Electronic Payments International approached experts in the payments field to see what trend will take the New Year by storm. What from 2015 will carry onto the next year? What new developments are on their way? Is 2016 the year that digital finally plants its flag on the payments industry?
Bethan Cowper, head of marketing and PR at Compass Plus
2016: the year that digital takes the payments crownPredicting the future of the payments industry a year at a time has never been that challenging in the past, though some payment experts might argue otherwise. Payments generally isn’t a fast moving space, new ideas are generated quickly, however adoption comes at a much slower rate. For example, mobile payments have been around a long time; since Coca-Cola introduced vending machines that could accept mobile SMS payments in 1997, contactless payments have been offered by a number of global giants since 2008, and NFC has had a much more volatile journey approved as an ISO/IEC standard in 2003, with its success completely dependent on the support of hardware device manufacturers.
The difference between 2016 and previous years is that now need, technology and adoption are ready to converge; not only is the industry ready, but financial institutions, merchants and consumers are finally getting on board as well. Whilst there might be discrepancies in behaviour between demographics and culture, consumers are increasingly aware and more accepting of the digital age, which is now poised on the cusp of stepping out of the niche and into the mainstream.
The Nordics are leading the way in the race towards cashless societies, with the Danish government recently proposing that retailers should no longer be obligated to accept cash payments, and Sweden severely reducing the amount of cash in circulation. The rest of the globe is not quite as prepared to support the demise of cash, however, 2015 was the year that digital payments finally eclipsed cash in the UK and in the US non-cash payments are set to grow exponentially, fuelled by economic recovery.
The dawn of the mainstream digital age is by no means exclusive to the more developed regions of the world. On the contrary, many global innovations are being led by emerging markets, born out of a combination of necessity and government initiatives. Stepping aside from our favourite case study of mobile payments in Kenya, Nigeria has introduced a contactless, prepaid, and biometric national identity card to combat financial inclusion, whilst Brazil is pushing both mobile and contactless in the run up to the 2016 Olympic Games. Zimbabwe, Mexico, Bangladesh and the Philippines are making substantial headway with P2P payments, and according to The Mobile Consumer, more consumers in Asia Pacific use their mobile to buy goods and services than any other region in the world (at 46%) and in China there are three times more mobile phones than there are bank cards.
With the correct groundwork in place, 2016 looks set to become the year the predictions the industry has been making around contactless, mobile and even biometrics evolving out of the niche finally come into fruition, geography depending. Not at the expense of the death of cash however; the availability and increasing popularity of the digital channels on offer provide options not replacement. Cash is a very culturally important channel within the payments ecosystem; not to be ignored or underestimated. Different regions show a distinct preference for cash based on traditions and customs that define them, for example, the ability to barter. The Middle East is not suddenly going to move away from cash on delivery in 2016, however, the options available mean that consumers in this region can now explore other avenues such as mobile or the prepaid cards and merchants can incentivise this behaviour.
In the UK, 2016 looks set to be the year of the contactless card, whilst Japan looks to continue the growth of biometric authentication at the ATM. In the US, the debit card market is predicted to take off as FIs become more rate-sensitive, and cash use will continue to decline in Belgium, France and Canada. It is possibly the most exciting time in payments since the introduction of the payment card, and this is without delving into the ongoing technical developments into payments security and open development platforms. In short, 2016 will be the year that digital wears the payments crown.
Liam Lannon, Payments Transformation Consultant, Sopra Steria
Payments Industry -2015 Highlights and 2016 TrendsIt’s the season when people look back over the year just passed – the good and the bad – and also start thinking ahead to what the next year holds for them: their hopes, expectations and fears. The retail payments industry in the UK has similarly seen a year of highs and lows and the industry can look forward with hope and high expectations – if not a little fear – to 2016.
Firstly, the highs of 2015 – it was all about xPay: after a year or so of hype, Apple Pay finally launched in the UK on 14 July, to a mixed response. While Apple ‘fanboys’ and ‘fangirls’ were eager to embrace this ‘new way to pay’, some of the UK’s leading issuers – HSBC, Lloyds Bank, Halifax, Bank of Scotland and TSB – didn’t queue to join up on Day One.
Nonetheless, HSBC and First Direct were only a little late, announcing the launch of their support for the mobile payment product on 28 July, with Lloyds and HBOS joining on 28 September, and TSB on 17 November. The stand-out omission is Barclays who have announced their intention to join but who so far have been focused on promoting their bPay wearable products instead.
And the verdict? Statistics are hard to come by but feedback so far has been broadly positive, with 51% of Apple Pay users who were surveyed saying they are extremely satisfied with the service and 40% of those who have an Apple device confirming that they have used Apple Pay to pay for goods and services. Contrast this, however, with the 75% who have yet to see Apple Pay pay points or symbols and it is clear that overall customer awareness of the product still has a long way to go . Generally, the news is good for Apple with Apple Pay performing well in most environments, the London Underground being a notable exception, where commuters are sometimes frustrated by having to wait while an "Apple Payer" tries to use his iPhone or Apple Watch to negotiate his entry to the Tube system.
What? I hear you say. Apple Watch? Yes, the Apple Watch debuted on 10 April with limited stock available soon after. When Apple Pay was launched in July, watch-based payments became a reality for Apple Watch owners, and independent research published in August by Wristly revealed that 80% of Apple Watch owners had used Apple Pay to pay for goods and services.
While these statistics are impressive, it must be noted that even a large percentage of Apple Watch and iPhone 6 "Apple Payers" still only represents a very small number of consumers. The payment system may never reach the same level of ubiquity as contactless cards, even if over time the majority of iPhones in the UK market eventually become Apple Pay-compatible, so should we be making such a fuss about it all? Well, yes and no.
On the one hand, it’s only another way to pay, competing with the aforementioned contactless cards as well as chip and PIN cards, Oyster cards and good old-fashioned cash. However, it does promise a future where all you need to take with you when you leave home is your smartphone, certainly if your day will involve a retail payment or two – and perhaps even a Tube ride.
Overall, the arrival of Apple Pay heralds a new dawn for mobile contactless payments and allows users to load their own (participating) bank cards directly into the iPhone Wallet via a very straightforward registration process: as such, it can be seen as a user-friendly success.
Of course, 2015 wasn’t all about Apple Pay: other newcomers have thrown their hats into the mobile payments ring in 2015, notably Samsung Pay and Android Pay. While Samsung Pay has already launched in South Korea to some success (and confirmed a US launch in October 2015) and Android Pay is live across the US, neither of these two solutions has so far confirmed a UK launch date, even for 2016. At this stage, therefore, it is difficult to make any comparisons between these two planned implementations and the live Apple Pay product.
So what about the lows of 2015? EE have decided to close Cash on Tap to any new subscribers, suggesting that it may be the end for one of the more successful mobile contactless payment solutions to hit the streets in the UK. That it took Apple a number of months to launch in the UK after its successful debut in the US in 2014 was also a disappointment, although much of that could be down to the UK issuers negotiating with Apple over the distribution of interchange fees for Apple Pay transactions at point of sale. Perhaps the greatest disappointment of 2015 is that, despite the fairly extensive coverage of contactless terminals across the UK, there has not been the level of mobile contactless payment solutions (either NFC-based or HCE-based) which the analysts have been forecasting for a number of years.
With the likely arrival of Samsung Pay and Android Pay to the UK next year, perhaps 2016 will see a burgeoning demand for mobile payments and a significant spike in activity, encouraged by the increase in the contactless payment limit to £30 and a significantly larger pool of compatible smartphones – Apple, Samsung, LG and others. LG have even announced the launch of their own mobile payment system for the South Korean market, but there’s no news on when (or if) that system will be rolled out across Europe or the US. Dare I mention that the UK market is still waiting for the arrival of Zapp mobile payments? This payment solution, supported by VocaLink and based on the Faster Payments Service, as opposed to the card-based solution which the ‘xPay’ solutions have adopted, has seen launch dates come and go.
Maybe 2016 will be the year where everything falls into place and the market will be flooded with mobile payment products. We can only hope.
Stuart Lacey, CEO and founder of Trunomi
2016: Time to comply with Data Privacy law2015 bore witness to a huge disruption in financial services, with a range of fintech companies coming to the fore. Advances in customer-led financial technology have led to increased industry transparency, empowering consumers.
Trunomi’s platform is a good example of this movement, giving end users a way to share their personal data with informed consent, while providing financial institutions with the framework to handle and process this data securely.
This comes at an opportune time for financial institutions, whose new year resolutions need to include an overhaul in how they acquire and manage customer data, due to incoming legislation.
In 2016, the European Union has resolved to unify customer data laws with the EU General Data Protection Regulation (GDPR), which was approved in December 2015. This legislation, to be fully ratified in 2016, controls the security and management of customer data, putting the power of back into the hands of consumers themselves. It has significant ramifications for the financial services sector, who will need to seek a solution this year in order to meet a 2017 deadline.
Globally, the financial world is experiencing a compelling convergence of regulatory risk, governmental policy, consumer awareness and technological innovation.
Financial institutions must rethink how they manage, store and share customer data in 2016, implementing more rigorous and auditable KYC and customer data management processes.
With advent of GDPR, supporting customers’ digital rights management for personal data will become mandatory, which is why we have created a platform that enables banks to connect to their customers with a customer-driven data sharing platform.
I believe this trend of transparency and personal data control will define 2016, fundamentally shifting the power dynamic between financial institutions and their customers.