In looking ahead to payments trends in 2019, a few things are clear: payments technology is advancing exponentially, payments infrastructure is shifting, and there is increased collaboration between incumbents and fintechs.
Given these knowns, its likely that some payments trends will include product commoditization as well as the convergence of services. Payments companies then need to determine where they live inside the quickly evolving ecosystem—and where they want to come out on the other side of 2019.
Players in the payments space must be aware of these trends and respond to them with strategic action to stay ahead of the curve. This could mean a pivot in business model or products or services offered. It also requires an inventory of current processes and whether or not data is being leveraged to its full potential. Perhaps most importantly, payments companies need to evaluate their customer centricity as consumer preferences will direct the next wave of payments trends.
Payments Trends: Navigating Certainties & Unknowns
Like any business, payments companies face stagnation if they fail to adapt to the changing ecosystem. Avoiding a stalemate requires planned responses to market trends, including a potential upheaval to business models, products, and services.
Disintermediation & Differentiation
As distributed ledger technology (DLT), cryptocurrencies, the Internet of Things (IoT), mobile wallets, and security technologies expands the ways people pay (and accept payments), incumbents face mounting pressure to differentiate. We will probably see the commoditization of things like payment processing speed and frictionless payments, making competitive differentiation more difficult—but essential.
Payment processing feels will fade to the background as precise technology obliterates traditional processing flow. Disintermediation will likely equalize the playing field when it comes to pricing, making the experience of a product or service paramount. Frictionless payments will be table stakes, but convenient, accessible, feel-good experiences woven into the payment process will set innovative payments companies apart in 2019.
Delving into Data
Big data has been around for longer than most realize; however, the act of harnessing and unlocking its full potential continues to evolve. Data a critical component for any payment provider to create new services, and if often requires herding disparate data across a myriad of systems. Beyond that, sophisticated analytics are needed to transform data into meaningful insights that can improve the customer experience. Currently, a few key players hold the keys to the data kingdom. These players tend to focus on architecting analytics systems that can be integrated with payments systems to provide a deeper understanding of consumer behavior, which can then be used to assess and mitigate risk and bolster growth.
Eyeing New Infrastructure
The modernization of payments rails in the pursuit of real-time payments (RTP) is disrupting many service provider business models. Bigger companies may be able to invest in new payments infrastructure; however, some may opt to outsource certain options to those with the resources to scale. Both cases could upend both operations and service delivery models for payments companies.
Collaborating to Bridge Gaps
Perhaps the biggest payments trends in 2019 involve collaboration between traditional financial institutions and fintechs. This collaboration enables incumbents to expand services and differentiate without the costly dismantling or upgrading of entire legacy systems. Fintechs enable traditional companies to layer functions and services on top of their existing infrastructure, improving speed to market and expanding product and service offerings by lowering barriers. How these collaborations will play out is yet to be seen in many areas. Ownership of data and customers will likely be a pain point, along with integration and security challenges.
With all of these payments trends, there will be a level of digital and organizational transformation required. Desired business outcomes may change and the infrastructure, staff, and technology needed to support those outcomes will require strategic thinking around the best ways to serve customers. The dramatic technological changes taking place are also complicated by an altered and uncertain regulatory landscape.
Agility and customer centricity will be the name of the payments game in 2019. The ability to pivot with and adapt to new technologies, regulations, and customer preferences will set apart the winners from the losers. Data silos must be obliterated and the focus must move away from individual payments products and towards holistic customer solutions.
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