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Five payment trends that decide the future of payments – Part 3


In the first two parts of this blog series, we introduced the developments that are currently happening within the payments market. As a result of this activity, we addressed Payments-as-a-Service in part 1 of the series and one-click payments and invisible payments in part2. In this final blog post, we will further elaborate on the changing payments industry, highlighting two payment propositions that are on the rise due to globalization and rapidly growing online marketplaces.

Trend IV: Cross-border payments

Constantly changing technology and mobility have made the world more interconnected than ever before. Globalization has caused rapid growth in cross-border payments, forcing banks to efficiently manage multi-currency payments and reduce costs. The ability to transfer funds globally is still an area within payments that is lagging. However, we see a promising movement rising within cross-border payments. Competition is growing rapidly, as several FinTechs enter the market, offering new global payments solutions that are more efficient and more cost-effective than those offered by traditional banks. These new developments pressure banks to rethink their global payment model and start their digital transformation if they do not want to fall behind.

So, the fourth trend that we see in the payments industry is cross-border payments. Cross-border payments are the foundation of global trade and they are becoming an even more important part of the banking business and of companies that operate internationally. However, in the traditional sense, international payments can still take up to three to five days to be processed. Also, cost is still a critical issue when it comes to cross-border payments. Banks are often still dealing with inefficient legacy systems that drive up the price, as multiple parties are involved to facilitate an end-to-end process for international payments. Virtual coins may offer a solution but still fluctuate too much.

Changing a banks’ complete core banking system is a tough challenge to take on, but with the pressure of new entrants, banks must seek new ways to pursue their digital transformation when it comes to cross-border payments. These new dynamics offer numerous possibilities for banks to bundle forces with FinTechs. An open mindset when exploring new technologies is key to transforming the cross-border payments industry. Blockchain technologies, in particular, may provide a solution to current issues and increase the speed of processing, and reduce additional fees and transparency in the payment process.

Blockchain and distributed ledger technology (DLT) can help to streamline cross-border payments, in which every transaction is processed in a secured distributed ledger. The great benefit of DLT is that intermediaries are no longer involved, resulting in a smooth and seamless process with no unnecessary fees. All transaction records are held in an encrypted ledger. Once a payment is initiated, it cannot be withdrawn or changed, ensuring a secure environment. The immense potential of blockchain and DLT has been addressed at length, and companies are exploring the opportunities to incorporate these technologies.

Given the increasing volumes of cross-border payments, long processing times, and lack of visibility in the process, it is evident that banks, FinTechs, and regulatory bodies join forces to transform the area of cross-border payments. Only by leveraging each other’s strengths, can rising demands for faster and cheaper international payment solutions be met. Blockchain-based payments are able to provide cost-effective, real-time, and secure payments and are set to break through the status quo and shape the future of international payments.

Trend V: Spread payments

As we discussed in the second part of our blog series, our online marketplace is available at all times and it is growing rapidly. Offline and online commerce is more intertwined than ever before, which means that retailers should be focusing on a frictionless and seamless omnichannel experience, both offline and online. However, renewed focus on online customer experience comes with considerable challenges. Not only should retailers rethink their product assortment, webpage design, and functional usage, they should also explore new payment solutions within the online checkout procedure to avoid shopping-cart abandonment and ensure a seamless customer experience. Currently, we see a trend in online payments, in which consumers are offered to pay after delivery or pay in installments – we call this spread payment solutions.

Payments play a crucial role in online shopping. Any friction that occurs within the payment process may result in a lost customer. This is why online retailers are keen on exploring new payment solutions that are as plain and simple as possible. Spread payment methods offer a new alternative for consumers to pay their goods. The idea is simple. The consumer buys the product now and pays over time at no additional cost. The payment provider takes over the receivables for the consumer, while charging a fee to online retailers. Proven records have shown that spread payments have a major impact in reducing shopping cart abandonment and offer a solid solution to maximize online conversion rates.

More and more online retailers collaborate with spread payment providers, including Klarna, AfterPay, and Billik to offer this new alternative to online payments. Does it seem crazy to allow consumers to leave the shop without paying for their goods? Maybe, but spread payment solutions are set to become common ground in the world of online payments.

So, what do we know now?

The payments industry is in motion. The pace of technological disruption is accelerating, leaving traditional payment models at risk. Technologies, such as artificial intelligence, machine learning, and data analytics are integrated into newly evolving payment solutions. In order to keep up with these rapid developments in the market, banks and FinTech should leverage their strengths to meet changing demands in the market. That is why the future lies in co-creating emerging payment models in integrated ecosystems while balancing each stakeholders’ strategic position.

Co-Author for the blog – Bas Smeijers.