Kevin Jenkins, Managing Director Visa UK & Ireland
If the UK payments landscape in 2016 shifts anything like as quickly as our environment shifted in 2015, then banks and payment providers need to fasten their seat belts. Last year saw a new payments regulator introduced, consumers embrace contactless payments (to the point where one in seven Visa payments is now contactless) and the launch of a game changer with Apple Pay. And I would be remiss if I didn’t mention the announcement that Visa Inc made their approach to acquire Visa Europe.
There will be constants in the industry, there will be more devices, more services and more places to pay. Regulators and their regulation will try to keep pace with developing technology. Banks will maintain security and levels of service while new products and new players will emerge; some will shine, others will fail. These things are certain for 2016, but there will be other key developments to keep watch on:
The pace of mobile payment: Contactless is leading the shift to mobile payments (using the same infrastructure) which could drive further growth in acceptance levels by merchants too; a barrier that Barclaycard has pointed out still exists.
Our research projects that mobile payments will grow three-fold by 2020. Last year Apple Pay provided some initial momentum for paying with a smartphone. Further mobile platforms have been launched and others announced that are expected to launch in due course – when they do, this type of payment is going to take another leap forward.
Together these will further the appetite for two types of purchase. The first will be shopping online on a smartphone. The second will be in-app payments, likely to be pioneered by restaurants and other merchants: imagine for example, browsing, ordering and paying for your meal at the table, or even before you arrive.
More innovation, shared innovation: The FinTech industry contributes £20bn a year to the UK economy according to UK Trade & Investment. The payments part of FinTech accounts for half of that alone, testament to its importance to the economy and the level of innovation and investment happening in the industry.
The Government is firmly behind FinTech and committed to its success; which is one reason why we are likely to see its continued growth in 2016. Developments like our Visa Collab programme will play a big role in driving the industry forward; encouraging the energy and ideas of start-ups by opening access to the expertise of companies like ourselves.
Personalisation: Consumer preference and demand is driving much of this innovation. There will continue to be conflict and competition in 2016 to find the best way to harness technology, enabling consumers to pay and manage their money with new devices, apps and even in new places.
To succeed, banks will likely have to recognise that personalisation is now the overriding demand. The security needed around any kind of payment will be key, but expect to see continued variety in offering ways to pay. The rise of wearable payments last year, like bPay, the Apple Watch and our collaboration with Swatch, are examples of this increased personalisation.
Retail will be a critical sector to watch in this regard – consumers increasingly fail to differentiate their shopping experience between online and offline. Leading retailers are making the two halves seamless, which means payment providers need to cater for this approach as well. How retailers and payment services respond together will be keenly watched.
Advanced authentication: Each of the developments above means we will see more ways to pay and be paid than ever before. But with more choice has to come the same or better methods of authentication and security. In 2016, we’re likely to see two trends in this space.
Firstly, further developments in biometric authentication. It was only a few years ago that contactless payment was confined to a small niche. Familiarity and acceptance have rapidly changed that. In a similar way, using a thumbprint to authenticate will become a more common occurrence in 2016. We could see greater exploration of other biometrics like retinal scans developing further too.
Secondly, we will hear and see a lot more about geolocation authentication – using geolocation services on a consumer’s mobile phone to understand where they are and verify that their payment is coming from the same place, that they are in the same place as their card.
Dedicated regulating: With the growth of the industry comes a keener eye on its activities. Payments now has its own regulator, the PSR (Payment Systems Regulator), a first for the industry. Good economic regulation, based on learning lessons from the experience of regulators in other industries, can make the payments industry stronger.
One of the PSR’s first tests will be monitoring and enforcing the new Europe-wide Interchange Fee Regulation (IFR). Other European countries, lacking a payments-specific regulator, will undoubtedly look at the PSR’s approach for inspiration. Provided that the IFR is interpreted and enforced in a sensible and pragmatic fashion in the UK, then the dynamics of change and innovation in this sector will continue at the current pace.