Panel talk: The payments landscape in 2020 Pt. 1 – Payments Eye

On the panel:
Liz Lumley, noted fintech commentator
Alain Falys, Co-founder and CEO, Yoyo Wallet
Matteo RizziCo-founder, FinTechStage @matteorizzi
Sam Tidswell-Norrish, Principal, Motive Partners

Three years is a long time in fintech. Innovations that may have seemed outlandish not long ago, for example paying your friends via emojis on social messaging services, are now a reality. However, human behaviours are less prone to change, and we’re not so keen to disrupt how we pay for our stuff – a routine activity we undertake numerous times a day. New innovations in payments, no matter how seemingly revolutionary, will succeed or fail depending on how seamlessly they fit into our everyday lives.

By 2020, which payment innovations are most likely to be widely adopted, and which might be eaten by their own hype?

We asked four fintech influencers and investors to predict the fortunes of some of the most significant payment innovations that have emerged in the last few decades, and what trends in payments they’re most excited about.

P2P and social payments
Year of release: unclear; Venmo, founded 2009
Top providers: Venmo, Snapcash, Square Cash, XOPOTO
Adoption rate: 743m active users projected by end of 2017 (Ovum)

Alain Falys: [Peer-to-peer payments app Venmo] is unlikely to have the same success here in the UK because the way to pay each other in the UK electronically, even with the current system, is actually pretty efficient, which is not the case in the US. [In Europe], if someone is going to play a part [in social payments] then it’s going to be the incumbents, the banks, because in the context of PSD2, specifically, there will be a better technical environment, a regulatory environment, [that will allow people to] send money between users even though they only have traditional bank accounts.

Liz Lumley: The most change and impact we’re seeing in social payments in from the US. But banks that ignore things like Facebook Messenger’s social payment service, for example, do so at their peril.

Sam Tidswell-Norrish: Banks could themselves be pushed further down the stack, becoming the piping of the industry rather than the interface owning the consumer relationship, I think that there’s a massive opportunity for traditional players to begin leveraging the open banking infrastructure to prevent this from happening. It’ll be a collaborate rather than compete culture that will enable the next evolution for traditional players.

Despite what happened in 2008, banks are still highly trusted brands with great distribution power, which is a big asset they can leverage.

Blockchain
Year of conception: 2008
Top companies harnessing the tech: Ethereum, Ripple, Dash
Adoption rate: Approximately 300,000 blockchain transactions a day, predominantly in the US.

LL: Blockchain is incredibly revolutionary, but I don’t think some [blockchain] startup’s going to come and revolutionise the industry. Banks and exchanges will slowly change their infrastructure in the backend, which is not necessarily something that consumers will even notice. However, SWIFT should be very nervous about blockchain.

AF: Because of the legacy environment, blockchain will gradually be adopted by the more traditional players.

Matteo Rizzi: The usage for blockchain and DLTs will not be in payments but rather in anything to do with [transactions in the] B2B stage, but not in the B2C or C2C, though it all depends on how much companies like Ripple will succeed and scale.

ST-N: The consumer applications for blockchain are there but we’ll see it in financial services for everything, from post-trade settlement technologies all the way through to peer-to-peer lending. There are many great fintech firms already successfully using distributed ledger technology, like Cobalt DL and the blockchain consortium innovators R3. Peer-to-peer lending is a high-yield investment product at the moment, it’s exceptionally likely that we’ll see blockchain disrupt it, lowering costs and removing intermediaries.

Mobile-only banking / neobanks
Year of release: Mid-2010s
Top providers: Monzo, Atom Bank, Starling Bank, Fidor, N26
Adoption rate: 100,000 Monzo users (Jan
2017), 300,000 N26 users (Mar 2017)

LL: The challenger banks, the app-only banks, are interesting. Because they have a lot smaller customer base, they’re much more customer-focused. In my opinion, we’re going to see some consolidation and fragmentation in this area – I think we’ll see a big bank buy a Monzo, like how BBVA bought Simple in 2014. One of the most likely scenarios is that several [of the neobanks] will be bought by a big organisation, which might not even be a bank, it might be Google.

ST-N: I don’t think there’s going to be an Uber moment [with neobanks].There could well be some mass consolidation in the market between
some of the smaller brands, led either by new foreign players wanting to enter the market, or by the core banking players who want to end up wanting ‘more eyeball’ ahead of open banking. This couldn’t be a more opportune moment for the neobanks, because of the emergence of open banking.

AF: [The most successful neobank] will be the one that combines better user experience effectively with a range of banking products that are very traditional, because a bank is a bank, right? It’s about accessing money, paying, borrowing, that sort of stuff. It’s not just the interface of mobile banking though that is a very important aspect of it – it’s going to be how quickly do I get access to a credit line or overdraft,  how quickly do I get access to the mortgage facility and so on. And of course, if you attract Millennials in the early days, and you start to offer them things that make sense to them as they grow in life, you’re going to be a winner.

MR: What we’re talking about is [neobanks] breaking into a huge chunk of what we call the ‘underbanked’ today. Neobanks will bring people who are not in the online and card business because they can’t afford it into the market, and that will be significant.

This article was originally published in Payments [R]Evolution magazine, which is available for download here

http://www.paymenteye.com/2017/07/11/panel-talk-the-payments-landscape-in-2020-part-one/

 

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