Trends in innovative payments

Efma feature

13 September 2018

Online transactions, peer-to-peer payments and services around real-time payments are the key product investment focus areas for banks in 2018.


Innovation around online payment capabilities, peer-to-peer (P2P) payments and services around real-time payments (RTP) are high on the agenda for banks right now. Some 68% of the banks surveyed in Ovum’s 2018 Global Payments Insight Survey: Retail Banking are currently investing or have recently invested in online payment capabilities, and many of them are enhancing support for third-party wallet offerings and tokenization.

Writing for The Financial Brand, Matthew Wilcox, SVP of marketing strategy and innovation at Fiserv, observes that a recent explosion in P2P payments with consumers now expecting that their primary financial institution will provide an integrated solution tied to their accounts. P2P payments solutions are the key driver for growth in this area, Wilcox notes, pointing to the findings of a recent Fiserv study: “Organizations believe P2P payments and mobile wallets are increasing in importance compared to other payment solutions, with most organizations believing real-time payments and P2P provide significant opportunities in the future.”

In its Overview of the Payments Industry, Medici highlights four key trends in innovative payments as banks respond to these drivers.

Real-time payments

RTP represents a new phase of evolution within the payments industry, says Medici. It highlights speed, value-added messaging capabilities and immediate availability of transaction status among the key features differentiate RTP from current payment methods. “RTP will provide financial institutions with the functionality/features to innovate and meet customer demand,” Medici predicts.

The financial industry has taken this onboard. Ovum found that RTP efforts have intensified significantly in 2018, with 62% of banks (double the 2017 figure) currently investing in solutions and 28% planning to invest in the future. Worldwide, the survey found, 43% of banks are also planning payment hub investments, and banks in markets that are moving to RTP infrastructure are leading the way.

Distributed ledger technology/blockchain

According to Medici, distributed Ledger Technology (DLT) or blockchain has the potential to completely change the financial transaction processing cost model through its various applications. In addition, by enabling all processing to be done over a distributed system network or in the cloud, the technology avoids the need to use usage of costly data centers or mainframes.

Financial markets commentator and author Chris Skinner noted the continuing rise of DLT in his The Finanser blog on the fintech outlook for 2018. “During the last couple of years, we have seen many proof of concept and trials of DLT, but 2018 sees it become mainstream as various institutions go live with real-world applications,” he wrote. “The Australian Stock Exchange (ASX) is one of the first, but there are others.”

Expansion of payments to non-physical interfaces

Voice assistants and virtual reality (VR) are the two ways that external stakeholders such as Amazon, Google, Facebook and Apple are challenging traditional interfaces, Medici notes. As connected assistants become smarter and add functionality with the enhancement of NLP and image recognition, Medici advises, “betting on physical interfaces, and mobile, in particular, can no longer ensure long-term relevance as voice-first solutions evolve.” It predicts: “with Facebook obsessed on killing the smartphone to own a virtual space, classic interfaces and solutions developed for them will gradually fall out of grace.”

Unified platforms

Medici foregrounds the Unified Payments Interface (UPI) – the first Visa/Mastercard/SWIFT-free payments system, launched by the National Payments Corporation of India in 2016 – as a benchmark for what the payments landscape should be moving towards. This open-source platform, powered by a single payment API and a set of supporting APIs, helps in the integration of various payment platforms and “offers a whole new model of the financial services industry ecosystem,” Medici notes.

“Disjoint experiences across businesses create customer confusion, and, at the end, with a limited customer base, limit opportunities for every payment service provider – existing and new,” the Medici advises. “Professionals from SWIFT emphasize that the payments industry must migrate from a plethora of aging and expensive systems and schemes to a single platform to process all payments. However, a single payment experience for customers (based on seamless system interoperability, comparable to mobile telephony) is a more probable future than a single payments platform.”

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Keywords : Digital payments/Wallet , P2P payments/Money transfer , Blockchain

Geography : International