The world of fintech is diverse and changing, so in this blog I want to focus on the payments industry. New technologies are changing how payment providers operate. Indeed, according to a survey by UBS, it is in the area of payments that fintech will be most disruptive over the next 12 months, as opposed to other areas such as peer-to-peer lending, or forex or remittances. This perspective is supported by research by CB Insights, which highlights how funding for payment startups rose 59% in the second quarter of 2016 over the previous quarter.
Here at Belatrix, we have already examined how a wave of agile, digitally-native firms are challenging traditional notions of finance and financial organizations. These new entrants into the world of payments are fundamentally changing a world which was traditionally the domain of large banks. And just to give a sense of how large the payment opportunity is, Starbucks now has more than $1.2 billion in deposits on its customer Starbucks accounts (their card and mobile app), which exceeds the amount of deposits at some major financial institutions.
Apple Pay and PayPal (which processed $278 billion in payments, with $9.2 billion revenues in 2015) may be some of the better known examples, but there are a myriad of new payment companies emerging. Square for instance is increasingly dominating the world of in-store payments for small retailers. New payment technologies are at the foundation of this emerging world. Instabill meanwhile is a company which helps to match business owners who want to process credit cards or make online sales, with a bank who can process those sales. In July 2016, it announced that it would enable payouts in Bitcoin to merchants and partners. One of the fascinating areas for many financial organizations is the potential to analyze, and ultimately monetize, the data and metadata which they collect from payments.
This disruption is emerging rapidly due to ongoing inefficiencies in traditional payment processes. According to the World Economic Forum (WEF), such payment processes currently suffer from being costly, slow, inefficient, and error prone. In many cases regulatory reports require additional technology capabilities (and associated costs) due to the need to bring together various data sources and channels. This slow, cumbersome way of conducting payments is increasingly archaic. Today, real-time payments have become a “must” rather than a nice to have for banks and other financial organizations. Immediate payments (IP) are desired by consumers who want new, better, and even dare I say it, more enjoyable ways of paying. A recent report by BNY Mellon, argues that payments will be impacted by a quartet of factors: technology, changing regulations, the emergence of new economic powers, and a new global currency landscape.
However while the future of payments looks certain to be cashless (as well as cardless and paperless), this will take time to materialize as the world shifts to adopting mobile technologies.
Here at Belatrix we’ve been working at the forefront of trends in the fintech and payment industry. For example, we’ve worked with pioneers in the space to help them develop their mobile payment platform, as well as the implementation of the solution in their final customers such as leading banks and other financial institutions. However reflecting the continued importance of cash, as part of the work with this pioneering company Belatrix also implemented an augmented reality solution to help customers find their closest ATM.
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