Faster pay also needs to find revenue

With businesses and consumers alike witnessing digital transformation like never before, every industry has pivoted its organizational strategy to one better suited to survive the dreadful state of affairs the pandemic has put us all in.

Modernizing organization and infrastructure to support new service offerings and identify new revenue streams has been the priority for businesses across the globe. According to McKinsey & Co.’s recent report, 40% of C-level executives who suffered the biggest revenue hit acknowledged that they were behind their peers in use of digital technology.

For the global payments sector, the events have reset expectations and significantly accelerated several existing trends. Compelled by disruptive and competitive forces, the industry built and offered services that are not only essential to tackling the challenges facing businesses today but are also shaping the future.

New platforms were designed to enable a secure, modern and compliant payments process that meet an organization’s business model and expectations. While instant payments and open banking have been gaining momentum across the globe, payments providers have established digitally backed services that not only facilitate seamless financial operations but also help generate revenue.

A recent report by Accenture predicts that $7 trillion in consumer spending will shift from cash to cards and digital payments by 2023. Acknowledging this trend, the payments sector, traditionally dominated by banks, is now witnessing increased competition from new entrants, most of which are nonbank players. Big technology companies are looking to assume the role that credit unions and other financial companies typically held to maximize on this opportunity.

Open banking is another important trend. According to a recent report by Allied Market Research, the open banking market is projected to reach $43.15 billion by 2026 at 24.4% CAGR. It is paving the way for a new generation of financial products, giving businesses more choice, transparency and control over their financial operations.

The marketplace model presents seamless digital experience that acknowledges SMEs’ need for an increased level of customization. In both cases, the appetite for each business type is fulfilled by technology. The G-20 made enhancing cross-border payments a priority this year.

Technology adoption and the increase in engagement of nonbank providers enables businesses to make payments on a real-time basis, across multiple currencies, geographic regions and markets. This helps businesses expand their revenue stream by adding new services to their value proposition. The power of partnership and collaboration shall act as a catalyst for the economy, forcing global payments providers to innovate and reposition themselves. That will cause a shift in fintech investment.

According to KPMG’s H1 2020, global VC investment in fintech remained robust, accounting for $20 billion globally. The ongoing acceleration of digital trends, caused by the pandemic, will continue to drive investment in fintech solutions that will help dependent businesses such as cybersecurity, fraud prevention, among others, to flourish. Big technology companies or payments providers will continue to acquire fintech proficiency to excel in their respective industries. Banking as a service, also known as BaaS, is a model that involves banks adopting API technologies to offer financial services through third-party channels. Banks will monetize the opportunity to utilize open banking to offer new innovative services to their clients. Reevaluating their present operating model and adopting future-proof technologies to capture new revenue opportunities will be a priority.

Immediacy has become the name of the game for vendors and suppliers facing eroding revenue streams. Businesses today desire payments platforms that can be customized to suit the requirements of their clients. AI and machine learning will be an essential tool for payments providers, empowering them to provide hyperpersonalized, exceptional customer experience. This will also help the enterprises benefit from increased operational efficiency and easy scalability.

Crisis births innovation and the accelerated digital transformation, driven by the pandemic, is proof. The payments business, traditionally dominated by banks, is now witnessing increased competition from new entrants, most of which are nonbank players. The power play to monetize opportunities that the future holds shall continue; however, the aim should be to ease operational challenges by broadening the financial technology ecosystem.