The payments landscape has completely changed and technological innovation is creating opportunities for new disruptors to enter the market. Consequently we are seeing the rise of a whole host of new acquirers and with them a plethora of new types of digital payment account.
Ten years ago, the payments market was dominated by a few banks and a handful of payment companies, now we are seeing more like 500 companies, some of whom are providing very specific solutions for particular niches. The same mobile, instant gratification technology has also generated a consumer with a short attention span with little patience when things don’t work as they should, and no loyalty because there is always an alternative supplier to try. Merchants are increasingly demanding the same levels of service and options that they have become used to as consumers.
PSD2 opens up the market
Payment Services Directive (PSD2) is now with us opening up the market to a new wave of integrated payments services organisations – PISPs and AISPs. According to Accenture’s report ‘Seizing the opportunities unlocked by the EU’s revised payment services directive’ by 2020 PSD2 payments could be as much as 16% of online transactions. The PSD2 framework mandates that banks provide access to bank accounts to trusted third party payment services providers. With restrictions on the fees that can be levied, the cost to the merchant of these new types of payments could be significantly lower than card-based transaction costs.
Less cash, more global
The uncertainty over Brexit, the rise of China and other emerging markets with new forms of payment, such as WeChat Pay and AliPay based on optical barcode scanning, means that payments innovation is set to explode in the coming years. PSD2 will provide the means for organisations to make payments to global partners, with much less cross-border transaction fees, making international payments far more transparent and the net result, reducing fees. Add to this the fact that recent data shows that as many as 62% of British 18-25 years, generation Z, prefer to pay by card or device, feeling frustrated if they are forced to pay by cash. Over a third of this age group believe cash will be dead within 15 years, and nearly half do person-to-person transactions with friends as often as every month. (Source: MoneyMailMe.com).
The future is here – the top trends to watch out for
For consumers, progress has led to an array of choice and faster payments, that are not based on a credit or debit card scheme. Here are the trends that we see having the maximum impact on consumer choice and flexibility. The emphasis is on increased choice rather than replacement payment methods, making the new world of payments an inclusive one.
Mobile contactless payments – have been around for some time, simple to use and saving time at the checkout. We’re going to see increasing numbers of consumers using ApplePay, AndroidPay and SamsungPay where the £30 card limit need not apply to because the customer has provided additional levels of security via their mobile device.
Real-time payments – mobile and internet devices, alongside banking apps, now offer a practical alternative to card transactions and can transfer funds instantly.
Alternative Payment Options – these alternatives to cards cover a wide variety of options from PayPal to Klarna (Sofort) and AliPay. Payments direct from bank accounts are generally more popular in parts of Europe where the attitude to credit is more conservative.
Blockchain – in the longer term, expect to see more of Blockchain especially in the corporate payments world where it acts as a powerful and secure ledger that records every step of a transaction and transfer of ownership.
Person-to-person – all part of the move towards digitising payments and made possible by the PayM central infrastructure and bank interoperability. Consumers are currently using the person-to-person method to transfer funds in real-time to trusted recipients such as friends, family and known suppliers.
Self-service – self-service payment kiosks and other unattended devices are starting to take the place of traditional cashier tills in certain environments. Customers in some pubs or restaurants can already order their food and drink, have it delivered to their table and pay for it using their mobile device then simply walk out the door.
At first glance, it appears that this increased competition is squeezing profits and confusing consumers. However, consumer demand for technology and an ‘always-on’ culture means transaction volumes are rising dramatically creating business advantage for the sector whilst meeting consumer expectations at the same time.
Enter the new Payments Facilitator
With so many options, merchants may wonder how this will affect them, and indeed, how to access these new services so that they are able to offer more flexible choices to their customers. The scene is set for the emergence of the new Payments Facilitator – a single entity that provides an end-to-end platform for payments of all types regardless of borders. Such Payments Facilitators would offer acquiring, a payment gateway and range of value added services. They would operate on a European and International scale and provide omni-channel payments processing.
As well as providing a better service to the merchant, with potentially lower fees, this type of approach provides a much better experience for consumers, allowing them to pay by any means, either card-based account, direct bank account, or through an alternative payment method.
For more information about Payments Services provided by Anderson Zaks please visit: www.andersonzaks.com, or email Adina.Ahmed@AndersonZaks.com.