It is very easy for many who are new to the fintech space to think that financial technology is an exclusive term for payments technology, and while there is some truth to this, it does not tell the entire story about fintech. However, in June, The Fintech Times is looking to indulge this belief as we look to discuss hot topics surrounding both sending and receiving payments, like buy now pay later (BNPL), early paydays and much more.
Having spent the last week looking into recent payment innovations, today, The Fintech Times explores the future of the payments industry. We hear from Coinweb; Jack Henry & Associates Inc; Token.io; Fime; Tribe Payments; Yapily; Incode and Clearbank on the topic.
Crypto purchases will inspire advancement
Toby Gilbert, the chief executive officer of Coinweb, spoke on the unreliability of using credit cards to make crypto purchases and what this could mean for the future: “What we are now seeing is a huge drive toward account-to-account transfers, opening traditional finance platforms and their fiat banking rails to enable crypto purchases. Delivering a considerably cheaper option for the end-user and pulling market share from the card schemes. This signals the beginning of a renewed drive for the payments industry further solidifying its position as a serious contender to traditional finance.”
How payments-as-a-service can assist business evolution
Bill Phillips, head of payments strategy at Jack Henry & Associates Inc says: “In addition to being today’s most influential innovation, Payments-as-a-Service is also the future of payments. Because it extends money movement capabilities more deeply into the marketplace, Payments-as-a-Service is the next logical step for financial institutions that spent the last half-century evolving from brick-and-mortar storefronts into sophisticated digital providers.
“By reducing payment friction and streamlining processing, Payments-as-a-Service will help financial institutions cement revenue-producing relationships with key account holders. By providing enhanced APIs, widgets, and SDKs for their businesses and fintech partners, Payments-as-a-Service will help banks and credit unions remain at the centre of their clients’ ecosystems.
“The future of payments will be built on interconnected solutions that dramatically amplify the value of individual providers. Payments-as-a-Service will be the framework that helps the payments industry evolve into that future.”
The future lies with Account-to-Account payments
Chief executive officer of Token.io, Todd Clyde, said: “The future of payments is fast, fair and frictionless. Open banking is fundamentally changing the payments landscape as Account-to-Account (A2A) payments become mainstream. Already we are seeing merchants integrating A2A payments to realise the benefits of significantly lower costs and instant settlement, while delivering seamless and secure experiences for their customers.
“In 2022 and beyond, A2A payments will also become the primary payment method for loading digital wallets, which will deliver exceptional frictionless experiences for consumers. Gone are the days when we need to key in long card numbers or login details. Instead, with A2A payments, wallet top-ups can be approved directly in a bank app, usually through seamless app-to-app redirection and facial or fingerprint authentication.
“And for the wallet providers? Open banking payments are between two and 20 times less costly than traditional payment methods – significant savings that can be passed on either directly or indirectly to end-users. What’s more, with secure consumer authentication through banking apps, open banking payments can also reduce false declines, increase success rates and settle in near real-time, enabling instant wallet deposits and withdrawals.
“The growing success of open banking means A2A payments now present a genuine threat to cards. Over the next four years, the global value of open banking payments is expected to exceed $116billion, with Europe accounting for 75 per cent of all transactions. And as A2A payments increase, the use of traditional payment methods such as cards will decline.
“As the adoption of open banking payments accelerates in Europe, API maturity is significantly improving. Pushing the boundaries of API functionality beyond regulation through new open payments and data capabilities, premium APIs and value-added services is a key focus area for the future.”
We must innovate future finance to improve inclusivity
Lionel Grosclaude, chief executive officer of Fime, explained what is important to consider when we think about the future of finance: “Digitalisation is changing the way we pay, authenticate, live, and the future of payments is a case of balancing risk and reward. Payments are becoming invisible as we move towards cashless societies. Apple has moved into SoftPOS. Mastercard just announced ‘smile to pay’ using biometrics. Open banking is taking off to empower consumers to maximise the value of their data. Countries around the world are exploring CBDCs.
“Let’s dig a little deeper into CBDCs. On the one hand we have the potential to drive financial inclusion, realise the benefits of programmable money and bring greater trust and stability to digital currencies. On the other hand, countries risk disintermediation of their retail banking infrastructure, citizens are expressing privacy concerns and political complexities can slow progress. As technologists, we must objectively weigh these risks and rewards to give end-users the tools to thrive. This is the path to sustainable innovation.
“We must also now consider that payments have become a geopolitical issue. One of the first sanctions in response to the invasion of Ukraine was to shut down Visa and Mastercard in Russia, and to disconnect Russia’s bank from Swift. Countries like China and India have built up strong domestic payments schemes to guarantee their independence. Innovation in payments is also a way to improve financial inclusion and cross-border remittance.”
Banks will compete to personalise customer experience
Alex Reddish, managing director of Tribe Payments explained: “There will be an increased focus in the payments industry to use ancillary data sets to derive the value of a transaction. The data surrounding transactions is already becoming more valuable to businesses than the transaction itself, which has resulted in banks, fintechs and merchants (and many more companies) becoming increasingly proactive. Proactivity for them means to provide a hyper personalised experience for their customers to build loyalty.
“A personalised experience is the ideal scenario for most, as its goal is to make life easier for the end user. For fintechs that provide the infrastructure to these businesses, they need to enable the anticipation of customer needs by tapping into the data surrounding the transaction.”
Variable Recurring Payments to replace Direct Debits
Ben Aier, vice president of product at Yapily, spoke of the potential VRPs could have in the future of payment: “VRPs represent the new frontier in payments – if widely adopted, they could wholly replace direct debits. The issue with the latter is that they’re rigid, inflexible, and create friction for customers who have changing payment needs. VRPs give the consumer an all-round better experience: from setting up recurring payments, and offering flexibility on maximum and minimum thresholds, to tailoring the frequency of payments.
“The use-cases for this technology are plenty: VRPs can be used in merchant apps, on websites, and more. Every time customers pay on Uber, for instance, via an online retailer, through in-app gaming purchases, or directly to their utilities supplier, they will have full control over the parameters of the payment.
“Fundamentally, the future will be driven by market opportunities with premium APIs being one of the key factors in unlocking Open Finance. With premium APIs, banks can look to commercialise their offerings and work together with TPPs (Third Party Providers) and create a healthy ecosystem where there is value for every participant.
“I am hopeful that, in the not very distant future, Open Banking payments will be embedded into every online store, adopted by every payment provider, and in the back-pocket of every consumer – without them even knowing it. This is because we can expect to see Big Tech platforms start to integrate open banking, allowing user adoption to skyrocket and more accessible financial services and products.”
AI and biometrics can recover the people’s trust
Ricardo Amper, chief executive officer and founder of Incode says: “Consumers, retailers and institutions are adjusting to constant digital innovation in fintech, and for many, the goal for payments of the future is frictionless and secure payments, where user data is kept private. Current financial transaction methods have their limitations, exemplified by the typical £100 contactless transaction limit to prevent extensive fraud.
“When linked to biometric data, transactions, as well as other pain points for financial services such as lengthy onboarding and account verification, become swift, comprehensive and exponentially more secure.
“When it comes to authenticating transactions, biometrics can be used in all areas of life. With perpetual advancements being made in the fintech industry and especially relating to biometric authentication, the possibilities of how biometrics will impact how we pay in the future are endless. Using AI, people themselves can be the only documentation needed to verify their identity.
“Trust is pivotal for the future of payments. The impact that AI and biometrics can have can be substantially limited if there is a lack of trust in how the technology is used. Users need to be sure that privacy is a top priority, and that their data is safe from theft or exploitation.”
Embedded payments will become key
The international payment products lead at ClearBank, Nida Sattar, spoke on the rise of the use of embedded payments and how we can expect to see this continue in the near future: “In the next 12 months, we can expect to see this trend continue, with more businesses and organisations making use of embedded payments. Embedded payments will also evolve, becoming more intuitive. For example, they may use geo-targeting to prompt consumers to make or authorise regular payments, in tandem with visits to familiar sites such as train stations on their daily commute, or restaurants they visit every pay day.”