While disintermediation has largely been contained, changes sweeping the industry suggest that there is even more disruption ahead with potentially more significant impact on banks.

As banking and commerce continue to evolve, the eventual industry leaders will be those that reimagine relationships with their customers and partners, says a new report written by Celent and commissioned by ACI Worldwide. Banks, retailers, and Fintech players need to acknowledge the value they each bring to the relationship, and taking on a collaborative attitude will benefit all parties.

The three-part report explores how payments relationships can be reimagined, focusing on the drivers of the payments ecosystem, namely retailers, banks and Fintech players.

Banks and Fintech players need each other to succeed

Fintech companies, attracted by revenue and opportunities to work with merchants, have made huge inroads into payments, and, in fact, are now “attacking all payment flows,” according to the report. Banks have responded to the Fintech challenge by deploying a range of strategies, from transformation and industry collaboration to an ‘if you can’t beat them, join them’ approach.

“The good news is that Fintech players increasingly appreciate that banks still have a lot to offer, and despite their shortcomings can be valuable partners,” says Zilvinas Bareisis, Senior Analyst with Celent and coauthor of the report.

Retailer-bank relationships have come under pressure

Retail banks have been responsible for most of the payment instruments issued to consumers and used at the merchant tills. Yet, it is corporate banks that have the main relationship with retailers. Even though both sides may belong to the same universal bank, they often operate in silos.

Retailers are increasingly asserting their power and encroaching on bank territory, and regulators seem to be siding with merchants. The pace of change in retailing has meant that merchants have often evolved far quicker than banks – and that comes with significant consequences for banking.

“Now is a pivotal moment to re-define the bank-retailer relationship for the better, as retailers are unlikely to need those banks which aren’t able to change,” says Gareth Lodge, Senior Analyst with Celent and coauthor of the report.

From threats to opportunities

“We believe that now is the time to reimagine the payments relationships between banks, retailers and Fintech,” says Paul Thomalla, SVP Global Corporate Relations and Development at ACI Worldwide. “Banks need to enter into a new era of cooperation with retailers and the new players entering the market. They need to understand that the requirements and interactions with consumers and businesses are changing. Rather than seeing the regulators and the new Fintech players as a threat, banks should embrace the opportunities that the new payments landscape will bring. Only by combining the best aspects of both worlds can they offer today’s savvy customers the services they want.”