Payment strategy for European financial service provider

European financial services company

In the past, financial institutes providing payment services have had distinct roles in the value chain because of regulation, technology and consumer preferences. Over the past years, new fin-tech entrants and next-generation digital payment providers have threatened the status of incumbent companies. Regulatory changes (such as PSD2) opened the payment market to new innovative players, and customers were getting used to the easiness and convenience of new digital payment services. Our client wanted to understand where the payments market was heading and to find a competitive edge in the disrupting market.

Success criteria

  1. Understand the assumptions underlying the current payment strategy

  2. Have a sense of clarity of about plausible scenarios for the future of the payments market

  3. Identify strategic choices and actions that perform well in all scenarios, but also help steer the course of change towards the preferred futures. 

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The client had used scenarios for years, but due to their abstractness, these scenarios had been difficult to utilize in strategic decision-making. Our work was to refine the existing scenarios for the payments market and define concrete pathways through which these scenarios could be attained.

In reviewing the client's existing scenario work, we noted that the focus had been solely on revenue impacts. Consequently, most of the decision recommendations following from this work had been related to cutting costs. To gain a more comprehensive view on strategic decision making, we deepened and broadened the existing scenarios to include all uncertainties that were critical to the finance sector. Moreover, we shifted the perspective to cover multiple business objectives to ensure the long-term viability of strategic decision recommendations.

Based on a desktop study, expert evaluations, back-office work and workshops with the management team, we developed four plausible but dissimilar scenarios describing alternative futures for the payment business with a 10-year time frame. Based on these scenarios, we started analysing which actions and choices should be taken to ensure success in different scenarios, or to increase the probability of most desired scenario being realized.

As a result, we were able to identify robust strategic choices that performed well in all scenarios, and choices that should be kept as strategic options while monitoring change.

The approach helped our client to commit to developing long-term strategic initiatives, and to be prepared for unexpected changes with the identified strategic options.  

 

With the help of model-based decision support, we were able to account for the impact of not taking certain actions, which is a consideration often neglected in decision-making. Moreover, our approach helped accommodate the impacts of proactive actions that could increase the probability of the preferred scenarios. 

 

After the project, the client had a clear execution plan, and each activity had a clear owner.  Furthermore, the modelling process helped the management board to focus their attention on the topics most critical to the strategy and keep up the excellent momentum during the execution phase. 

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