The UK payments industry is undergoing an unprecedented transformation, driven by the twin engines of growing adoption of technology and changing consumer expectations. This has led to a race to launch innovative new payment products, services and business models to meet growing customer demand.
This is according to new research, Paytech: Reinventing Transactions. Commissioned by Enterprise Ireland, the second largest investor in fintech companies in the world by deal count. The research demonstrates traditional banks are being increasingly disrupted, as technology-enabled businesses carve out a completely different payments ecosystem. The result is a proliferation of new opportunities, as banks, long the cornerstone of the payments sector, are both challenged by – and themselves embrace – new digital payment options.
The customer demand and business case for an improved payment experience is clear. The UK market, in the past 10 years, has seen a 33% decline in the number of cash payments. 2018 alone representing a 15% drop. The changing consumer preference in the UK is further exemplified as the UK ranks higher than every other EU market for cashless payments. In addition, a consumer survey showed 82% of respondents were dissatisfied with the service received from incumbent money transfer operators and banks, citing slow, complex, non-transparent and inflexible traditional payment options.
David Orme, Senior Vice President at IDEX Biometrics, told TFT:
“It seems likely that the UK will ultimately become mostly, as opposed to completely, cashless, but preparation is key and the transition must be well supported. Rural areas must be sure they are able to access electronic money transactions, for example.”
The changing consumer preference in the UK is further exemplified as the UK ranks higher than every other EU market for cashless payments.
Due to the slow pace of innovation over the years, incumbents are seen to lack the agility and capabilities needed to enable a seamless transition to more open, intuitive and secure methods for card-based payments, cross border payments and account-to-account payments. However, according to J.F. Clarke, Fintech Market Advisor at Enterprise Ireland, collaboration between the traditional banks and fintech companies is essential.
“In an environment where smart phones are ubiquitous, consumers have come to expect payment solutions that are seamless and available 24/7 across different channels. The UK market is no different. The pace of life in the UK has changed, consumers are more cash-rich and time-poor than ever before and businesses must adapt effectively to maintain their customer base. Traditional forms of banking have become almost obsolete, particularly across the younger generations who are far more familiar with digital software like Apps than cheques. UK banks must employ fintechs to modernise their systems and ensure the Paytech industry is striving for greater stakeholder collaboration and creating a more unique, innovative and competitive solution for customers.”
The research also outlines how recent mandatory regulations such as PSD2 and GDPR and their impact on the payments industry, will encourage the use of technology, such as Machine Learning, Artificial Intelligence, Big Data Analytics and Blockchain.
“As the global payments industry undergoes unprecedented transformation, Irish innovation is helping to reinvent payments around the world. This is due to the expertise that has emerged in Ireland, as an internationally acknowledged global fintech hub” added J.F. Clarke.
“Implementation of advanced technologies such as machine learning, artificial intelligence and big data analytics facilitate automation and predictive analytics; applications based on these capabilities add value across multiple functions. Innovative products, services and business models create new growth opportunities and increase agility of enterprises,” said Adrian Drozd, ICT Research Director at Frost & Sullivan and author of the new research.