The payment industry is undergoing numerous changes at a rapid pace. 2017 is witnessing multiple trends while 2018 is expected to see a reinforcement of frameworks and emergence of new technologies in the payment sector.
Fintech is seen as a decisive player in the creation of new opportunities and payment instruments, while regulatory initiatives, as well as stakeholders’ fresh strategies, are expected to promote security levels, unify marketplaces and create a new kind of payments ecosystem. Here are the points of view of 10 experts and big players in this sector poised towards transformation.
The fear of PSD2 stifling the European marketplace
The influx of technological innovations in the payment industry, as well as multiple challenges, have led to the creation of PSD2 (revised Payment Services Directive). It has been designed by the countries adhering to the European Union and members have until January 2018 to implement it. The new requirements will affect the whole industry, by bringing changes to even little things such as what information a consumer sees when making a payment as the dynamics of existing regulations are becoming somehow obsolete and complex to comply with.
There are 2 key features namely, breaking banks’ monopoly on users’ data, and requiring sturdier identity checks for online payments. In other words, merchants like Amazon, may retrieve a client’s data from his bank with his permission, and make payment for him without having to use the services of a third party such as PayPal.
Aran Brown of Hyperwallet is of opinion that the legislation’s full implications are still unknown and the need for compliance will certainly set up further ramifications for the European market as a whole, especially in regards to two-sided marketplaces such as Britain’s Deliveroo or France’s BlaBlaCar. An opinion shared by the Merchant Risk Council. Saxo Payments equally sees that regulations will improve support for nonbanks and that continued collaboration will bring about a new level of services.
Regulatory frameworks are also viewed as a key point for both 2017 and 2018 by the Emerging Payments Association. More than ever, regulatory risk is in the limelight with the imminent adherence to PSD2.
Mobile contactless payments and fintech solutions will continue to soar
The mass adoption of cheap communication technologies has offered a greater level of convenience to customers around the globe. This has naturally entailed a rise in the adoption of digital payments as well. Contactless cards payments are seen by Visa as a precursor of mobile contactless payment. This trend is expected to keep soaring while by 2018, it is expected that the Internet of Things (IoT) will be combined seamlessly with payment solutions, thus promoting tokenized payment solutions to add supplementary levels of security in payments and to reduce transaction costs as well as operating costs.
The Finanser, on its behalf, equally sees fintech as a key strategy, pushing regulators to compete to innovate further. Banks are already struggling to compete with fintech players that are offering cheaper, faster and enhanced customer experience. To support the regulatory framework and facilitate implementation of requirements, the Emerging Payments Association is of opinion that automation and relevant technologies such as behavioral analytics, artificial intelligence and blockchain should be designed accordingly.
Consumers’ behavior will continue to evolve
On a parallel level to the evolution of payment solutions, consumers’ behavior is expected to undergo changes too. According to Amazon, shoppers are becoming more and more digitally savvy, increasing purchases through mobiles and connected devices. As such, payment solutions will have to blur the line between online and offline shopping to offer a seamless and user-friendly experience.
On the other hand, PPRO considers that the regulatory framework will go against the needs of consumers as well as merchants to a certain extent. While consumers will seek further ease and convenience in payment solutions, the enforcement of the PSD2 will be counteractive, making payments systems harder to use with the aim of reinforcing security levels with the Strong Customer Authentication (SCA).
Customer choice and competition will likely boost open banking with more digitized operations focused on customer relationship. In this sense, noncore functions and activities are likely to be outsourced to third parties.
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