I’ve posed what some would consider a simple question, what others would consider a loaded question and what I would consider a simply loaded question. Special thanks to our incredibly smart and talented prognosticators, Craig Ramsey and Lu Zurawski, transaction banking and retail banking leads, respectively.
Me: guys, first off, thanks for participating in this most exciting interview. I’m buying you both pints the next time I see you.
Craig and Lu: we’re not holding our breath.
Me: well then…here goes…what do you think are going to be the 2-3 biggest (payments, banking, fintech) trends in 2016? And why?
“API-ness” – 2016 is about Open Collaboration. Payments experts will be summoned once again in 2016 to explain all about – what seems – another esoteric subject, Open APIs.
The need to understand this concept at the C-level is partially driven by the need to comply with Government initiatives – particularly in Europe as a consequence of the new Payment Services Directive, and in the UK as part of the Open Banking initiative.
But many aspects of “Openness” – including the publication and promotion of connectivity tools attractive to “Developer Communities” – will help large-scale businesses to survive, thrive and become key players in new digital payment ecosystems. Smarter executives will look to understand new commercial models that result from Openness.
They will also ask how APIs can be used to make internal operations more efficient through a process of componentization and the use of lower-cost, Open Source tools and platforms. Compared to last year’s Blockchain presentations, the outcomes may have more immediate impacts – after the execs have learned the new jargon of Swagger, GitHub and hackathons.
Methods of Payment – more expansion. Conventional wisdom and classical economics suggest that competitive markets eventually consolidate – governed by a “Rule of Three.” But the global consumer payments market seems to acting in reverse.
The number of sustainable payment methods, brands and techniques is expanding, tracking the ability and desire of both consumers and retail businesses that seek good “conversion” rates at their commerce sites.
Although the range of methods can stimulate passionate debates about style and usability (I frequently upset colleagues working on QR-codes), it seems that the digital economy is nurturing a very secular payments society.
Is this sustainable? I believe so, and payment providers will seek to expand their range of payment instruments (offering retailers high conversion) whilst also extending their reach (to make sure consumers everywhere have access to their accounts and payments).
The Platform Economy – a new payments services menu is designed. Predictions for electronic payments growth will grow as analysts realize how dominant the emerging Platform Economy will be, and understand how crucial it is for new methods of payment to be fully embedded/integrated in these new platforms.
Payment providers will need to interact with platform companies like Uber, Airbnb, Cargomatic, Scripted (and even Amazon and eBay), not just directly with consumers and retailers.
Small businesses interacting with these trading Platforms will need flexible access to tools and support services; lending/funding for bigger deals, payment processing for retail payments including immediate settlement of funds, customer profile management, and authentication/validation tools.
Payment providers will need to redesign their menus and make sure their services and prices are palatable to all.
Immediate Payments. This will really take off in the US and EU, and as a result of pressure to get to market quickly, banks are going to need to suddenly find budget and resources to achieve the testing phases. This is more than a trend; it’s a shift in how banks will receive and process payments (obviously we can help).
Blockchain. It’ll continue to get focus, but until the throughput volumes are improved, this will continue to be a ‘wait and see.’ But there will be a shift in the business case as the ability to merge Blockchain initiatives with Immediate Payments initiatives, particularly for cross-border payments, is realized.
The cost of international trade will increase. As the cost and regulatory pressures increase for doing business in some countries increases, banks will no longer be able to make ‘easy’ profits in all the markets in which they currently do business. And that will cause them to reduce their own local footprint, but as global trade increases, they will rely on correspondents more.
That will come at a higher cost, which is unlikely to be absorbed by bank profits, but rather passed onto the end customer, hence the cost of trade instruments, borrowing and supply chain finance will all increase.
And perhaps one personal trend….The term ‘fintech’ will fall out of fashion as people realize it is just a trendy term and actually has no substance behind it. Banks will stop jumping on this bandwagon as they will need to focus on what is really happening in the industry…..discuss…..
Me: guys, thanks again for these trends; look forward to seeing how they shape up in 2016.
Craig and Lu: speaking of shape, it looks like you’ve eaten a bit too many mince pies lately.