extinction and cash finds its floor. Trend 2: Regulators bring nonbanks into the fold Expanded scope of banking regulation, to include nonbanks, will change the players of the payment market as some nonbank payment providers leave due to increased regulation.A more diverse ecosystem fosters competition, leading to better services and lower prices.
• Systemic risk: Over-reliance on a small number of institutions creates systemic risk.If one or two major banks experience problems, the entire payments system can be disrupted. Banks dominate payments That needs to change. Strategy/Growth/BD. Founder/C-Level. ex Big 4. The future of finance - Bitcoin crypto markets.A more decentralized system is more resilient to shocks.

Consider the example of stablecoin issuers. Payments in 2025: 5 Strategic Priorities for Bank Execs In a new report, Deloitte interweaves several trends in and around the payments space to argue that banks need to move aggressively on multiple fronts including product development, technology and partnerships, CX and fraud prevention or risk losing their grip on retail banking customers for whom payments is the core of theirCurrently, these entities often rely on traditional banks to convert tokens to cash.This dependence creates friction and introduces potential bottlenecks.Allowing stablecoin issuers direct access to central bank settlement accounts would streamline the process, reduce costs, and enhance financial stability. The most successful approach to payment modernization involves senior executive sponsorship and a clear recognition of the need for change in providing financial services. By bringing all payment systems under unified governance and establishing a transformation path that can eventually phase out legacy systems, large banks can reduceThe broad consensus in the EU Parliament highlights the growing recognition of this need for legislative change.

The Rise of Account-to-Account (A2A) Payments

One of the most promising alternatives to traditional card-based payments is the rise of Account-to-Account (A2A) payments, also known as pay-by-bank options.These payments bypass the traditional card networks and allow consumers to directly transfer funds from their bank accounts to merchants or other individuals. Banks dominate payments That needs to change. Strategy/Growth/BD/CMO. Founder/C-Level. ex Big 4. The future of finance - Bitcoin crypto markets.Several factors are driving the growth of A2A payments:

• Increased security: A2A payments often offer enhanced security compared to card payments, as they eliminate the need to share sensitive card details.
• Lower fees: A2A payments typically have lower transaction fees than card payments, making them attractive to merchants and consumers.
• Real-time settlement: A2A payments can often settle in real-time, providing faster access to funds for merchants.
• Growing adoption: Consumers and businesses are increasingly adopting A2A payments as they become more aware of their benefits.

Driving Forces Behind A2A Growth

The projected surge in A2A payments in 2025 is fueled by several key stakeholders:

• Central banks: Central banks are increasingly interested in A2A payments as a way to promote financial innovation and reduce the reliance on traditional card networks.
• Consumers: Consumers are drawn to the security, convenience, and lower fees of A2A payments.
• Commercial banks: While some banks may initially resist the shift to A2A payments, others are embracing it as an opportunity to offer new services and attract customers.

For example, imagine a small business owner who currently relies on card payments and pays high transaction fees.By offering A2A payments as an alternative, they can significantly reduce their costs and attract price-sensitive customers.Similarly, consumers can benefit from the added security and convenience of paying directly from their bank accounts without sharing their card details.

The Decoupled Payments Era: Beyond the Bank Account

The payments industry is on the cusp of a ""decoupled era,"" where payments are progressively disconnected from traditional bank accounts and dominated by a few winning technologies.This doesn't mean the end of banks, but it does signal a significant shift in their role.

Key Characteristics of the Decoupled Era

• Focus on customer experience: Customer expectations are driving innovation in the payments space.Consumers demand seamless, convenient, and personalized payment experiences.
• Technology-driven: New technologies, such as blockchain, artificial intelligence, and cloud computing, are enabling new payment solutions and driving down costs.
• Platform-based: Payment platforms are emerging as central hubs for connecting consumers, merchants, and financial institutions.
• Data-driven: Data analytics are being used to personalize payment experiences, detect fraud, and improve efficiency.

This decoupling is driven by the need for greater flexibility and innovation.Think of the rise of digital wallets like Apple Pay and Google Pay. The fast-changing payments industry is on the cusp of a new decoupled era, 1 On the cusp of the next payments era: Future opportunities for banks, McKinsey, Septem. in which payments will be progressively disconnected from accounts and dominated by a few winning technologies. In this context, customer expectations willThese wallets allow users to store multiple payment methods and make payments with a single tap. In 2025, debit cards remain the dominant payment method, used by 53% of respondents, followed by bank transfers and credit cards at 39% and 33%, respectively. Digital wallets are also gaining traction, particularly among younger demographics, with 34% of respondents aged using them compared to only 21% in the age group.They are a prime example of how payments are becoming increasingly disconnected from the underlying bank account. 835 subscribers in the Satoshi_club community. Satoshi Club is a community that connects blockchain companies with a large pool of cryptoSimilarly, buy-now-pay-later (BNPL) services offer consumers a way to finance purchases without using a credit card.

The Role of Regulation and Non-Bank Payment Providers

Regulators are playing an increasingly important role in shaping the future of payments. Banks dominate payments That needs to change. Opinion: E-money issuers should have the ability to convert your tokens to cash without relying on traditional banks.They are tasked with balancing the need to foster innovation with the need to protect consumers and maintain financial stability.

Bringing Non-Banks into the Fold

One key trend is the expanded scope of banking regulation to include non-bank payment providers. The case for non-bank access to central bank settlement accounts in the EU is stronger than ever. There is a broad consensus in the EU Parliament that such a legislative change is necessary. I wrote down my thoughts on the topic for Cointelegraph: 3 of the 4 largest-ever U.S. bank failures occurred in the past 2 monthsThis can have both positive and negative consequences:

• Positive: Increased regulation can help protect consumers and ensure the stability of the payments system.
• Negative: Increased regulation can increase costs and compliance burdens for non-bank payment providers, potentially driving some out of the market.

However, this regulation is often necessary to ensure fair competition and consumer protection.Imagine a scenario where a non-bank payment provider is not subject to the same regulatory requirements as a traditional bank.This could create an uneven playing field and allow the non-bank provider to offer riskier or less transparent services.

The Evolving Payment Preferences of Consumers

Understanding consumer payment preferences is crucial for businesses looking to thrive in the evolving payments landscape.While debit cards currently remain the dominant payment method, several trends are worth noting:

• Digital wallet adoption: Digital wallets are gaining traction, particularly among younger demographics. The case for non-bank access to central bank settlement accounts in the EU is stronger than ever. There is a broad consensus in the EU Parliament that such a legislative change is necessary.They offer convenience and security, making them an attractive alternative to traditional payment methods.
• Decline of cash and checks: Cash and checks are becoming less popular, as consumers increasingly prefer digital payment methods.
• Demand for seamless experiences: Consumers expect seamless and convenient payment experiences, regardless of the payment method they choose.

For example, younger consumers are more likely to use digital wallets for everyday purchases, while older consumers may still prefer debit cards.Businesses that cater to a diverse customer base should offer a variety of payment options to meet their needs and preferences.

How Banks Can Adapt and Thrive in the New Payments Landscape

While the rise of alternative payment methods may seem like a threat to traditional banks, it also presents an opportunity for them to adapt and thrive.Here are some key strategies that banks can pursue:

• Embrace innovation: Banks need to embrace new technologies and develop innovative payment solutions to meet the evolving needs of their customers.This could involve partnering with fintech companies or developing their own in-house solutions.
• Focus on customer experience: Banks need to prioritize customer experience and offer seamless and convenient payment options across all channels.
• Offer A2A payments: Banks should actively promote and offer A2A payments as an alternative to card payments.
• Develop platform-based solutions: Banks can create payment platforms that connect consumers, merchants, and other financial institutions.
• Leverage data analytics: Banks can use data analytics to personalize payment experiences, detect fraud, and improve efficiency.

Internal Changes for Payment Modernization

Successful payment modernization requires a holistic approach, starting from within the organization:

• Senior executive sponsorship: Securing buy-in and support from top-level executives is crucial for driving meaningful change.
• Unified governance: Bringing all payment systems under a single, unified governance structure ensures consistency and efficiency.
• Phasing out legacy systems: A clear transformation path that gradually phases out outdated legacy systems is essential for long-term success.

For example, a bank could partner with a fintech company to offer a new mobile payment solution that integrates seamlessly with its existing banking app.This would allow the bank to offer its customers a cutting-edge payment experience without having to completely overhaul its existing infrastructure.

The Benefits of Non-Bank Access to Central Bank Settlement Accounts

Granting non-bank payment providers access to central bank settlement accounts can bring several benefits:

• Reduced costs: Direct access to central bank settlement accounts eliminates the need to rely on intermediary banks, reducing transaction costs.
• Faster settlement: Direct access allows for faster settlement of payments, improving efficiency.
• Increased competition: Access to central bank settlement accounts levels the playing field, fostering competition among payment providers.
• Enhanced financial stability: A more diverse payments ecosystem is more resilient to shocks and less reliant on a small number of institutions.

Imagine a small e-money issuer that currently relies on traditional banks to process its transactions.By gaining direct access to central bank settlement accounts, it could significantly reduce its costs and offer more competitive pricing to its customers.This would benefit both the e-money issuer and its customers.

The Future of Payments: Predictions and Trends

The future of payments is likely to be shaped by several key trends:

• Increased adoption of digital wallets: Digital wallets will continue to gain traction, becoming the preferred payment method for many consumers.
• Growth of A2A payments: A2A payments will continue to grow in popularity, challenging the dominance of card payments.
• Expansion of blockchain technology: Blockchain technology will be used to develop new payment solutions, such as stablecoins and decentralized payment networks.
• Increased use of artificial intelligence: AI will be used to personalize payment experiences, detect fraud, and improve efficiency.
• Greater regulatory scrutiny: Regulators will continue to closely scrutinize the payments industry, ensuring consumer protection and financial stability.

The pace of change in the payments industry is accelerating, and businesses that adapt to these trends will be best positioned for success.The future belongs to those who embrace innovation and prioritize customer experience.

Conclusion: Embracing a More Open and Competitive Payments Ecosystem

The dominance of banks in the payments landscape is increasingly becoming a constraint on innovation and financial inclusion.The rise of alternative payment methods, such as A2A payments and digital wallets, is challenging the traditional banking model and paving the way for a more diverse and competitive ecosystem.Regulators are playing a crucial role in shaping this evolution, balancing the need to foster innovation with the need to protect consumers and maintain financial stability.For banks to thrive in this new landscape, they must embrace innovation, prioritize customer experience, and adapt to the evolving needs of their customers.By fostering a more open and accessible payments ecosystem, we can unlock new opportunities for economic growth and financial inclusion.The key takeaways are:

• Banks need to adapt: Sticking to legacy systems will lead to stagnation.
• A2A payments are growing: Embrace the trend and offer this option to customers.
• Regulation is evolving: Stay informed and compliant with the latest regulations.
• Customer experience is paramount: Offer seamless and convenient payment options.

The future of payments is not about replacing banks entirely, but about creating a more level playing field where innovation can flourish and consumers and businesses have greater choice and control.It’s time to embrace the change and build a payments ecosystem that is more efficient, accessible, and equitable for all.