Seven payment trends for 2018
From IoT solutions to peer-to-peer offerings and real-time systems: Technologies are also advancing in leaps and bounds in electronic payment systems.
The PPRO Group as a specialist for cross-border electronic payment, has identified the trends in the payment sector for 2018. The following seven developments are to be expected in 2018 - especially at European level:
Internet of Payments
According to Gartner, the number of devices connected to the Internet of Things (IoT) will increase from 6.4 billion to 20.8 billion between 2016 and 2020. Consumers increasingly expect their IoT devices not only to perform tasks automatically, but also to handle payments. For example, appropriately connected refrigerators will automatically replenish and pay for groceries, and users of electronic voice assistants, such as Alexa and Siri, will increasingly shop using a simple voice command.
Context-based payment
People who go to the checkout with their virtual or real shopping cart often reconsider whether the purchase is really worth it. To make the payment process easier, it should be integrated into the context of use as much as possible. This means that the checkout is practically invisible and the payment process runs largely automatically in the background of the application being used. What is already being implemented to a greater extent online will also be used in real retail stores: In the future, customers will no longer have to fork out cash or credit cards, but will be able to pay in passing via wireless transmission - whether via Bluetooth with a smartphone, RFID chip on a customer card, or automatic payment via facial and voice recognition.
Peer-to-peer payment
Payment processes will also be increasingly integrated into peer-to-peer (P2P) systems in 2018. For example, in India, WhatsApp already allows money to be transferred to a friend via P2P payments while the user is chatting with them. Apple is also launching this feature with Apple Pay Cash. With the help of the new voice input options - for example via Alexa, Siri or Cortana - P2P payments and banking transactions will also be able to be instructed verbally.
Real-Time Payments
Push payments (i.e., payments initiated by the consumer, such as SEPA credit transfers) enable payments to be made in real time. In the euro zone, the necessary infrastructure has been available since November 21, 2017 with SEPA Credit Transfer Instant (SCT Inst). Various financial institutions have already implemented corresponding systems. Others will follow as market pressure increases. It will be interesting to see to what extent SCT Inst will open up new payment options and to what extent online merchants in particular will use the speed and binding nature of real-time transfers to convert their processes to full real-time processing.
Partnership between banks and fintechs
The Regulatory Technical Standards (RTS) defined by the European Commission for the new Payment Service Directive (PSD2) represent a major compromise between the interests of the established banking industry and European fintechs. Overall, and especially from a fintech perspective, it would certainly have been best if the bank's free choice to offer an API or allow access via online banking had also been offered to fintechs. That is, good APIs would have been used and bad ones would not, thus resulting in simple self-regulation. At the very least, however, the new version is less threatening to the European fintech sector than the EBA's original version from late February 2017, likely resulting in a solid foundation in 2018 that will lead to more competition and security in payment processes and provide choice and data control to merchants and consumers alike.
Decentralization through blockchain technologies
The technological basis of Bitcoin and other cryptocurrencies will provide further novel solutions in finance in 2018. Institutions will establish direct connections with each other via blockchain technology to avoid correspondent banks or other intermediaries. Nasdaq, for example, already provides a platform where private companies issue and trade shares via blockchain. Here, all trading - from execution to clearing to settlement - takes place in near real-time, with the technology enabling tracking. In addition, blockchain can be used as a fully transparent and accessible system of record for regulators, making auditing and accounting much more efficient. The number of use cases for blockchain is growing every day. While the actual breakthrough of the technology is yet to be seen, as with many fundamental technology changes, it will take time to catch on.
Commercialization of MNO wallets
Globally, more than two billion people are currently without access to formal financial services. In many countries with low financial inclusion, peer-to-peer payments via mobile wallets or MNO (mobile network operator) wallets are the norm. With the increasing growth of e-commerce in these countries comes the commercialization of such wallets for B2C payment methods. Thus, in the future, there will be a merging of P2P payment systems with B2C payment systems in many countries in Asia, Africa, and Latin America.
