PCM4.1.!!

2018: A SEMINAL YEAR FOR THE FUTURE OF PAYMENTS?
by Matthias Setzer
The payments industry is in a constant state of
transformation. Long gone are the days when it was
dominated by innovation in cards and terminals.
It is – quite expectedly – now under the influence
of digitalisation. Technology companies, fintechs,
untraditional currencies and banking models are
pushing the drive towards a more sophisticated,
decentralised, customer- and security-driven approach
in what was once considered a straight-forward
industry: payments. This revolution has been hailed as
golden among analysts and investors, with its appeal
to put security and users at the centre, amid growing
consumer demands and expectations.
With so many developments ahead, one would wonder
- what’s the ultimate goal of this transformation? Is it
to fully digitalise an industry that still runs virtually on
cash? Is it to facilitate P2P, P2B or B2B2C payments?
Or is it to simply ensure that eventually, everyone,
everywhere, will be able to make and accept payments
when (and how) they like? Looking at the latest figures
by The World Bank, the latter presents a massive
challenge. It’s almost universal for consumers in highincome
economies to have a bank account and use
it at least three times a week for online and offline
payments (94%). Still, only slightly more than half of
all adults in developing economies have access to the
same convenience in payments.
With so many important developments unfolding this
year, 2018 is shaping up to be a seminal year for the
payments and fintech industry. Here’s a look at what’s
ahead:
Regulations will define the pace
This year is all about compliance and requested
permission and nowhere is the hype more prevalent so
than in Europe.
While tech giants are taking precautions to ensure they
comply with strict new policies, especially as the EU’s
General Data Protection Regulation comes in effect this
May, the payments and fintech industry has its eye on
PSD2. As of January 13, 2018, the Revised Payment
Services Directive (PSD2) is in fact in place.
In short, PSD2 mandates the use of open APIs, allowing
financial transaction information to be shared with
explicit permission from the account holder.
What’s interesting to explore is that PSD2’s mandate
carries a hidden opportunity – it’s a chance for banks
and traditional financial institutions to co-operate with
fintechs, rather than see them as potential threats.
Built with security and customer protection at their
core, fintechs have the ability to facilitate the struggles
banks have when adapting to PSD2, as they’re already
leading the way with the latest security components
such as tokenization in place.
Tokenization came to exist as a way to encourage
fraud prevention; it’s where payment credentials are
tokenized to ensure the uselessness of data should it
happen to fall into the wrong hands. One of the ways
in which tokenization is already shaping the year is the
impact that it has as a fraud reduction measure and
the ability it has to improve the user experience. As
more consumers make mobile purchases, tokenization
enabling one-tap payments is creating a new way to
pay online.
It’s All About Customer Experience – It always has
been, actually!
Ask any business owner about their main business goal,
and they will wholeheartedly say that nothing comes
close to ensuring a high level of customer retention.
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