Forging the Future of Payments – The Emerging Trends
With the rapid pace at which the payment industry is gathering momentum, the global payment environment will go through a sea change in near future. There are many factors responsible for an ongoing shift in the payment industry.
We are going to discuss these trends in the light of the 5 major factors that are as follows:
- Increasing regulations and compliance post global recession of 2009
- Entry of new players in the market and increasing competition
- Economic growth in emerging markets and a resultant boom in payment flow across new regions
- Innovation and unprecedented growth in technology
Technological innovation is paving the way for increased accessibility, efficiency, velocity and reach, as far as payment transfers are concerned. It is responsible for a complete shift as to where, when and how payments are initiated and transferred.
Banks need to be cautious and monitor the situation carefully as to how developments are taking place in the payment industry and what opportunities and threats it is posing for the banks. In order to thrive, they need to be alert and ready to capitalize on the emerging possibilities.
- The impact of regulation
Increasing regulations is the biggest factor that is going to impact this industry in future. With an unprecedented growth in the volumes of cross-border payment transactions, the volume of these transfers has doubled from US$10 billion in 2012 to US$18billion in 2018. Such a huge volume of international transactions warrants strict monitoring and control.
Banks need to keep an eye on the complexities involved with local and international regulatory framework. The other influencing factors are current practices, currencies and payment formats.
Changes in regulatory compliance can lead to enormous innovation, where it becomes necessary to reevaluate both internal and pan-industry practices. It will open a whole new world of opportunities for banks and corporate sector.
To simplify and harmonize payment practices across Europe, EU has introduced the Single European Payments Area (SEPA). Fixing regulatory and compliance issues, SEPA has harmonized and standardized the payment market and eased local transfers. Such integration activities are likely to take place in other regions as well.
- Entry of new players
Many new players are likely to enter the payment industry and those can be online payments providers, virtual marketplaces and large technology and social media companies such as Google, WhatsApp, Amazon, and Apple, etc. A thriving fin-tech ecosystem will boost the market.
The factors that are responsible for attracting new players in this market are the current secure payment propositions. The industry as a whole is gravitating towards new payment methods that are not constrained by banking regulations and offer convenient and innovative methods to the customers.
- Economic growth in emerging markets
Shifting economic landscape and changing global demographics across the planet will also shape how future payment flows will take place.
A soaring middle-class population and changing economic landscape is creating global opportunities in this industry. In the year 2000, the US and Western Europe together controlled 70% of global financial assets, but by 2020, it is estimated to fall to 45%. China, on the other hand, is flexing its economic muscles and it has seen a 600% growth in global financial assets since then.
- Rapid growth in technology
With the rapid pace of change in financial technology, many regions such as Latin America have experienced unprecedented growth in smartphone penetration. Nearly half of the adult population in this region doesn’t have a bank account. So, there is huge potential for payment processors and mobile banking. Technology allows you to not only transfer the funds instantly but also to track it in real time.
Payment processors like PayTabs have a real advantage here because they have future-proof strategies in place that include customer-centric approach, convenience, flexibility and multi-currency support.