We’ve been surveying the fintech landscape as we head into 2020. Using a crowdsourced model, we polled some of the top executives in the payments space on what they expect next year and in the near future. We did a similar piece for 2019 -- you can find that here.
We received enough submissions that we split this series into multiple articles. Get Part 1 and Part 2.
Top of file
Matt Boss is evp, head of U.S. credit cards and unsecured lending at TD Bank
The age-old race to be top-of-wallet will be a driving factor in what we see card companies deliver in 2020, but the real race is to become "top-of-file" – card issuers should continue the focus on becoming the card of choice across popular consumer apps and services, such as Uber or Lyft, retail giants like Target, Amazon and Walmart, payments providers like Apple Pay and so on. With that comes the focus on mobile enablement and mobile optimization – both of which have quickly become table stakes when it comes to the customer experience – and will move to the forefront as issuers increasingly recognize that online and in-store points-of-sale are ancillary to mobile.
I expect we'll see an enhanced focus on convenience, seamless transactions, and both the consumer and merchant experiences at point-of-sale. While necessary, EMV added friction to the customer experience, so now we're walking back from that experience and working to change the current perception of POS transactions and mobile payments with an eye on what each of these can and should become from a customer's point of view.
Software will eat payments
Deana Rich is co-founder and co-ceo of Infinicept
“When the payment facilitator model was first introduced by Mastercard and Visa in 2011, many within the payments industry viewed the undertaking as either too risky or cumbersome. Despite early skepticism, the payment facilitator market is now skyrocketing and becoming a mega trend with total transaction volume on target to achieve nearly 80 percent CAGR through 2021.
Today the market barriers are crumbling in large part because PF-as-a-service companies are offering turnkey solutions that help banks and their customers dramatically decrease the time, cost and headaches of moving to the PF model.With so much upside from card payments, it just makes sense that software companies would want to keep the revenue (and improved market valuation) for themselves rather than hand it off to a third-party bank or processor.
As the payment facilitator model matures, we’re seeing companies spanning every imaginable software vertical take over their payments offering. This includes wellness companies like Mindbody, platforms servicing the restaurant industry like Toast, healthcare companies including Instamed and Phreesia, and countless others who are realizing they can provide a better customer experience while increasing revenues and business valuation by becoming a payment facilitator.
As PFs enter into developing countries, they bring new opportunities for economic expansion. It’s a win for the payment facilitator, customer, end users and economy. That makes it an opportunity that is impossible to resist. In fact, in the next eight years payments volume is expected to grow by over $55 trillion and the vast majority of the growth will be controlled by software companies, so players must position themselves to either profit from or stand by and watch as software eats the payments world.”
Lenny Crotty is vp of global partnerships at EBANX
"Financial inclusion will shape the payments industry in 2020, as technology and mobile commerce has increased the addressable market on a global scale. This inclusion is key to growing the overall payments market and will define the services that fintechs provide. As the payments industry becomes increasingly global, companies will be expected to offer solutions that target the unique needs and preferences of each market, providing consumers the ability to access the international marketplace.
To illustrate, in 2019, Latin America saw a strong boom in startups that worked to address access to credit and streamline logistics and payments, for instance.
In addition, we expect payments companies to expand their offerings to include installment options and reduced transaction fees, leading to more financial inclusion. The payments industry will see a strong need in holistic solutions that transcend market and global barriers by providing seamless and inclusive consumer experiences."
Growth in points-based systems
Jennifer Philo is gvp, business development, network, loyalty, first and third party retail at Blackhawk Network
"The entire payments landscape is experiencing a period of major growth and transition. As brands continue to tap innovative payment solutions in 2020, several key trends will rise to the top, including the rise of points-based systems. According to research from Blackhawk Network, 29 percent of consumers surveyed report paying with points more often than they did last year. Additionally, 70 percent of consumers surveyed said they are somewhat or very interested in paying with points. Certainly, brands like Starbucks have been leading the way on this, but as consumers become more comfortable with points-based payments, look for this trend to continue to take shape.
By bringing innovative, approachable payments to life, brands in 2020 have a unique opportunity to better reach customers along an increasingly critical purchase path through digital and mobile payment offerings that are seamless, invisible and efficient."
Hugh James is cto at PCI Pal
"If you consider whether voice will play a part in the infrastructure for collecting future payments, I believe there is certainly a growing number of predominantly cloud-based services that utilize speech recognition to provide innovative services to customers. For example, Alexa from Amazon, Siri from Apple and Google Assistant all provide speech recognition services that offer a wide variety of add-on functionalities to manage any task.
This technology is relatively inexpensive, yet provides excellent quality and results. So, why wouldn’t this type of service stray into the arena of making payments? As I see it, the answer is, in time it will, however perhaps not in the same way that it has been adopted to date.
The ability to read out a credit card number, expiry date and the three digit CV2 security number into an Interactive Voice Response (IVR) platform has existed for some time, and many companies have implemented payment services that offer a good customer experience using this ability. But, the way in which payments are managed is rapidly changing and the concept of verbally providing a series of numbers from a card (which was originally designed to appear on a paper imprint) over the phone call isn’t what I would consider to be a disruptive approach for the future.
The ubiquity of smart devices, which are a combination of phone, e-wallet and web terminal, means that customers should instead be able to easily mix communication channels, which will create a seamless experience. This would combine the human interaction with a merchant on a phone call with the ease of making a payment from an e-wallet – all from the same device.
Where voice fits into the payment process here is in ensuring the security of the payment. The new European PSD2 directive requires a secure authentication – and the method for this could be voice."
Payments + lending
Keith Smith is co-founder and ceo of Payability
"From where we see it, the biggest trend in the payments space is to also provide customers with financing. Chances are your payments clients are already in need of financing and advanced machine learning algorithms make it possible to underwrite a wider range of businesses based on sales performance and history rather than credit scores."
Faster and more seamless payments
Rich Aberman is co-founder and chief strategy officer at WePay
"One of the biggest trends the industry should look out for next year is integrated banking. 8 percent of the payment card volume in the U.S. has moved over to integrated payments, and that portion of the market is growing at double the rate of the overall market, with analysts estimating it will hit 40% in the medium-term. When more businesses start incorporating integrated payments, there will be greater access to money through an easier and more efficient solution -- one that doesn’t require a fee or take a week to process. Just as mobile payments had its heyday in the last decade, 2019 standards for payments will become obsolete as we look toward new and innovative ways to take a more holistic approach to finance with integrated banking.
Next year, the payments industry can expect faster payments, more integrated solutions and a rise in non-traditional players moving into the payments space. We’re already seeing this happen today, with companies like Uber announcing plans to start operating as a bank in the near future. As a prelude to the longer-term vision of open banking, how fintech and traditional financial institutions react and adapt to this trend of more fully integrated solutions will be crucial to their survival in the coming decade."
Increasing automation of corporate payments
Debbie Smart is senior product marketer at Q2
"One of the biggest trends Q2 is seeing is automation of the corporate payments supply chain. Check usage for B2B transactions continues to decline. The percentage has decreased by nearly half since 2004, with organizations making only 42 percent of their business customer payments via checks.
Commercial bankers and corporations are battling a complex payments supply chain historically riddled with paper processes. Until now, industry attempts to increase the efficiency, safety and adoption of digital payments have been complex, requiring payers to evaluate numerous payment options, laboriously integrate with ERP or accounting systems or perform extensive manual data entry. The road to faster—or even automated—corporate payments is still unclear to many.
To better serve their corporate customers, especially SMBs, banks need to implement innovative commercial payments strategies, including best practices for remittance messaging and streamlining accounts receivable/payable processing, as well as new strategies for automating the corporate payment supply chain.“
Krish Subramanian is the ceo and co-founder of Chargebee
"As the industry puts a greater focus on recurring, subscription-based business models, companies will need to grow their current payment management systems. This is where they will truly be tested. Stricter payment legislations and the transition from single transactions to recurring payments will challenge its existing tech infrastructures. Businesses must reassess whether its tech solutions can keep up with changing models, global regulations and growing market needs. In 2020, revenue operations will address just that.
By expanding beyond marketing and sales to include customer success and finance teams, RevOps will transform the way organizations view revenue management and growth. This cross-organizational alignment will help businesses think about KPIs beyond transactional stats to plug gaps, remove inefficiencies and drive opportunities across payment modes, sales motions, deal desks and all processes and metrics, underscoring real revenue drivers."
Rewards and incentives
Theresa McEndree is vp, marketing at Blackhawk Network
"Looking toward 2020, the biggest trends in payments and banking may be connected to the C-suite—not through the CEO, but instead, the CMO. And, what could be an over-looked marketing tool – reward and incentive programs – could be poised for big impact.
Customer acquisition costs are an increasing concern and brands should look at inexpensive ways to attract and engage customers. Some things to consider include free trials or leveraging popular forms of branded payments like prepaid, gift card and egift rewards to encourage desired behaviors. With digital gift cards, consumers volunteer information that can add a layer of insights beyond a one-and-done purchase.
Retailers can enable their teams to issue egifts in real time to help solve appeasement issues immediately in the store or online. This can turn a negative experience into a positive one, limiting damage to a brand’s image and preventing negative social media chatter from escalating.
We all expect the future of payments shift and evolve in 2020 and beyond, and I believe that seamless integration of reward and incentives will play a major role in defining success for payment programs in the coming years."
Electronic grocery payments
Josh Wiles is the founder and president of Novo Dia Group
"Over 45 million low-income Americans spend more than $70 billion a year on groceries using their Supplemental Nutrition Assistance Program (SNAP) mag-stripe cards. In 2020, use of these electronic payments methods will accelerate as the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) completes rollout of its e-card (by October), and small grocers and farmers’ markets adopt new solutions that allow them to accept these payment cards.
Small grocers who did not have access to integrated government benefit POS systems—unlike most national retail chains—can now upgrade from legacy POS terminals to intuitive, user-friendly and cost-effective mobile alternatives. This ensures simpler and faster checkout when accepting SNAP and WIC—along with cash, credit, and debit—on one system.
Another development that will drive growth in electronic payments in grocery is the recent cooperative agreement between the USDA’s Food and Nutrition Services (FNS) and the National Association of Farmers Market Nutrition Programs (NAFMNP) to provide markets who accept SNAP with access to Mobile Market+, a smart and secure mobile transaction processing application that accepts EBT and all other forms of payment."
Curtis Webb is vice president, emerging payments – product management at Meta Financial Group
"Even more so than before, we predict faster payments will explode in popularity. The ubiquity of faster payment tools PayPal, Venmo and Zelle for peer-to-peer transactions will likely hold steady, or possibly increase. But consumers expect lightning-fast payments for business-to-consumer transactions, too — and our research indicates we’ll see more companies adopt this innovation.
Per a recent study from MetaBank, Faster Payments: What Consumers Want from Businesses in 2019, companies that meet this consumer demand have a lot to gain — two in five Americans would be more willing to do business with a company again that offers a direct deposit option they’d receive in a few days. But that willingness increased to about half (47 percent) for direct deposit options available in minutes.
All-in-all, the study made it clear — consumers want seamless, instant options to spend, receive and move money. In 2020, we forecast businesses will continue to respond to this demand."
Real time payments
Robert Mancini is head of payments at Finastra
"Real-time payments are on the mind of every bank executive involved with payments strategy and 2020 will be the year banks move from RTP planning to implementation. The most nimble banks will be rewarded with new customers for being first to the table with RTP, with two-thirds of U.S. demand deposit accounts expected to be RTP-enabled by the end of 2020. Once customers have an RTP experience, they will be reluctant to go back to the comparatively sluggish 72-hour waiting period for payments that most banks have today. Prioritizing true RTP - meaning both demand deposit and receipt capabilities - will be a catalyst for new technologies looking to leverage the convenience of RTP in new and exciting ways."
Regulation in P2P
Michael Diamond is gm and svp of digital banking at Mitek
"Peer-to-peer payment technology has only grown in popularity on the heels of Venmo and Zelle. But while it is becoming more common for consumers to ‘park their money’ in other places besides a traditional bank account, there is still a long way to go for these digital payment channels to reach maturity. Unlike the controls and safeguards that exist within bank accounts and credit card companies, the same can’t be said for P2P payments. In 2020, expect regulations for this growing form of payments to become more of a priority for financial organizations as consumers demand more protection."
Kimberly Sutherland is vice president, fraud and identity at LexisNexis Risk Solutions
"2020 is shaping up to be a banner year for payments providers, both in terms of booming opportunities, and also the operational challenges from the mobile and online payment fraud that go with them. The trend toward behavioral biometrics and analysis for user assessment throughout the customer lifecycle will gain traction as organizations embrace passive risk assessment to identify high-risk behaviors and payment fraud.
This is true even in instances when a transaction attempt is made by a legitimate customer who has been manipulated or recruited into perpetrating a crime. This same technology will also be used to detect and disrupt credit card-testing and purchasing bots capable of mimicking human behavior. Speed vs. security and friction vs. fraud are the competing forces that will continue their never-ending battle this coming year and biometrics are at the heart of all."
Kimberly DeCarrera leads DeCarrera Law
"What happens when payments are issued but not redeemed? Uncashed checks and failed ACH payments are a big concern for companies. On the other end, you have companies that receive checks and ACH payments and are not able to identify the account that these payments should apply to.
States are using unclaimed property as a means to raise revenues without raising taxes. Audit activity in this area has only increased and as tax revenues begin to fall, expect more states to become even more aggressive. This means that companies need to be proactive in addressing these unsuccessful payments, before they become larger audit liabilities.
Unclaimed property is part of the payments lifecycle that is often ignored, at a great cost for many companies. Assessments have run into the millions and tens of millions for unaddressed unclaimed property liabilities. Companies have been subject to penalties and interest that exceed the base liability. And now, we are seeing whistleblower lawsuits that subject the company to treble damages."