The payments landscape is changing fast due to new disruptive technologies such as open APIs, distributed ledger technology, cloud, Apple/Samsung/…Pay, and customers’ expectations are changing for seamless and faster payments. Despite this, I can see clear trends through our work with clients and observation of industry developments, and based on these, I have developed a set of predictions for 2017.
Contactless and Mobile Payments
- Contactless card transactions in the UK will rise to between 6bn – 9bn txns in 2017, and 20bn – 30bn txns across Europe (compared to my forecasts a year ago of 3bn txns for UK and 9bn txns for Europe for 2016).
- Cash usage will see a clear reduction across Europe—as an example, ATM cash withdrawals in the UK, which peaked at 2.9bn withdrawals in 2012, will fall from 2.7bn withdrawals in 2016 to somewhere between 2 – 2.5bn withdrawals in 2017.
- Use of Apple Pay, Samsung Pay etc. will become more widespread in 2017, for both POS and in-app payments—expect to see published figures for strong growth rates in specific markets, even if absolute transaction volume figures remain undisclosed.
- Omni-channel retailing will drive development of cross-channel and cross-border payment gateway solutions.
- As augmented reality becomes a big theme in retailing, expect to see new payment solutions to support augmented reality commerce.
- Wearable payment mechanisms will remain a niche—but imaginative new wearables will emerge.
- Payment solutions from China will gain traction in other markets, following Alipay’s entry to Europe in 2016, and will start focusing on acquiring local customers, as well as supporting Chinese consumers abroad.
- The use of payments in the Internet-of-Things (IoT) will grow, in particular with connected cars and utility meters.
- Voice payments solutions will start making a hit with the public—perhaps through Siri on iPhones, Alexa on Amazon and at POS.
- Alternative payment mechanisms such as PayPal, iDEAL in the Netherlands and Klarna (Europe and US) will continue to grow strongly (20% – 30%) for e-commerce, driven both by convenience and by high fraud rates in card-not-present transactions.
- Card-not-present (CNP) fraud will continue to outpace e-commerce growth globally, even as e-commerce continues to grow strongly in all markets. Expect regulators to act to contain it, with new regulation similar to those in the PSD2 (EU) for secure customer authentication being copied elsewhere around the world.
- Card-present fraud will fall globally, or at least be contained, in part due to the rollout of EMV in the US, and in part because fraud will migrate from POS to CNP, as an easier target for fraudsters.
Real-time Payments Interbank Infrastructure
- With instant payment infrastructures coming on-stream in Europe, the US and elsewhere, take-up in terms of transaction volume will be low initially in 2017, and will become more significant in 2018 or later.
- However, the UK will continue to lead the world in instant payments:
- Plans will be developed for a new real-time payments infrastructure that leaps ahead of current implementations in terms of its ambition and capability.
- Faster Payments will process 1.65bn txns, 15% higher than 2016 (1.4bn txns).
- The Paym mobile real-time payment service will continue to grow at 200% – 300% per year and will see around 10m payments in 2017.
- The PSD2 in Europe will continue to catalyse activity across European banks to develop external payment APIs.
- European banks will prepare minimum viable products ready for payments APIs for launch in January 2018, but will be surprised by the uptake and demand from developers in retailers, Fintechs and GAFAs (especially) in 2017.
- Virtual accounts will become a big theme in transaction banking, and be seen as a way of acquiring new corporate customers and generating new revenue streams.
Distributed Ledger Technology
- Bitcoin transactions for 2017 will be 150m transactions (up from 83m in 2016), miners’ revenue $850m ($562m in 2016), the average hash rate will be 5.7gh/s (1.5ghs average in 2016), $120bn will be transacted in Bitcoin ($56bn in 2016) and the average number of unique addresses used daily will average 600k (406k addresses daily in 2016).
- Banks will see that Bitcoin is not going away and is growing as both a borderless payments network and a store-of-value network, but will continue to keep away from providing Bitcoin services, even if their hostility towards Bitcoin, and to companies that use it, diminishes.
- However, banks will continue investments in blockchain technology, but mainly in capital markets, outside of payments.
- Ripple will be the one DLT player in payments that grows, with its technology moving on from use by banks for pilots, bilateral exchange and internal payment flows, to use as a new cross-border payments network with growing transaction volumes between networked banks.