In April this year an insightful report – Payments Innovation Jury Report 2015 – into payments and payments innovation was released. Basically its a what’s hot and what’s not in the world of payments. The report, written by John Chaplin, is important because it reflects the thoughts of 40 experts from 23 countries around the world. These guys are looking globally at everything that is happening in the world of payments right now. Everything from disruptive start ups, technology, incumbents versus newbies, regulation, mobile money, cryptocurrencies is covered. In short, if you’re in the payments space you need to read the Payments Innovation Report 2015!
In this post, I will summarise just one takeaway from each section of the report.
1. Payments Innovation: Fintech
Innovation in the payments sector is best handled by and most likely to be realised by new Fintech start-ups. The jurors also report that successful start up are most likely to be acquired by a ‘technology giant’ citing the LoopPay and SoftCard acquisitions by Samsung and Google respectively.
2. Payments Innovation: Incumbents versus Disruptors
Incumbents need to be mindful that innovations may cannibalise their existing revenues, and partnerships rather than acquisition of fintech start ups would most likely encourage continued innovative
Culture, compliance, fear, security, risk and regulation are inhibiting incumbents from properly engaging with new fintech start ups.
3. Payments Innovation: Regional Variations
The greatest payment innovation would happen in the following regions in the stated order Asia, Africa, North America and lastly Europe
4. Payments Innovation: Financial Inclusion
Payments innovation will drive economic and social change – the usual examples (M-Pesa and bKash) are highlighted
5. Payments Innovation: Let’s get down to Business
The greatest opportunity for payments innovation in the business world is with Small and Medium sized Enterprises. The Jurors report that the SME tier is currently offered a restricted, costly and inefficient service, particularly when it comes to cross border payments
6. Payments Innovation: Its all about Regulation
Regulators and their lack of understanding of the payments industry are seen as the greatest obstacles to payments innovation. Interestingly though, some highlight the uncertainty and lack of regulation clarity as an opportunity for some start ups to ‘exploit’ a particular niche.. Nice!
7. Payments Innovation: Mobile Money
The jurors agreed the current and biggest driver for payments innovation is the global availability of mobile phones. One of the most important drivers for the deployment of mobile money services is the availability of low cost (i.e. less than $100) smart phones.
8. Payments Innovation: Its all about Blockchain
Again, no surprises here. The key message is that cryptocurrencies are unlikely to replace traditional currencies anytime soon – but recognise huge potential in the underlying blockchain technology. With one juror suggesting that blockchain will in time replace SWIFT – now there’s a thought…
9. Payments Innovation: The Buzz
Apple Pay and Bitcoin, the Jurors believe are “over hyped”
I found this to be a particularly exciting report as it highlights globally many emerging trends that we as players in the payments space need to be aware of. Not only that we need to factor these opinions into our own decisions as we consider how we make and receive payments in the near future. The report also provides some frank and insightful snippets into what the Jurors are thinking. As I noted down the page numbers I was also intrigued to see which sections had the greatest coverage, this is how they did:
- 4 pages – Investment, growth & exit –> Established firms & market disruptors –> Mobile money & payments
- 3 pages – Innovation & geography
- 2 pages – Regulation & compliance –> Cryptocurrencies & the blockchain architecture –> Hype & Success
- 1 page – Payments & social change –> Business Payments
Whether by accident or design, I think this tells us something about what is popular and sexy in the payments space and what is not. What do you think…