Aite Group: Banks Increasingly Find it Hard to Make Mobile Payments Pay…Them.

September 19, 2019         By: Steven Anderson

For the longest time, we wondered if banks were ever going to get in on the mobile payments action. With good reason; while retailers and restaurants and mobile device makers rushed to stake a claim in the still growing mobile payments market, banks seemed to be keeping to the sidelines and leaving scads of money on the table. A new study from the Aite Group, commissioned by Icon Solutions and sent our way, reveals potentially some of the reason why banks weren’t in a hurry.

As it turns out, 65 percent of banks—nearly two out of every three—reported problems making mobile payments and other payments services actually profitable at the bank level. That might sound ludicrous, but banks cited a combination of high costs and low margins as being huge problems, as well as “…increasingly commoditized business models.”

Worse, it’s not a situation that appears to be improving. Just 18 percent of banks believe they can charge what they want for access to mobile payments services, and fully 80 percent agree that payments are actually becoming less profitable of a business as time goes on. Worse, a surprising number of banks don’t actually have much of a payment presence at all; 30 percent report just getting started, and merely 10 percent are in the final stages of establishing a payments presence. That means a lot of tools that may never be released amid reports of declining profitability already.

Under normal circumstances, I would be concerned here about a lack of options in the field making their way to consumers, but in mobile payments, that’s about the farthest thing from my mind. There are options everywhere; that the banks can’t turn a profit on the deal is sad, certainly—Zelle doesn’t seem to be having any trouble at this—but there are more than enough options to fill the gaps in the meantime.