Payments in 2016: a pivotal year
With challenges across the board, banks will have their work cut out to keep up with the changing world of payments in 2016. It is shaping up to be a pivotal year for the payments industry as regulation, new technology, major infrastructure overhaul projects and security issues combine to reshape the landscape.
According to a joint report from analyst firm Celent and payments systems company ACI Worldwide the result is that the time has come to “reimagine the payments relationships between banks, retailers and fintech firms”.
In the report, Banks, retailers and fintechs: reimagining payments, Celent and ACI argue that significant disruption lies ahead and that banks should not be complacent about the threat of disintermediation.
The key threats come from the potential relegation of banks to the role of utilities, losing control of customer relationships as a result of the European Union’s incoming Payment Service Directive II’s XS2A – Access to Account – provisions; the rising profile of Apple, Google and other technology companies in payments; the impact of distributed ledger on financial services; and the longer-term possibility of central banks deciding to issue government-backed cryptocurrencies, which would enable broad access to central bank money.
For banks this poses a range of challenges that they need to address urgently says Gilles Ubaghs, senior analyst for financial services technology at Ovum in a recent report, Customer Centricity in Payments: an approach to personalisation.
“Banks remain well placed in payments, but the existential pressures on them are growing,” he writes. “Consumer expectations are beyond the control of financial services and the growing prevalence of intelligent, personalised services will soon extend to payments and indeed financial services as a whole.”
In a separate report, 2016 Trends to Watch: Payments, Ubaghs identifies five main threads:
• Customer-centric product design.
• The POS space is evolving into a broader payments-as-a-platform ecosystem.
• Authentication and tokenisation will drive security investment in 2016.
• Recognition is growing for improved clearing and settlement capabilities.
• The distributed ledger/blockchain is finally moving toward practical applications.
“The speed with which the payments market is evolving is by now well known to nearly everyone both within and outside the market. This is only adding fuel to the flames of technology development; the ever-increasing variety of players now entering the market are introducing a range of both new opportunities and competitive threats,” he says. “Competition levels will remain extremely high as investment in payments continues at the high rate of recent years and the number of start-ups and high-profile acquisitions continues to grow. Old assumptions are dying off and it is increasingly clear that no one has a guaranteed dominant positioning in payments.”
This is an excerpt. The full article is available in the February 2016 edition of Banking Technology. Click here to read the magazine online.
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