Payments innovation: A comparison of banks and non-banks and how they can learn from each other

Abstract

Payments innovation is a critical driver of economic development and is influenced by banks, non-banks and regulators. Different players have unique capabilities and strengths. This paper will explore how banks, non-banks and regulators can use these unique strengths to contribute to payments innovation. Non-banks play a key role in enhancing existing payment solutions and have a strong track record of identifying customer needs, embracing underserved populations and enhancing payments system efficiency. At the same time, banks also have a strong history of innovation that is sometimes overlooked. Banks control the core payments infrastructure, and bank-led innovation is required for changes to underlying payment systems. Regulators also have an important role to play in enabling payments system innovation without sacrificing safety and soundness. This is all the more important as, even as the pace of new technology evolution accelerates, most payments innovations will be based on a complex interplay between banks, non-banks and regulators. And, while different players may have unique roles to play, banks and non-banks can also learn from each other.