With the year coming to an end, it's clear we can all agree 2020 was a year of upheaval. The pandemic, lockdown measures, Brexit, and US elections have all contributed to the unsettled global economy. Spurred by these factors, the global payments industry has had no choice but to accelerate digital innovation and become agile in order to stay competitive and maintain market share. Given the technological innovation that is already happening, here are the top trends in 2021 we see taking the stage in the FX and payments industry.
1. Regulations and Compliance
With the increase of digital payments, financial watchdogs will continue to monitor and challenge existing regulations and update archaic ones. In terms of regulations, increasing cooperation between jurisdictions and the move toward international standards can only mean good news for the industry as regulators are looking to ensure consumer protection while also utilizing fintech innovation.
2. Card-Based Payments
A plethora of options are available for digital payments such as Electronic fund transfers (EFT) and SWIFT wire transfers. However, next year we will see an increase in demand for a relatively new entry to global payments: card-based payments. This solution offers a pre-paid or reloadable card that helps ensure that the unbanked population can take part in the quick payment processing that is typical for those with bank accounts. This payment option will most likely be popular in industries such as the gig economy, where businesses need to issue cards to send cross-border payments and disbursements in varying currencies quickly and efficiently.
3. Consolidation and Collaboration
A 2020 McKinsey Global Payments report states that payment companies continue to outperform other banking sectors in value creation. The banking sector's payments business needs to drive scale quickly to reduce per-transaction cost and improve profitability roles. Banks and financial institutions are also facing the challenges of meeting clients’ demands for faster payments with less hassle. In a highly competitive market with an increasing need to grow revenue, there is difficulty in charging substantial transaction fees. Partnerships and collaborations with fintechs and vice versa will be the natural progression for efficient operations. Strategic alliances and integration between fintechs, banks, and payments companies will help parties increase revenue and provide flexibility for the varying needs of each customer.
4. Pricing Pressures
Along with the desire for speed, comes the need for cost-efficiency. With more sophisticated tech-savvy customers, the payments industry is faced with increasing pressures from customers to remain price competitive. Enterprises are not looking at just the services, technology, and ease of integration to move from their current provider but also at the inherent cost-savings to the bottom line. This is where digital innovation and customization are key to gaining ground.
5. Growth of specialty payment providers
Gone are the days where payment companies would cast a wide net to capture corporate customers in a variety of industries. With a shift in customer behavior and consumer knowledge, we see payment providers focusing their efforts to target one or two specific industries and capture that market as the leading provider and experts in that space. Providers are also improving their services by offering abundant knowledge of the pain points of that specific industry and offering personalized customer service with the right technology and touchpoint. One example of this would be moneycorp’s services for Gig Economy companies. With these trends on the horizon and the rapid developments in fintech, it won’t be long for the global payments industry to get ahead and follow the predicted path of growth pre-Covid.
Meanwhile, if you are looking to find out more about payments or risk management, listen to our podcast on hedging or contact a moneycorp specialist who can offer you personalized services and tailor-made solutions.