The Capgemini Top Trends in Payments: 2020 report emphasises an increasing shift towards collaboration as the driving force behind expanded payment options, increased efficiency, cost savings, as well as the development of innovative new technology. This collaboration takes on different forms, such as banks and FinTechs working together to deliver instant payments, card issuers and banks joining forces to keep up with merchants’ needs, as well as some key mergers and acquisitions among payment firms.
It’s clear the global payments landscape continues to evolve rapidly. Here are some key trends emerging in the industry as identified in the report.
Instant payments and open banking strengthen each other
As instant payments and open banking continue to reinforce each other, the need for back-office rationalisation will become even more apparent. Whilst banks have been concentrating on front-end activities focused on improving customer experience, back-office optimisation has often been considered a lesser priority, but it’s the time and effort in this area that will help banks fulfil the infrastructure requirements needed to accommodate new and improved payment methods.
The significant investment that’s been made by several banks around the world in instant payment infrastructure amplifies the need to use IP rails for processing low value, high volume transactions too. Not only does it provide customers with a seamless experience, it means savings can be made and invested in customer experience boosting initiatives.
We’re now at a stage where most central banks of major economies are either implementing Real-Time Payment Systems (RTP) or they’ve announced deployment plans. In the US for example, an around-the-clock, real-time payment and settlement service, FedNow, has been announced, to support faster payments at over 10,000 US financial institutions. Similarly, the Eurosystem implemented the Target Instant Payment System (TIPS) in November 2018.
We’re also starting to see more banks implementing front-end functionalities that help customers access back-end data through multiple touchpoints. It comes as regulatory initiatives are forcing banks to rationalise back-office functions. This pressure holds benefits for banks however, helping them futureproof themselves by allowing third parties to access bank systems and data seamlessly.
Card firms and banks driven to expand offerings by merchants
With merchants increasing their payment offerings to reflect an e-commerce dominated environment, banks are playing catch-up to provide payment systems that can compete with options like digital wallets and net-banking services that are often faster and more convenient.
For example, BBVA and Uber have collaborated on a third-party app that allows Uber to pay unbanked drivers digitally. Banks are also creating smart PoS for merchants as a way to produce a robust point of interaction with multiple payment options for customers.
Card firms are also working hard to match the efforts of alternative payment companies, with Visa debuting an API solution enabling merchants to provide instalment payment options at checkout using Visa cards.
Banks and FinTechs continue to collaborate on improving B2B payment efficiency
Banks are increasingly working with FinTechs to take advantage of their technological agility, advanced data analytics and machine learning capabilities.
Banks are still experiencing the same pain points they’ve been facing for the last few years, such as managing legacy systems, technology infrastructure, risk management, as well as the prospect of adapting operating models. However, where FinTechs were initially seen as a threat; a disruptor to the market in a race to be the first to deliver real-time payments, the two are now collaborating on this venture – a move that benefits both parties. FinTechs are provided with another revenue stream, whilst banks can invest in tech they don’t have to build themselves, allowing them to offer faster real-time transactions, reducing their costs and passing the savings on to their customers, providing them with a more attractive proposition, particularly amongst SME clients.
These partnerships are also seeing progress being made in the areas of accounts payable and supplier financing. The movement means businesses can eliminate manual accounts payable and supplier financing processes, helping to improve their overall supply chain operations.
Payments firm mergers and acquisitions enhance capabilities and create new ecosystems
In a bid to become end-to-end players, payments firms are seeking the purchase of specialised firms to improve their skills and offerings.
This shift towards consolidation among payment firms will see the creation of global firms with a presence across multiple geographies, as well as the emergence of more end-to-end payment players joining the ecosystem, offering a range of solutions for issuers, acquirers, and e-commerce.