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Digitalisation in payments: From interoperability to centralised models?
‘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.
The full article is available to institutions that have subscribed to the journal
Udo Milkau is Head of Strategy and Market Development for the business line transaction banking at DZ BANK. He received his PhD at Goethe University, Frankfurt, and worked as a research scientist at major European research centres, including CERN, CEA de Saclay, and GSI. 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 (EACB) in Brussels and of the Operation Managers Contract Group of the European Central Bank (ECB).
Jürgen Bott is a 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, such as 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 Goethe University, Frankfurt. Before he started his academic career, he worked with JP 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.