A week back we published FinTech predictions for Asia for 2017 by Henri which can be read here. We got predictions from four more people who run their own companies and/or are industry experts.
Nigel Savory, Managing Director, Bottomline Technologies, on trends he expects to see in the global business and payments space in 2017:
- 2017 will mark an important turning point in the rising use of cards over recent years. The launch of real-time payments in North America and Europe will see rapid adoption of these new payment instruments by consumers and businesses, due to their ease of use, 24/7/365 availability and lower cost compared to cards. This topic will be especially pertinent ahead of the upcoming real-time payment initiatives of SEPA in the EU and The Clearing House in the US, which will be launching in November 2017.
- Consumer-facing corporates, especially big brands in e-commerce, will start becoming regulated Payment Institutions to take advantage of changes in payment rules. This will enable these large businesses to improve their customers’ “user experience” and make payments an invisible and integrated part of buying. This will be especially relevant in 2018 when the PSD2 regulations become effective, but many big corporates (e.g. the big tech and online retail companies) will be exploring and discussing this next year.
Christopher Kong, Senior Payment Consultant at Icon Solutions discussing what he sees as the major trends for next year.
Payments Security – All change in 2017
More payments traffic, particularly with APIs, will mean more threat of fraud and possible data breaches – firms providing resilience and recovery services will be in more demand. Card schemes will be trying to get alignment on 3D Secure 2.0 and to remain relevant in the online payments security space, after card-not-present/3D Secure is phased out. The USA will be torn between investing in the 3D Secure roll out as part of the EMV upgrade or waiting for the new European online payments security models to be developed. Big e-merchants like Amazon will likely be impacted by any new security models.
Depending on the final EBA PSD2 RTS on authentication, we can expect some new physical security solutions and providers – some even removing the need for physical cards completely – being able to enter and monetize with new market demand. To this end, most mobile handset providers in Europe will be ensuring that their handsets have a TEE be secure for use in banking payments and apps.
FinTech Challenger Ecosystem
Despite the hype and waiting, initial noise makers like Starling and Monzo don't yet have fully working bank accounts and the associated overlay services we were promised. Rising costs, lack of banking knowledge, low consumer uptake, and withdrawal from investors will cause some new players to fold and 2017 may see a challenger bubble burst, particularly given the market consumer apathy outside of the FinTech sector. Others that have secured good foundations and customer acquisition prior to 2017 (Metro, Clydesdale) will likely be in the ascendency when PSD2 awareness is pushed out to consumers in 2018.
Global – Instant Payments becomes reality in the US
The Clearing House in the USA will have their first online working gateways for Instant Payments USA – given the pace of their FinTech sector, players like Stripe, Ripple and GAFA (Google, Amazon, Facebook and Apple) will be developing overlay products quickly on any new model. US banks will be aiming to work with FinTechs who provide e-money, international remittance or P2P payments like TransferWise and PayPal, bypassing the card networks to get quicker access to funds.
Flywire CEO Mike Massaro sees a few big trends emerging, and in some cases, continuing in 2017 and beyond:
Global Citizens Grow
The year 2016 saw the emergence of an important new demographic for financial services – the Global Citizen. This fast-growing segment does not consider borders in terms of lifestyle, access or travel and is spending more than ever on goods and services outside of their home countries – on education their children, medical care for themselves and their family members, real estate, luxury items and other offerings that bring diversity and culture to their life experience. We’ll see this demographic continue to grow in 2017 and beyond and flex their spending power in new ways.
This will have a significant on the service providers and channels used to process international payments. These cross-border transactions are typically complex and fraught with challenges for both the payor and payee – especially when dealing with important life events. Businesses looking to appeal to this segment must take steps to reduce the friction in today’s cross-border payment process and find ways to make them more convenient, transparent and cost effective.
Digital Channels Dominate
As international payments become more common, consumers are seeking out the most convenient, cost efficient and transparent channels available. We are already seeing these transactions moving to web channels vs. traditional agent or bank-based alternatives due to the significant advantages of online options; e.g., convenient access to fast, cost-efficient and transparent payments, and the ability to pay in local currencies via familiar options such as bank transfers, online banking, and credit and debit cards.
Payment speed and convenience aren’t the only drivers for global citizens. Their top priority is ensuring the payment gets to the institution on the other end. The certainty of funds is also critical to the receiving institution – assurance that the amount owed is the amount received, along with the data that goes with it to reconcile their own ledgers.
In 2017, international payment service providers that depend on physical agent-based models will see increasing pressure to move even more of their business to digital, and do it quickly.
Security Takes on Even
Not surprisingly, payment security will also increase in importance in 2017. Both payors and payees are looking for protection against fraud and assurances of compliance with any international regulations. And with governments’ increased focus on cutting-off financing sources to potential terrorists, any entity processing large, cross-border payments will need to have secure systems in place to verify sources and recipients; ensure strict compliance with anti-money-laundering laws and provide detailed transaction reporting.
The year 2016 also saw an increase in more local forms of fraud – bad actors trying to take advantage of international students and patients by offering supposed discounts on their tuition or fees, and threatening them with fictitious penalties for immigration taxes and other types of fraudulent fines. This type of activity will lead many institutions to protect their customers by clearly designating preferred payment channels and providers and investing in efforts to educate their customers to conduct their transactions solely through those channels.
Payor Expectations Rise
With consumers around the world making large sum payments from different time zones, the number and frequency of payment-related questions and inquiries will rise – at all hours and in a variety of languages.
Schools, hospitals, tax agencies and others are not necessarily equipped to be in that business. Any entity accepting large, cross-border payments in any volume will need to be able to provide ancillary support services related to those payments – in-house or via qualified third parties. 24x7 customer support will become a minimum requirement.
The Opportunity in Cross-Border
Payments Continues to Grow
The international education market is estimated to be $53B worldwide in 2016–2017. Over one million international students studied at US colleges and universities alone in the 2015–2016 academic year. And another 600,000 studied in Europe and Australia. Medical care is another prime spending area for this segment. Industry groups estimate that as much as $40 billion per year is spent each year by patients traveling outside of their home countries for care. And it is growing at 15–25% per year.
Foreign real estate investments are not new, but they are increasing with new wealth being created in Asia and other emerging regions. Over $100B in US real estate is owned by foreigners. And interestingly, about one-third of those same people send their kids to the US for school.
Paragon expects 2017 to bring the following trends:
Enhanced testing practices:
- As payments systems continue to evolve in scope and complexity, antiquated testing practices will no longer be good enough to ensure successful transactions. In response to this situation, financial institutions and payment processors will invest in more comprehensive, automated and virtualized testing solutions.
- As financial institutions and payment processors are expected to test exponentially more code with less of a budget, there will be an uptick in Testing-as-a-Service (TaaS) offerings, allowing organizations to more efficiently and cost-effectively test their software.
The continuing rise of DevOps:
- This approach, which removes the organizational boundaries between development, operations and testing to drive innovation and a faster time to market, will become the gold standard required for the companies in our industry that want to be in business in the future.
- As more financial services providers commit to the DevOps approach, it will be necessary for them to partner with companies that understand and can support rapid product development and deployment with continuous integration, continuous testing and continuous delivery.
- Hackers’ methods will continue to become increasingly sophisticated, prompting increased pressure for financial service providers to deploy fortified security methods, including advanced tokenization and encryption.
- As merchants and financial institutions adjust to EMV regulations, hackers will focus on the ‘low-hanging fruit,’ i.e., those organizations that have yet to become EMV compliant.
- EMV regulations have changed the user experience, prompting a notable uptick in different payment methodologies, such digital wallets and payment apps.
- As an additional EMV deadline at the ATM looms ahead in the latter part of 2017, ATM providers will spend a significant portion of the year preparing for the shift, coordinating hardware, software and certification testing.
Evolution, not revolution:
- Recent years have been characterized by emerging technologies, but 2017 will see more innovation within existing technologies. For example, 2017 will mark the 50th anniversary of the ATM, yet adoption of innovative services in this channel, such as contactless ATMs, will continue to be robust over the next 12 months. This phenomenon will be repeated across many of the channels through which financial services are delivered.
Jim Perry, CEO of Paragon, commented, “The payments industry is making strides towards providing ubiquitous user access through a growing number of end points. With such a growing presence comes increasing amounts of complexity, code and processes that must be dealt with by testing methodologies built for this type of environment. Paragon exists to provide financial services companies with solutions that address these conditions. The one thing that is certain about 2017 is demand for next generation testing platforms will increase as the industry deals with more innovation, payment types, security demands and certification requirements.”