This goes with that......
In 1996, banking companies garnered a whopping 53% of domestic payments business revenues, or nearly $100 billion, according to our estimates, for the single largest slice of the pie. The banking industry derives three-fourths of its payments revenues from net interest income on deposit and credit card accounts. The remainder largely stems from the industry's dominance in check processing. The checkless society, prophesied for two decades, has not arrived . . . and banks have prospered.
Banking strategists will be sorely tempted to delay electronic payments ventures, which often have lower margins, so as to prolong the rich returns they now enjoy from paper-based operations. To the extent that banks help hasten the electronic revolution, the logic goes, they are hastening the obsolescence of their own prized systems, built up over decades.
While we sympathize with that view, the raw truth is that new players and payment methods are already chipping away at the traditional paper-based payments system, and the trend is only going to grow more pronounced. By the year 2000, for example, we project that 65% of U.S. households will use some form of electronic bill payment, up from 38% in 1995. Measured by volume, electronic payments could comprise almost 50% of total non-cash payments, compared with roughly 34% today. Senior managers can either participate in the transition, facilitating customer migrations while developing new skills and business propositions, or they can bury their heads in paper, and let new electronic payments players make wholesale inroads with consumers, businesses and government entities.
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