There are plenty of defining years in the history books, and as 2020 draws to a close, it’s almost certain that the global pandemic will ensure that this year is featured prominently. With events cancelled, launches delayed, and country-wide lockdowns, the way we work has changed forever. Still, for financial technology and surrounding industries, this was also a year of challenge and opportunity.
This December, The Fintech Times is asking industry leaders for their ‘View from the Top’ to gain an insight into the decisions behind the last 12-months. Today, we’re looking at the issue of Embedded Finance, hearing from Euan Andrews, Paul Marcantonio, Paul Swinton and John Cragg on their 2020 thoughts, plus a look ahead to 2021. Will there be a Happy New Year? Read on…
Paytech is one of the most thriving sectors of fintech and has seen a particular boom this year, with the Covid-19 pandemic causing the shift to digital and cashless payments to accelerate dramatically. Payments are a necessary facet of everyday life, and the paytech scene in Europe has evolved to meet the needs of the consumer, whether its wearable payments devices or the ability to send money abroad. In this View from the Top, companies xDesign, ECOMMPAY, MYHSM and B4B Payments outline their own 2020 experience.
Euan Andrews is the CEO of xDesign, a web and mobile product development company delivering enterprise and consumer-facing digital products for some of the UK’s largest bluechip organisations. In his opinion, the rise of embedded finance is one of the more notable aspects of payment trends in 2020.
“If I was to pick one trend that emerged in 2020 and is due to come of age in 2021 it would be ’embedded finance’. For those not familiar with the term Embedded Finance is when a financial service is integrated with a non-financial service. A familiar example would be Amazon or eBay offering the opportunity to pay later, to finance a transaction at checkout. The extension of this – Livestream shopping (where you “buy what you see”) is already a multi-billion industry in China alone and companies like H&M owned Monki will become bigger in the West.
“The embedded finance trend has already begun to spread to other non-retail focussed apps and that will continue at pace. In the United States, Google Maps now allows the direct purchase of parking and Tesla (and an increasing number of dealerships) offers its own car insurance at the point of sale. While the customer-facing finance options are significant it is the enabling of merchants that will provoke the biggest disruptions. Amazon, for example, offers merchants working capital loans. As Amazon has the data about sales, seasonality profit, loss etc those decisions can be made faster, on better terms, and more accurately with less risk than traditional lenders with the added benefits of increasing loyalty and sales to their existing platforms. Embedded finance will be big in 2021 for the end customer yes, but even more so behind the scenes.”
Paul Marcantonio is the Head of UK/ Western Europe at ECOMMPAY, a payment service provider and direct card acquirer headquartered in London. He sees the move towards a cashless society as a significant factor this year.
“In a matter of months, we’ve seen the trend towards a cashless society accelerate at an unprecedented pace. While the rise of Apple Pay and Google Pay were key contributors in influencing less use of cash, the pandemic has altered the course of cashless transactions forever. We saw that once lockdown was lifted, most venues shifted their payment models to be entirely digital, only accepting contactless payments. This is reflective of how the payment landscape is in a revolution, making a meaningful difference for customers.
“In the year ahead, we’ll undoubtedly see a number of trends that will influence the future of paytech. We’ll see BigTech players move fast to launch more seamless payment infrastructures to have a greater grasp on accessing customers. This will in turn catalyse better trust and collaboration between legacy banks and paytech innovators to conceptualise more improved regulation and standardisation to together drive success in the sector.
“Anti-fraud solutions will also pick up momentum where the use of AI and automation will be more widely deployed for risk control specialists to discover where the pain points are and how they can better protect merchants. This will be increasingly important in the context of mobile payments and we will continue to see a wider move to implement 3D secure 2.0 authorisation.
“There’s also signs of a rise in demand for localised payment methods. At this time, ecommerce doesn’t recognise borders and now with one in seven online transactions being made cross-border, there will be a need to move faster to manage the needs of individual customers.”
John Cragg is CEO at MYHSM, the first independent, global provider of Payment Hardware Security Module (HSM) as a Service. John agrees with Paul, citing the acceleration of digitalisation as the biggest impact of the year.
“There’s an exciting digital journey ahead of all of us involved in the payments space. Digital payments have evolved tremendously over the past few years, and the impact of Covid-19 has further accelerated this evolution. Many customers have changed their payment preferences, and this has opened up new opportunities for various payment options.
“In the not too distant future, we will likely see more social media-initiated payments, voice-activated payments, cryptocurrencies, biometric payments including facial recognition all becoming mainstream. One point is for certain, mobile payments will continue to gain mass adoption in the immediate future, and it’s worth paying attention to developing countries like Latin America which will likely contribute substantially to this development.
“NFC and QR codes will also see an uptake as a safe and fast payment solution. Despite their popularity in China, other countries have been slower to adopt this method, especially the US. However, this is projected to change due to its cost-effectiveness for the merchant, requiring less infrastructure to process payments, whilst delivering convenience for customers.
“The unbanked and underbanked population will provide the biggest opportunities for growth and innovation within the digital payments landscape and will contribute to the overall growth of digital payments. Financial inclusion provides opportunities for fintechs to deliver products which provide true value and address real needs, and in developing countries incumbents will be bypassed completely for a more agile and flexible approach in the form of challenger banks.”
Paul Swinton is the CEO of B4B Payments, helping companies go cashless and control their spending with pre-paid cards. Similarly to the others, for him the rise of contactless is the biggest hit of the year.
“It’s clear that 2020 has been an Annus Horribilis for many, our ever-robust and pragmatic industry has firmly stuck 2 fingers up to these challenges and innovated like only it can. In a largely negative backdrop, there were many environmental factors that emerged to fuel growth and innovation.
When this year began, the biggest challenge we as an industry expected to face was the continued uncertainty caused by the Brexit decision to leave the European Union concluding on the 31st December 2020. Many firms use the passporting opportunities on a service basis to provide their products EU wide and are/were only UK based but servicing continental EU customers.
“But 2020 had other plans. Enter Covid-19; Against a backdrop of retailers (those allowed to open) shunning cash, the pandemic has only served to highlight the benefits of a cashless society, with hygienic contactless and remote digital payments growing like never before.
“The fintech and prepaid industry has stood up and provided rapid solutions for example to the charity / NGO space by providing funds distribution tools via cards to those in need and who do not have access to bank accounts and who may have received cash that has become toxic. Other firms pivoted and pirouetted to provide their sector-based solutions (think travel) to other industries that have stood up well during the crisis.
“Though these innovations may have been fostered by the pandemic, the trend lines will continue to be reaped throughout the transition into a post-Brexit world when the importance of online and digital payments will be paramount.
“With the Treasury keen to retain the UK’s number one spot as fintech world hub, it’s also increasingly likely that they will want to continue to foster a good international trading stance and UK-specific insolvency measures designed to protect the UK market, so we hope to see more incentives for innovation and to ease businesses through these hurdles.
“I have no doubt 2021 will provide further opportunities to growth and innovation as new markets are tapped and new partnerships and relationships formed.”