Payments Industry Trends YOU Need To Know…

There is so much information about finance, technology and the latest and greatest payments industry trends that I find it difficult to keep track of what is going on. In this post I intend to share what I have learnt about why the payments industry is changing and outlining some of the key trends that are shaping and defining the payments space.

Payments Industry Changes:

Accelerated changes in the banking and payments industry have been happening due to the following drivers:

  • The 2008 global recession during which the financial markets and banks reached melting point
  • Regulatory demands from various national and international authorities
  • Digital technology which is transforming the way in which we work, rest and play
  • The growth of customers who are better informed about services and products available to them
  • The growth of multi-channel solutions that are in the cloud and real time
  • Emergence of new and innovative start up companies that are able to better server customers in key niche areas
  • Recognition that financial inclusion is a global concern that needs to be resolved
  • The need to better protect customers from online cyber threats

Source: Capgemini – World Payments Report 2014

Key Payments Industry Trends:

According to McKinsey

  • In short, cash transactions will be ousted by electronic transactions
  • Merchant payments will increasingly happen through digital channels, with McKinsey predicting that merchant payment revenues could double in size
  • Data, specifically how it is used, will enable better market/product/customer insights and will in turn drive new products and service offerings
  • Real time payment solutions will according to McKinsey help to create a $80 billion revenue pool by 2018 by replacing cash transactions with electronic ones
  • There will be an increase and growth in cross border transaction banking and payments
  • Payments are a critical platform in the next chapter of digital banking

According to PWC

  • There is a competitive drive to store customers payment information in one place (one wallet) – this convenience means that payment details do not need to be entered each time a purchase is made, and speeds up the overall purchase process
  • Financial services sector will need to partner with other providers (hotels, airlines, retailers) to offer rewards for using their debit or credit card services
  • Old school ways of measuring borrower risk miss opportunities to lend to consumers who maybe credit worthy – giving rise to new and innovative companies like LendUp and Kreditech
  • Crowdfunding sites are also offering viable alternatives to traditional financial institutions
  • Customer data will enable more customer focused rewards, offers and coupons to be offered through digital channels
  • While it is recognised that mobile wallets speed up purchases and offer convenience, PWC acknowledge that a single mobile wallet solution has not yet gained widespread popularity, and for that to happen will require greater industry collaboration

According to Tobias Schreyer

  • E-money accounts and prepaid cards will emerge as competitive alternatives to the widely used credit and debit cards
  • Mobile payments will continued to grow as solutions such as Paypal and Apple Pay become increasingly mainstream
  • Biometric authentication will gain traction as the number of available solutions increase, these already range from finger print, voice and retina recognition

According to Digital River World Payments

  • Contactless payments via a virtual wallet will bring together a variety of customer interactions making e-wallets more convenient and rewarding than the traditional leather wallet – The analogy used is that a physical wallet is like a filing cabinet, whereas the virtual wallet is an ecosystem
  • The Internet of Things – in short, as more items are connected to the internet, more payment methods become available
  • The Internet of Things will reveal more data about a particular person, which in turn will enable companies to offer more specific and focused products/rewards and coupons to them
  • Regulation compliance will be rewarded by consumers
  • Recognising and responding to the needs of the customer will be key

According to Mobile Payments Today

  • Improved technology combined with the growth of mobile banking apps is resulting in an increasing number of financial services going mobile
  • Frictionless payments are crucial and are enabled by offering one click purchases and ‘ancillary services’
  • Purchases from tablet devices, rather than mobile phone devices, are growing most in developed markets
  • In developed markets, in-store payments via a mobile phone are starting to gain momentum
  • The UK loves mobile payments, ranking first for total m-commerce spend in 2014
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The Payments Industry

The payments landscape is an interesting place to be right now as we witness a remarkable level of change and innovation happening right now. With this innovation comes competition from a new type of start up that has little respect for the old way of doing things. These start ups want to mix things up and this combined with new customer demands is shaking up the payments space. Add to this lively mix an increasingly regulatory environment, with demands for heightened security on the one hand and fast and frictionless payments on the other and you have what many are calling a ‘perfect storm‘. A payment is now no longer just a payment, it is much more than that. If the above payments industry trends are anything to go by, this will become increasingly apparent through 2015 and beyond…

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