Each year I take a look at what’s ahead for the payments landscape, based on our work with clients and observations of trends in the wider industry. Here are my predictions for 2016:
Contactless card transactions will start reaching saturation in many countries. For example expect to see over 10bn contactless transactions across Europe, including around 3bn transactions in the UK. These will spill over into mobile NFC payments such as Apple Pay, Samsung Pay, Android Pay which will be launched progressively in more countries during the year.
The USA is on a different path due to the lack of contactless point-of-sales terminals – instead, new mobile payment propositions, often merchant-centric, will be rolled out, hoping to emulate the huge success of the Starbucks mobile payments app. One to watch is Samsung Pay, which was launched in the USA in 2015 and could take-off strongly this year, as it works with standard mag stripe terminals.
In-app payments, using the “xxxx Pays” to pay in merchant smartphone apps will also become more common.
Real-time interbank payments will be a dominant story for 2016 and the landscape will become very competitive in many countries. In the USA, competing clearing systems to The Clearing House real-time system (in development) will appear. In Europe there will be a race amongst the major automated clearing houses (ACHs) to develop real-time payment infrastructure. One of the drivers for this is the demand for real-time overlay services on top of the ACH networks, to create alternative payments systems to cards. We will alsol see continued growth of alternative payments such as Blik in Poland, MobilePay in Denmark, and iDeal in Denmark.
Changes in industry structures and operating models will continue. M&A activity will grow, particularly in ecommerce-focused payment service providers, interbank processors and payments technology vendors. Banks will start adopting software-as-a-service solutions for core payment platforms, including in some cases making full use of public clouds.
Banks, especially in the USA and Europe will start programs to launch open payment APIs (application program interfaces), creating API factories to standardize their offerings. With open APIs, banks can extend their brand and payment functions into third party digital services and apps, in effect using third parties as a viral distribution channel. In doing so, banks no longer can serve just their own customers, but all consumers and corporates/SMEs, and although there is a compliance angle to this in Europe (PSD2), the focus will be on new commercial offerings and services.
Finally, there will be a significant focus on distributed consensus ledgers/blockchains. Expect to see some traction in commercial uses in cross-border payments and perhaps trade finance, in particular with Ripple. But outside of this, there won’t be any breakthroughs this year – the technology is too immature, the industry is still in a discovery phase, and most use cases are too complex. Ethereum is in a good position to crack this complexity and could gain prominence this year. However, although banks spent 2015 emphasizing “blockchain good, Bitcoin bad”, don’t be surprised to see by the end of 2016 a greater interest from banks in exploring use of the Bitcoin public blockchain itself as a component in new propositions.
I’ll be watching the market to see how many of these predictions unfold. I’m always interested in hearing what others have to say, so let me know if you see others on the horizon.