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Digitalisation in payments: From interoperability to centralised models?
Journal of Payments Strategy & Systems,
9
(3),
321-340
(2015)
Abstract
‘Digitalisation’ seems to be the current buzz word, and it is used
to discuss various things from 3D printers via always-on health
sensors powered by smartphones to challenges in financial services
by new ‘non-bank’ players (so-called FinTechs), which track
relationships with the clients. Payments, as an electronic product
offered by banks for decades, are taken here as the subject of
study to analyse the impact of digitalisation and future
developments in payments. This is based on three examples
representing three antagonistic concepts: interoperability,
centralisation, and distributed systems. The examples highlighted
here are: first, the implementation of the Single Euro Payments
Area in Europe and a comparison between some original objectives
with the current status of realisation; second, the development of
so-called business platforms, such as Google or Facebook, which
facilitate exchange between the agents in a multi-sided market;
third, the emergence of digital currencies such as Bitcoins with
decentralised ledgers and decentralised consensus systems used as
means of payment. For all three examples, the form of
digitalisation, the current implementation, potential limitations
and future development paths are compared. Finally, the question of
what a future payments ecosystem will look like and whether there
will be a shift from interoperability to centralised models are
discussed with the clients.
Keywords: digitalisation; intermediation; taxonomy of payment systems; interoperability; business platforms; decentralised public ledgers
The full article is available to subscribers to the journal.
Author's Biography
Udo Milkau is Head of Strategy and Market Development in Operations/Services, the transaction banking business segment at DZ BANK. His responsibilities include, but are not limited to, the ‘quantitative’ strategic development of DZ BANK’s transaction banking. After his academic education in physics, he worked as a research scientist and performed experiments in large collaborations at major European research centres, including CERN, CEA de Saclay and GSI. He received his PhD at Goethe University, Frankfurt. Thereafter, he held management positions in the automotive industry and consulting firms before joining DZ BANK. He is also a part-time lecturer at Goethe University Frankfurt, where he delivers courses in transaction banking, and is a member of the Payments Services Working Group of the European Association of Co-operative Banks in Brussels and of the Operation Managers Contract Group of the European Central Bank.
Jürgen Bott is professor of finance management at the University of Applied Sciences in Kaiserslautern. As visiting professor and guest lecturer, he has associations with several other universities and business schools, eg IESE in Barcelona. He studied business administration at the Julius Echter University of Würzburg, and statistics and operations research at Cornell University (New York). He received his doctorate degree from the Goethe University of Frankfurt. Before he started his academic career, he worked with J. P. Morgan, Deutsche Bundesbank and McKinsey & Company. He was involved in projects with the International Monetary Fund and the European Commission (EC) and is an academic adviser to the EC, helping to prepare legislative acts or policy initiatives on banking issues.
