Finance is not prepared for the coming wave of value destruction

Major shifts in how money moves are coming, and they will likely lower the cost of doing business for retailers who rely on financing and digital payments. Current financial systems are built on high-margin fees for moving money. New blockchain-based rails are set to do to payment processing what the internet did to long-distance calling: make it nearly free. For a merchant, this means the high fees you currently pay to accept certain types of credit or to facilitate cross-border financing could eventually plummet. However, there is a catch. As the cost of moving money drops to near zero, the 'value' in the financial chain shifts away from the transaction itself and toward the person who owns the customer relationship. Banks and traditional lenders are currently unprepared for this loss of fee income. They will likely try to recoup these losses elsewhere. For retailers and operators, the takeaway is clear: the infrastructure of payments is becoming a commodity. Your power lies in your direct relationship with the consumer, not the specific payment tech you use. You should expect a future where transaction overhead is minimal, but competition for the customer's attention becomes even more expensive.

Source: American Banker — Top News

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