What is the future of payments? In a recent webinar hosted by the Centre for the Study of Financial Innovation (CSFI), a panel of industry experts – including Banking Circle’s Chief Growth Officer – delved into the rapidly evolving business landscape for incumbents and FinTechs, the impact of digital and cryptocurrencies, and what the payments ecosystem of the future might look like.
Read our wrap-up of the session below, or watch it in full here.
- Andrew Hilton, Director, CSFI [Moderator]
- Jonathan Guthrie, Head of Lex, Financial Times
- Søren Skov Mogensen, Chief Growth Officer, Banking Circle
- Tony McLaughlin, MD Emerging Payments & Business Development, Citi
There has already been a significant revolution taking place in the industry when it comes to international payments, according to Jonathan Guthrie, Head of Lex, Financial Times – who highlighted the rise of newer, specialist payment providers and their role in the transformation of cross-border payments in recent years.
“The more I looked at this, the more I could see that the tide already seemed to be going out for these conventional payments businesses, because – particularly in what are seen as the main channels for remittances across the world – correspondent banks aren’t really even trying to compete,” Jonathan said.
“Now, rather than if you’re trying to move money from one country to another, it taking three or four days and costing you seven or eight percent, you can do it more or less instantaneously – and of course it costs very little. I think that is a genuine solution. But it is also, in terms of technology, a genie that’s coming out of a bottle with some potentially huge implications for the financial world.”
Søren Skov Mogensen, Chief Growth Officer at Banking Circle, highlighted one of the major transformations currently happening in the industry: payments companies broadening and expanding their offerings beyond the traditional core services.
“Payments is simply becoming more than payments,” Søren said, pointing to the increasing need for payments providers to offer solutions for merchants that enable e-commerce. By creating a scalable, 21st century banking platform, Banking Circle has built a network of clearing and settlement that allows for constant innovation – and means new solutions can easily be built on top, he said.
“We in Banking Circle have realised this, and we are able to augment our core platform with a rich set of propositions, for example, Buy Now Pay Later, card issuing, and so on. That’s what I believe is the future of payments – a much more diverse set of propositions.”
Tony McLaughlin, MD Emerging Payments & Business Development at Citi, urged the need to examine how digital currencies and other innovations based on Distributed Ledger Technology (DLT) will impact the global payments landscape.
“When we think about the future of payments, I think the question is: are we facing an inflection point where the next phase of evolution will be driven by unregulated entities that operate in non-sovereign currencies?” he said.
According to Tony, a key point that is often missed in the conversation around DLT is the gap between what is made possible through technology, and what is legally permissible.
“The FinTech revolution is bringing increased competition within an existing system. But the challenge that comes from cryptocurrencies and digital assets is that, potentially, we’re faced with a different category of competitor,” he explained. “I think what we need to do is find a way that for all of the innovation that comes with Blockchain technology, we [can] harness that to augment the system of sovereign currencies.”
Jonathan pointed to the regulation of cryptocurrencies and Decentralized Finance (DeFi) as an inevitability in the coming years.
“It is simply naive to think that there will be the development of a non-mediated, non-regulated payments sector and store of wealth sector that governments will be happy to allow to flourish. They’re not going to,” he said.
Asked how Banking Circle fits into the ‘DLT universe’, Søren explained: “We’re here to enable payments and global commerce, and to serve payments companies, banks and marketplaces. Of course, we are selective as to what kind of flow we take in… But we also believe that there is a perfectly legitimate crypto flow that is basically just a future version of how payments can be done.
“I think crypto and DLT will augment the payments universe – almost like how Request to Pay will augment Direct Debit methods. But I believe that these can go hand in hand. Our observation is that every time a new payment method has been introduced, it hasn’t killed off the other ones. It’s just added more opportunity, more growth, more potential.”
On his predictions for the payments sector in the years to come, Tony pointed to the migration from the high street to online as a useful indicator of the direction of travel.
“In previous years, the financial services were all on the high street because that’s where the people were, that’s where the footfall was. But now that footfall, or the eyeballs, are on digital platforms,” he said. “What’s really happening is that financial services will migrate into digital platforms.”