I was reading through some old Payments News stories recently and stumbled across the Google-BCG study into the growth of digital payments in India by 2020. Its a fascinating report focusing on India, but what i also found interesting were details of what both Google and BCG revealed as four global payments trends, or rather mega-trends, that will significantly impact the future of payments. Its interesting when you compare these payments trends with the payments trends McKinsey highlighted in October 2015.
Four EPIC Global Payments Trends:
Do read the BCG-Google report for full details, but following is a quick snapshot of the 4 global payments trends that will continue to drive the payments industry in the coming years.
1. Technology / Digital Revolution
This digital revolution is of course being driven by the growth and increasing adoption of mobile devices that have internet access. According to the BCG-Google report:
- Internet services on mobile is predicted to reach 3 billion users by 2020 – that’s about 65% of the world adult population
- By 2020, the main way of accessing the internet will be via mobile devices (80%), and importantly 58% of these mobile device users will access the internet using a smartphone
- This smartphone adoption is important because already smartphones are packed full of sophisticated technology – huge memory, great cameras, barcode scanning, GPS geocoders, NFC technology, easily accessible apps, various social networks… the list continues
- All of the above are important because these all enable new payment methods
2. New Players in the Payments Space
Payments are being transformed by a number of new entrants into niche areas within the end to end payments process, the examples highlighted by BCG and Google include:
- Mobile device producers: Apple, Samsung
- Using technology and biometrics to enable frictionless payments
- Technology firms: Alibaba, Google, eBay
- Providing access to a huge customer base
- Retailers: Starbucks, Walmart
- Providing a unique customer experience and establishing customer loyalty
- Teleco’s: Vodafone (M-Pesa)
- The combination of technology and a conducive regulatory environment to enable financial inclusion
- Fintech startup: Square, TransferWise
- Changing customer expectations by providing faster and cheaper cross border payments experience
Whats more is that the study reveals that fintech disruption is set to continue with the number of fintech startups doubling in the last 5 years, and fintech funding expected to have hit the $11 billion mark in 2015.
3. Changing Customer Demands and Expectations
The introduction of new players into the payments space has simplified, enabled faster and more convenient ways of making payments. And now customers have come to expect a better, smoother, instant and personal payments experience that is changing the way in which payment service providers are having to operate. Payments service providers, incumbents and new players alike are having to think about new, improved, real time individual customer focused payments solutions.
4. Empowering Regulation
BCG and Google describe the importance of regulation in the success of a payment solution. The report goes on to talk about how various payment platform modernisation initiatives (such as the move to real time payments) are enabling state of the art changes in the way in which payments are made.
The report also talks about PSD2, and the expectation that the Directive will open up the payments landscape by providing a level playing field among payment service providers. Regulation, and specifically regulators, are a critical component in enabling a innovative payments solution environment.