The PAYTECH Book

The Future of Digital Payments Market Infrastructures

By Jonathan Liebenau

Reader in Technology Management, London School of Economics and Political Science

Dana Lunberry

PhD Candidate, London School of Economics and Political Science

and Daniel Gozman

Senior Lecturer, University of Sydney

Introduction

Payment market infrastructures (PMIs) are facing considerable turmoil and are under a great deal of pressure to be updated. There are three reasons for this:

1. New attitudes towards regulatory scrutiny from central banks and regulators.
2. New business models associated with FinTechs and especially challengers such as Ripple.
3. New technologies that offer new control mechanisms and promises of cheaper, faster, more transparent and less risky methods.

Below we explore how the rise of digital banking, emerging payments alternatives and some aspects of the service economy are likely to lead to substantial changes in PMIs in future.

The Rise of Digital Banking

Digital banking is reinventing the financial industry as we know it.

Digital banking is substantially different from “digitalized banking”, which involves updating legacy products, services and processes to become digital. Digital banking uses new business models and digital technologies that give more choice for organizations because they are more flexible and malleable than technologies of the past.

Digital technologies also enable organizations to integrate in new ways, allowing structures to cross-subsidize each other. They ...