Barclays’ tie-up with former rival Paypal is a sing that unusıal couplings will become an increasingly common feature among FIs
There’s an old piece of advice that says ‘keep your friends close and your rivals even closer: Institutions across the financial services sector are taking that very much to heart.
Old enmities are being replaced by groundbreaking alliances, as incumbent banks, tech firms and newcomers recognise the need to co-operate to thrive in the new financial services landscape being shaped by the revised Payment Services Directive (PSD2) and the Open Banking environment.
According to PwC, 82 per cent of banks, insurers and asset managers intend to increase their partnerships with fintechs over the next three to five years. Not surprisingly, consumer banking and payments are the areas of most interest because that’s where banks themselves admit they could lose up to 24 per cent
of their business if they fail to adapt to new consumer-focussed freedoms.
With a watchful eye on the ‘triple A’ retailers, Amazon, Apple and Alibaba, growing their financial services, the trend for ‘frenemies’ to agree a truce and co-operate is one that Barclays followed earlier this year when it teamed up with payments provider PayPal.
The agreement will enable consumers in the UK and the United States, and small businesses in Britain, to view and manage their PayPal and bank accounts more easily through Barclays’ digital channels, and for consumers to use Barclays’ products in their PayPal digital wallet to pay online, by mobile or in the bank’s Pingit app.
They can seamlessly add Barclays credit and debit cards to their PayPal wallet, update them automatically in PayPal, and the card image will appear in the PayPal wallet so they can easily select their preferred way to pay.
In the US, the bank’s customers will also be able to redeem Barclays rewards via PayPal.
PayPal’s UK small business customers will now be able to choose to see a snapshot of their PayPal balance, recent transactions and sales on the Barclays SmartBusiness Dashboard and move seamlessly from the Dashboard to their PayPal account for further insights.
Barclays is the first bank in the UK to collaborate with PayPal in this way.
At the time of the launch, Ashok Vaswani, Barclays’ UK CEO, said:”Our customers and clients live in an increasingly connected world and this is why we are working with PayPal to make services more joined up and convenient for them. By joining forces, we can make it easier for people to manage their money and payments.
“Each of these new features, whether removing the hassle of updating an expired card, connecting with Pingit, or being able to see all your finances in one place, are about designing the very best customer experience:’
In many ways, Vaswani’s comments
“It is becoming increasingly common to hear the names of incumbents mentioned in the same sentence as powerhouse innovators underplay the full implications of such a development, which goes beyond Open Banking. Collaborations, such as that between his bank and PayPal, are revolutionising the approach banks take and, as a result, dynamically altering customer experience of the sector.
As for PayPal, this is not its only such partnership with a mainstream bank that was at one time seen as a rival.
It has also worked with Bank of America, Citi, JPMorgan Chase and HSBC, all of whom acknowledge the logic in teaming up with a payments giant that handles $132billion of the $.1.8trillion transactions made annually to better serve their own customers’ needs.
PayPal has also, though, sent $3billion to 115,000 small businesses in loans of up to $125,000 since 2013 under its PayPal Working Capital scheme for which businesses pay a small setup fee but are not charged interest. It can do this because it can see what sales a company is making through its PayPal account. In the spirit of disclosure between friends, perhaps Barclays could also see some advantage in this.
It is becoming increasingly common to hear the names of an incumbent bank mentioned in the same sentence as those of powerhouse innovators such as Amazon (JPMorgan Chase) and Apple (Goldman Sachs). That has obviously not been lost on PayPal – which in the pre-digital era was once dubbed one of the 10 worst business ideas. It doesn’t look so dumb now – the company is clearly pursuing a clever first-strike strategy when it comes to alliances between major technology firms and big banks.