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FinTech Payments are Open for Business

FinTech Payments are Open for Business

Another year has begun, and how appropriate to kick it off with my 2017 expectations for FinTechs. There are always exciting technological innovations afoot in the FinTech space, but this year it’s all about Open; open technologies, open partnerships, and open customer choice. The New Payments Ecosystem has its foundations in open practices, and this in turn is changing how payments players work together to meet customer needs.  So what does this mean for FinTechs?

Open Technology

The new wave in open payments technology is all about offering open access to payment infrastructures for innovative payment service providers. The latest move toward openness is actually being mandated at a regulatory and governmental level. Take the example of the UK’s Faster Payments scheme, which has been opened up to FinTechs thanks to the New Access Model for direct agency participation. In the past non-banks had to connect via a sponsor bank, now aggregator services offer cost effective and scalable access to the rails. To complement this the Bank of England has announced planned changes to its settlement account policies. The trend for non-bank access to payments infrastructure is spreading beyond the UK; PSD2 pushes for open access to bank account information, across the European Union, for Trusted Third Parties and Payment Initiation Service Providers – in a word, FinTechs. In our recent report FinTech Disruptors 2017, both financial institutions (46%) and FinTechs (44%) ranked open APIs as a key opportunity in 2017.

Open Partnerships

Open is not just about tech, we also need to talk about trust. The broader payment ecosystem needs to form open payment partnerships. FinTechs are going to have to learn to trust their experienced counterparts; banks, processors and networks. For their part, traditional payment providers can partner for digital innovation to meet customer needs, and expectations. There’s been plenty of discussion around collaboration between the established institutions and the start-ups, but we’ve yet to see this realised. The opportunity lies in making innovative products and services from FinTechs available directly from your traditional bank account in a transparent, unbundled format. New kinds of partnerships are occurring across the payments industry. Transferwise became the first FinTech to gain direct access to the UK Faster Payments scheme by collaborating with Raphaels bank as a technical partner, and using ACI UP Immediate Payments. I predict 2017 will be the year that new partnerships cement the New Payments Ecosystem, and we will see a kind of ‘Payments 2.0.’

Open Customer Choice

The last ‘open’ in our trio relates to choice for the end customer. Unbundling of solutions mustn’t overcomplicate financial services for the consumer, it should make it simpler for us to create our own personalised package. Both consumer and business customers are more demanding than ever. Small businesses are looking for ways to make their cash flow more predictable. In our research, 95% of SMEs said they believed real-time payments would be useful to them. The consumer expects to pick and choose from both traditional banking providers, and new payment service providers, and for their selections to be compatible in a single ‘dashboard’. This relies on openness or interoperability between solutions and providers that will enable any combination of options.

You may have noticed that my FinTech predictions centre on payments innovation, and with good reason; 56% of industry respondents ranked this as their biggest area of investment in 2017. To find out more, download FinTech Disruptors Report 2017.