The world makes big steps towards a ‘digital payments revolution’, pushing the end-users to demand fast, frictionless, and borderless payments. Which are the main trends to be followed in 2022?
The era that we are current living in demands quick and seamless payments. This is what can drive an organisation to real success, which has two main elements that we need to consider:
the user experience for the consumer – relevant, contextual, and secure;
the invisible engine that lies underneath processing this every widening variety of payments.
Consumers want to deal with these things easy, effortless, fast, and with low costs. They are easily captivated by new payment options; as we can see, pay in instalments or Buy Now, Pay Later (BNPL) credit facilities are growing with no signs of vanishing.
As we are the processing and provider side, we see the prevailing trend of Software-as-a-Service (SaaS). Fintechs and financial institutions are now able to access top-notch technology on a SaaS platform faster, which means there is more focus on revenue and less on the technology stack as experts are available all throughout the process and can improve it as it goes.
If we look at digital banks that transform into super apps, shopifying the banking experience and beyond, we can see that the trends are now combining and creating improved products.
While PSD2 was transformational, it left gaps that Open Finance might fill. What opportunities have already been driven and gained traction through Open Finance? How can it still be leveraged?
While Open Banking democratised the way we bank and pay, Open Finance will mark a turning point in the way we embed finance in our daily lives’ transactions. Think about the way businesses finance projects and trade. It touches a wider set of financial services from lending, mortgages, investment, and more. It navigates across non-financial industries including commerce, smart city, mobility, government, healthcare, education, and much more.
For too long, traditional finance was seen as a major obstacle to inclusive lending. To break this pattern, the financial industry needs to act differently. We are starting to see the rise of industry mash-ups that use smart data to improve lending decisions and increase financial inclusion. Looking ahead, Open Finance will have the ability to enable us to build products that help consumers make better choices and get hyper-personalised offers fitted for their lifestyle.
What is interesting is that the prime relationship and the financial offer might come from non-financial institutions from various industries as they understand how to communicate with their customers and recognise their preferences and needs.
Mobile users have increased their screen time to 25%, what can banks do to prepare for a future dominated by super apps and mobile financial services?
Today, when one looks around in any public space (or even at home), it is difficult to imagine how we survived all these years without the existence of super apps. Their ability to cater to consumer needs by including various customer preferences, all in one single platform, is a major contributor to the increase in average screen time.
Millennials and Gen Z have made it very clear how they wish to take care of their finances. Banks and other financial and non-financial institutions who accept and adapt to the trends of Open Banking and APIs are the ones who will succeed in the future of mobile services. Super apps are also widely becoming a platform on which to aggregate a broad range of services; from home loans to trading and grocery shopping, all while creating a seamless experience. Banks need to be ready for partnerships that will support this consumer journey in a seamless manner; by bridging real life to digital.
The increasing interest in alternative currencies like crypto has put Central Banks Digital Currencies (CBDC) on the agenda around the world. What do you think are the risks of countries misusing it as it develops? What could be the consequences?
There is a considerable amount of buzz in the market around CBDCs, stablecoins, and cryptocurrencies. We are currently in the experimental phase and 80% of central banks have performed/are performing a CBDC research on various levels.
It is important to understand the motivating factors behind CBDCs, including what markets it can serve. In developing economies, this is typically improving financial inclusion, payment infrastructure, modernization, and perhaps responding to currency substitution threats. In developed economies, it is about cash replacement and protecting the currency on a global level, while providing competition to the private payment systems.
While most banks are taking a self-protective approach, central banks do not have the desire to disrupt commercial banks because they have an important role in the financial ecosystem. One solution is to have a common platform where central bank reserves and commercial bank deposits can be tokenised. This would solve the issue of fragmentation as they would all be compatible regulated liabilities, whilst at the same time, opening a world of Web 3.0 innovation.
What did the growth in adoption of Payments-as-a-Service (PaaS) mean for the current markets, especially in an increasingly non-cash environment?
Technology has become the critical enabler for any financial institution or fintech to remain competitive in today’s payments business. While having a new age future-ready payments system is a must, the use of a one-stop-shop cloud-native platform that manages all the payment processing and servicing requirements is seen as the ideal solution. A PaaS platform takes care of the operational and technology requirements related to payment processing for a bank or a PSP, thus, allowing them to focus their time and resources on more strategic endeavours such as building partnerships, marketing activities, and develop a distribution strategy. It also means that the service provider is the one keeping the platform up to date in terms of compliance, regulation, etc.
The ideal PaaS model offers various value-added services around its core, particularly anything around end customer satisfaction. It is important for both the immediate users, such as banks and financial institutions, and end users to be able to experience a seamless journey. For Payments Service Providers, it is imperative to offer a smooth full circle customer experience from the point of purchase itself. Another key expectation of a good platform is to maintain a user-friendly app with access to all the functions of commonly accepted payment methods like Google Pay and Apple Pay, in addition to the more ‘traditional’ and regionally accepted.
Joining a ‘best practice’ platform has become a must rather than an option as the cost of processing tends to increase due to a wider variety of payment solutions.
About Jane Loginova
Jane wears multiple hats within BPC, a leading payment solution company headquartered in Switzerland. She has been working for BPC for almost ten years and has global responsibility for corporate strategy, marketing, and business growth. She is successfully leading the development of BPC through the rapidly changing landscape of payments, banking, commerce, and mobility.
About BPC
Founded in 1996, BPC has transformed over the years to deliver innovative and best in class proven solutions which fit with today’s consumer lifestyle when banking, shopping, or moving in both urban and rural areas, bridging real life and the digital world. With 350 customers across 100 countries globally, BPC collaborates with all ecosystem players ranging from tier one banks to neobanks, Payment Service Providers (PSPs) to large processors, ecommerce giants to start-up merchants, and government bodies to local hail riding companies.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now