By Simon Fairbairn, Director of Solution Development at Ingenico Banks & Acquiring
With almost 40 years in the industry, the collective payments expertise of the Ingenico team is unparalleled. So, as the New Year begins, Simon Fairbairn, Director of Solution Development at Ingenico Banks & Acquiring, considers 12 key payment predictions for 2020.
- Fraudsters Innovate Too
In 2019, Authorised Push Payment Fraud (APP Fraud) rose by 40%, costing the UK £616 million.
Thanks to PSD2 and Open Banking, we will continue to see more new players in fintech. This is brilliant, but it means fraudsters will inevitably innovate their techniques, too. As a result, in 2020 we will see banks enhance their security and implement measures to protect customers, such as payment delays, SCA, 2FA and Confirmation of Payee.
- Digital Payment Rewards
Alongside enhanced security, monetary savings and ease of use, digital payment rewards will increasingly become embedded in payments as a value-added service. These types of loyalty initiatives provide opportunities to engage directly with customers and are useful to increase customer allegiance with brands.
With innovative payment terminals on the rise, such as Android, that offer enhanced applications and collect more consumer data, customers will expect more personalised offers. Organisations will deliver them in 2020.
- More Data, More Powerful AI
Often thought of as just for use with fraud prevention, Artificial Intelligence has enormous potential to improve the payment ecosystem for banks, processors, merchants and, ultimately, consumers. Together with companies using AI to analyse certain patterns and algorithms in data to detect fraudulent activity, retail payments will also use this technology to enhance digital interactions in voice commerce and mobile banking.
- New Smart City Payment Options
For the last few years we have seen the beginnings of frictionless towns and cities across the globe. The TfL tube system and contactless buses are a prime example of an effective cashless system – since its inception over 1.7 billion frictionless journeys have been enabled.
In 2020, cities will implement new smart payment options by joining forces with the right partners and platforms to counteract new challenges, including ease and speed of implementation, disruption and data security.
- Smarter Purchase Suggestions
This year, Amazon generated 35% of its revenue from its recommendation model, which utilises customer data to deliver smarter purchase suggestions. By using data to personalise suggestions, retailers are truly listening to customers and continuously pushing the boundaries of shopping experiences. In 2020, we’re going to see more retailers following in Amazon’s footsteps, either in store or online.
- Generation X Demand Payment Security
A lot of the fintech revolution has been driven by millennials, for millennials. As this demographic seeks and demands new ways to pay, Open Banking continues to enable new players in the payment ecosystem for millennials as well as Gen Z, a third of whom are estimated to have opened at least two new accounts with a challenger bank within the past five years.
While the focus has predominantly been on these young demographics, their older counterparts, such as Gen X, are being left behind. As such, in 2020 we will likely see Gen X demanding that the basics of their financial services, such as security, are prioritised over anything else which might cause a generational divide.
- The Rise of Social Commerce
Social commerce is indisputably going to be the breakout trend for ecommerce in 2020. The line between social media and ecommerce is increasingly becoming blurred, driven by the sheer amount of time spent on social media apps.
The rise is down to popular platforms, like Instagram and Snapchat, enabling short form video content, which 91% of consumers prefer over conventional static media. What once consisted of a static online shopping experience is becoming a much more fluid ecosystem defined by multiple threads of content media.
- Digital ID Becomes King
At its core, identity verification has always underpinned financial services in order to protect users and meet compliance demands. Efforts to help streamline identity procedures, such as the creation of long passwords, cause friction for customers. Many inevitably forget the long passwords they create and $70 charges by banks to change passwords cause frustration. In 2020, Digital ID will help eradicate these bugbears while providing numerous economic benefits and more secure identification for consumers.
- Relentless Collaboration
Fintech continues to be the buzzword in financial services, relating to the rapidly evolving technology that is fast revolutionising the industry. However, in order to keep innovating within the industry we can’t rely on technology alone; it’s a team sport. Throughout 2020, as Open Banking continues to offer more opportunities within the payments ecosystem, we must continue to collaborate with other players to keep innovating.
- Make Payments with Cars
The Internet of Things (IoT) is making devices smart.For many years we’ve heard about fridges that consumers can make payments on, but cars have been noted as the next big thing to be inter-connected. Research highlights that the automotive industry could be the most lucrative IoT platform, and by 2023 it’s estimated that 775 million cars will be connected through telematics or in-vehicle appsaccounting for $63 billion in transactions that year.
If these estimations are to be achieved, over 2020 we’ll start seeing IoT payments for petrol, tolls and food.
- Banks and Card Payments Converge
Due to Open Banking and PSD2, the ability to have a card or bank account payment in near-real time starts to enhance the possibilities for how a consumer may wish to pay at the point of sale in 2020.
We will likely see consumers offered with the choice of paying by real time payment rather than by card; same outcome through a different route with a different charging scheme. This may extend to initiating a sequence of recurring payments, the first in real time, the remainder in a Direct Debit format.
- Invisible Payments
Invisible payments are dominating the payments industry with the likes of payments rings, Uber and Amazon Go, all of which are completely frictionless, with payment details stored inside the product. Across all sectors in 2020, businesses will need to keep up with convenience-led lifestyles, placing it at the heart of financial services product design.
Black Friday payment data reveals rapid growth of ‘pay later’ methods like Klarna
Payment processor Mollie reveals the most popular payment methods for Black Friday
Mollie, one of the fastest-growing payment service providers, has revealed insights into the most popular payment methods used this Black Friday. The data, which provides a year-on-year comparison of 2019, shows that payment methods allowing customers to pay flexibly – like ‘pay later’ service Klarna – has more than doubled in 2020. The study spans 101,000 merchants across Europe, primarily from Germany, U.K., France, the Netherlands and Belgium.
Black Friday trends:
- In 2019, Mollie saw a 36% increase in the overall number of transactions on Black Friday versus the previous year. In 2020, this shot up to a growth of 56% on the 2019 numbers, representing a difference of 20%.
- And this year, even in the four days leading up to Black Friday, there was a 58% YoY growth in transactions.
- Use of ‘buy now, pay later’ services on Black Friday (such as Klarna or ClearPay) has more than doubled from 1% of all payments in 2019 to almost 2.5% in 2020.
- Use of mobile payment methods on Black Friday is consistent on the previous year – 0.20% in 2019 to 0.25% in 2020.
“There is a lot of pressure on consumers’ wallets at the moment, which is making people look to payment methods that offer them financial security,” said Ken Serdons, Chief Commercial Officer at Mollie. “It makes sense that fintechs like Klarna, who have performed phenomenally well this year, have been so popular this Black Friday. The increase is in-line with this growing trend towards more flexibility in how consumers pay for goods.”
Beyond Transactions: The Payment Revolution
By Marwan Forzley, CEO of Veem
The uninterrupted disruption brought on by the pandemic accelerated the need for robust, digital-first tools created to support remote teams and accelerate online commerce.
As offices across the US moved to work from home for indefinite periods, specialized back office departments handling sensitive information have had to go a layer deeper to find tailored solutions that support the transition of their in-person workflow. For finance teams, payment approvals, issuance, and general management became a challenge overnight. Particularly for those who — even in 2020 — continued to send and receive paper checks through the mail.
For years and even to this day, millions of small business owners around the world have relied on slow and confusing bank processes to manage their business finances. Every day, they spend valuable time using old, complex and expensive platforms to transact with domestic and international vendors — never knowing where their payment is or even when it arrives at its destination.
With ongoing economic and logistical uncertainty looming as we move into 2021, this old norm should not be expected for much longer. This year has seen small business owners wear more hats than ever before, and has influenced a mass adoption of online financial applications that offer heightened security, save more time, and provide more value as budgets tightened.
A study conducted by Mastercard earlier this year saw online business-to-business payments skyrocket in popularity with more than half (57%) of small business owners across North America turning to digital services since the start of the pandemic to improve cash flow and modernize their payment processes.
If this study is of any indication, the days of making an appointment with a banker or sending a wire transfer through an outdated web portal have passed. And the time for the payment revolution is here.
Putting the user in the driver’s seat
Major world events have always acted as a catalyst for innovation and change. As of a result of the growing pains we experienced this year, in 2021 businesses can finally say goodbye to huge transaction fees and bank-imposed gatekeeping when it comes to managing their financial processes.
The financial technology firms, in partnership card and local bank networks and sometimes even each other, have been building and iterating on products over the past decade that were created to work flawlessly from a desktop or smartphone.
For the first time, small businesses have access to needed, user-friendly financial tools packaged to make their lives easier. No longer reserved for major enterprises, those previously underserved by traditional banks can sign up for applications that consolidate billing, payments, working capital and more to one central dashboard.
With the owner in the driver’s seat, they can better communicate with vendors and customers and reallocate their time previously spent manually sending, receiving and reconciling payments toward growing their business — without ever stepping foot out of their home.
Genuinely seamless and automatic integrations with complimentary functions aligned to core financial activities mark a fundamental change in how businesses will choose to operate moving forward. Not only should experiences be integrated, but the entire lifecycle of the transaction should be digital.
Consider a freelance contractor that uses a time tracking and invoicing software to invoice a client. Through an integration between the time tracking tool and Veem (a complete online business payment tool) the client receives and captures the invoice within their Veem payment dashboard. Because Veem and Quickbooks are integrated partners, as soon as the invoice is received, a bill is automatically created, marked as paid, and reconciled on the client’s accounting software as soon as the funds are issued.
In this flow, the contractor only needs to send an invoice, and the client only has to approve the payment for everything else to move. Thoughtful integrations like these empower businesses to log-in to one application, but benefit from several, ultimately eliminating inefficiencies.
Understanding that old habits die hard, it’s expected that businesses of any size have questions when it comes to moving payments from a bank to an online provider.
Answering these questions with unprecedented product value and relentless transparency is the best way forward to bring more businesses onboard in 2021.
This means providing up front pricing, tracking, choice and flexibility to users. Before, during and after the pandemic, cash flow management remains the most critical part of running a small business. Digital payment providers enable the entrepreneur to have unparalleled insight, visibility, and control over their cash flow.
Through non-bank payment options, businesses can secure their information over a secure data network, watch their money move from origin to destination, and choose the speed at which they would like funds to move. By these tools working in harmony, the user can remove friction and spend more time focused on their business.
Separating the signal from the noise
2020 is a year that changed everything for the global small business community. In a report by Veem issued at the start of the pandemic, an overwhelming 80% of businesses shared that they anticipated COVID-19 to impact their business over the next 12-16 months. Problems surfaced that many didn’t even realize they had. And in finding those problems, businesses turned to technology to support them.
As enabling technology, it’s our job to listen and bring clarity and solutions to those contributing to and growing our local and global economies despite the hurdles and challenges they’ve faced.
Right now, small businesses deserve more. More access, more choice and more credit. In the road ahead we expect online payments and bundled user friendly financial services to play a pivotal role in the recovery of small businesses. The payment revolution will see the continuation of important and meaningful products that value the users time and enable businesses to launch, grow, and scale regardless of what’s to come in 2021.
The UK’s hidden payments crisis: why businesses should rethink their payments strategy
By Edwin Abl, Chief Marketing Officer at Modulr.
As the economic conditions imposed by the Coronavirus endure, businesses are facing a dilemma about how to reduce operational costs while meeting customer needs in as economical a way as possible. And all without compromising on their quality of service.
A recent survey of 200 payments decision makers across the UK, revealed there are hidden costs of payment processing which will have an exponentially greater impact on wider businesses if left untreated. It found, UK businesses are spending an average of £1.5m a year in costs attached to payments – money they simply cannot afford to lose to inefficient processes in these uncertain times.
Businesses need to plug any holes in their boat to avoid sinking. And for many this includes the examination and recalibration of their payments strategy.
The research reveals that the payments process now represents a huge 12% of a business’s total operational expenditure. With two-thirds (64%) of all businesses expecting the cost of payment processing to increase over the next two years.
Two thirds (67%) of payments decision makers surveyed believe the way they process, and service payments has had a direct impact on their customer experience. In fact, 62% of respondents believe the hidden costs of poor payments outweigh the hard costs. This indicates that a poor payments strategy is no longer something business leaders can ignore, as it now has a far greater and unseen impact on wider business mechanics.
The top three hidden costs attached to inefficient payment processes were ‘impact on customer experience/satisfaction’ (38%), ‘influence on relationships with other teams and departments (35%) and ‘impact on competitor differentiation’ (31%).
These findings suggest there is widespread consensus that getting payment operations right, directly creates performance boosts elsewhere in the business. When asked to estimate, as a percentage, the business performance boost received if hidden payment inefficiencies were resolved, the average margin for improvement was +14%, with traditional banking the sector most likely (31%) to predict a performance gain greater than +15%.
The 5 key steps UK businesses can take to drive payment efficiencies
There are five key areas payments decision makers and tech leaders should be looking to change, so that they can drive end-to-end payment process efficiencies:
1 – Locate hidden payment process inefficiencies
Visibility is a key issue. Respondents across large (46%) and small businesses (47%) say they have very clear metrics directly related to payment process costs. Only 8% say that they don’t understand the costs involved. Yet, businesses know they could do better with improved visibility of costs. Both large and smaller companies cite ‘lack of visibility for operational costs’ as the top challenge when it comes to achieving strategic goals around payment process and money services provision.
Digital banking companies, including lenders and FinTechs, identified ‘lack of visibility for operational cost’ as a challenge when it comes to increasing payment services revenue (37%). This is in comparison with all respondents mentioning other issues such as lack of skills (25%) and constrained resources (25%) as secondary and tertiary challenges respectively.
For many businesses, developing a cost model for current and projected payment process costs, both hard and hidden, is a top priority.
2 – Make payments key to stakeholder experience management
Customer, departmental and even supply chain partner experiences are increasingly intertwined. There is no doubt that customer experience is a top priority for payment services strategy. But enhancing the broader stakeholder experience is a close second, and certainly complements the former.
Employee experience affects customer experience. So, payment services innovation must extend beyond customer touchpoints. Happy employees who feel they are working with effective and efficient payments systems will be best placed to enhance the customer experience. And, employees in commercial roles who have bought into the benefits of efficient payments will naturally want to extoll those benefits to customers.
Companies with a sophisticated and integrated supply chain are likely to be the frontrunners in implementing the integrated payment services that benefit all stakeholders, due to their historic experience. As customer experience management evolves into a broader discipline of stakeholder experience management, including employees and supply chain partners, it will become more crucial than ever to include payment services experience
3 – Integrate and automate to support payment innovation
Payment innovation is driving a culture change, connecting previously siloed functions such as IT and finance. There is increasing integration of systems from customer relationship management (CRM) and enterprise resource planning (ERP), into accounts and payments. The research tells us that payment processes are impacting nearly every department, affecting areas including customer experience, brand, leadership, business agility and ultimately, revenue. Integration enables new business models for paying suppliers and customers.
Automation is key to driving efficiency, replacing manual error-prone and time-consuming processes with real-time and responsive, digital ones. This is particularly the case when it comes to operational and payment processes.
Indeed, 52% of large companies say that team hours spent on payment processes was their biggest hard cost attached to payments, compared with 26% of smaller companies who share that view. This suggests that automation could contribute more to cutting the cost of payment processes in large companies.
A host of payments-as-a-service providers (including Modulr) are supporting customers to do just this by enabling them to stream a whole unified product ecosystem of payments functionality directly into their own software.
4 – Bring business leaders together
Payments innovation is driving systems integration and creating a more collaborative stakeholder ecosystem. As all the C-level roles become increasingly focused on the customer experience, the finance remit now includes overall business operations and its associated risks and opportunities. The role is evolving beyond just accounting, tax liability and funding. Therefore, closer collaboration between senior leaders is key to driving efficiencies and enhancing customer experience.
5 – Innovate by adding finance and payments to vertical services
Companies with a vertical focus are well placed to innovate by offering new payment services. In many vertical sectors, especially employment services, software vendors are increasingly embedding financial services facilities, such as payments, into their technology platforms. Employment services SaaS providers, across payroll, accounting, bookkeeping and more are offering financial services to existing and new customers within their specific ecosystem.
This means they can develop hyper relevant, convenient and delightful financial products and services for their end users through highly flexible, ‘plumbed in’ payments. This creates an ecosystem of stickier products while boosting the lifetime value of each end user.
Moving forward – engaging technology to drive efficiencies
If the onset of the Coronavirus crisis has taught us anything, it is that there are many advantages to investing in technology and having a digital infrastructure as responsive as your customer-facing experience.
However, whilst digital technologies enable companies to provide customer service in new ways during lockdown. These same businesses are failing to transform their digital strategies, with the biggest priority still being cost reduction (41%).
By not shedding legacy technology and shoring up operational efficiency, UK businesses are following an increasingly risky strategy. And one which will have an exponentially greater impact on the wider business if left untreated. Particularly when this widespread failure to act concerns the customer experiences that sit at the very heart of a proposition – the payments.
To find out how you can drive payment efficiencies into 2021 and beyond, download the full report here for all the insight you need.
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