The payments landscape is evolving at a dizzying rate right now. The Open Banking revolution has ushered in a flood of innovation in how we manage and transfer our money. Changes in regulation have come in tandem with technological leaps and bounds, bringing an era where, finally, consumers and businesses have access to a diverse range of flexible, forward-thinking financial options.
Wondering what to expect from payments in 2019? Let’s take a look at some trends you should keep an eye out for.
Streamlined, Seamless User Experience
We don’t have time to wait around for slow payments to process. We don’t have the patience to navigate a clunky user interface on a buggy mobile app or be given banking services that we have absolutely no interest in. This is true of almost everyone but especially true of Millennials and Generation Z and for fintechs, this provides a valuable opportunity, as it is expected that they will make up two-thirds of the global population by 2020.
They are tech savvy, digital-first and continually seek information from friends or online to support their banking choices and decisions. They will compare best offers and have more loyalty towards financial brands that will demonstrate they have their needs and financial well-being at the center of all their innovation, services and products.
The banking provider to come out on top will be one that will understand their customers’ lifestyles, and will adapt products to their banking behaviours and needs; and in return will offer customers services that are seamless, convenient, and which will truly make a difference in their financial management and well-being.
Banks are playing catch up
Due to the banks’ existing legacies innovation has been limited and are now lagging behind; still trying to figure out their digital transformation, let alone where they are in their payment innovation. However, banks such as Leumi Bank in Israel or DBS Bank in Singapore have largely demonstrated that they have been able to adopt an innovation-led culture and continue to provide their customers with enhanced user and customer experience through continuous launch of innovative banking products.
Others banks have realised that they don’t have the agility, nor the flexibility internally to launch new products and innovate as fast as Fintechs. This has resulted in banks partnering with Fintehcs or acquiring their technology to facilitate innovation by integrating this on top of their banks’ existing legacies rather than innovate from scratch.
Fintechs will increasingly continue to provide solutions to long-standing payment problems which banks have yet to address. One clear example of this is Fintechs disrupting the traditionally inconvenient and expensive process of converting, sending and making payments in different currencies. Today, consumers and businesses have access to a variety of payment options from the disruptors that allow them to store, load, transfer and convert money in numerous currencies and in real-time.
Banks and Fintech, Coming Together
Seeing how well-placed fintech companies have now become, banks have understandably become more willing to co-exist and collaborate with them. According to a report from PwC, global banks are planning to increase their partnerships with fintech over the next 3-5 years, for which they expect to see an average ROI of 20%. It makes sense that instead of trying to do all the hard work themselves, banks will call in experts to provide intuitive, customised solutions in specific areas. Partnership has its advantages for both sides: traditional banks have solid infrastructure, brand-name recognition and a broad customer base, but they also have a low tolerance for risk and limited level of flexibility. Fintech players, meanwhile, are agile, flexible innovators, but also smaller and less well-established.
Fintech integration and open API platforms
Many Fintechs have already been plugging APIs from other businesses into their own platform with the aim of creating new services for their own customers. We’ll see an increase in the future of open API marketplaces, especially with the new legislative of PSD2 Open Banking giving the ability for third parties to plug in their service offerings to the bank.
The Rise and Rise of Mobile Payments
Mobile payments have been steadily gaining traction and 2019 could be the year when they truly explode. Projections indicate that the global mobile payment market will reach $4,574 billion by 2023, achieving a compound annual growth rate of 33.8% from 2017-2023. By 2020, 56% of US consumers could be using mobile to make payments in-store. Again, open banking and APIs are drivers here, allowing for the creation of better, smarter systems. Users will come to expect mobile wallets which give them a holistic view of their finances, rather than having to use a separate app for each provider. We should also expect to see more social media integration and more intuitive loyalty and reward programs in the mobile payments sphere.
The Return of the QR Code?
For a glimpse at the potential for mobile payments, we need only to look to China. The country has utterly embraced mobile payment technology, thanks to the small wonder of QR codes. QR codes never quite took off in the western world, where they were never really put to good use. However, China has taken full advantage of QR’s payment potential – over 65% of the population are already using it. Most people and businesses have their own unique QR code. Payments are transferred when a user scans a QR code with their phone or allows their own QR code to be scanned. QR codes are cheap and easy to acquire and make, which means that even street vendors and buskers can use them to accept payment. It’s easy to picture the US and Europe following suit, especially since 90% of Chinese tourists would use the mobile option overseas if they could. That’s a type of purchasing power it’s hard to ignore.
Investment in Authentication
One of the few things holding back QR adoption is the relative lack of security – QR codes are hard to distinguish, so one paper code can quite easily be swapped out for another without anyone noticing. This has been a concern that plagues contactless payment as a whole. 2019 will see greater efforts to ease this pain point. Expect payment providers to increase their investment in developing secure, multi-factor authentication services. Options to explore and improve include biometrics, cryptographic keys and location-based authentication. The National Australia Bank has already partnered with Microsoft to develop a facial recognition system for ATM withdrawals. They’re heading in the right direction: a projected 2.6 billion people will be using biometric payments by 2023.
We’ve reached a point in time where we understand the potential of our new technology but we’re only just beginning to realise that potential. A lot of payment innovation is fully-formed and ready to go, it just needs to be implemented and adopted on a wider scale. Yet we continue to uncover fresh ideas every day, as new players enter the payment scene and get creative with APIs. You might just call it the dawn of a whole new era.