“Without a doubt, the 'era of fintech' is upon us and banks can’t merely be mindful of this, they must also have a clear plan in place…”Hany Saad , Asst Director. J.P Morgan.USA
The global payments industry is in the midst of rapid change as financial technology's (“fintech”) potential to alter how, when and where payments are made gains momentum. This paper examines fintech's growing capabilities and explains why bank-fintech partnerships hold the key.
The wind of change in the payments world is gaining in strength as financial technology’s (“fintech”) potential to alter how, where and when payments are made – as well as who it is that facilitates them – is further explored and leveraged. This paper examines the growing capabilities of fintech in both the consumer/retail and wholesale/corporate payments arenas, and discusses the monumental role fintech – and the array of solutions it presents – will play in shaping the course of the payments industry as a whole.
Without a doubt, the “era of fintech” is upon us and banks can’t merely be mindful of this; they must also have a clear plan in place in order to adapt to and benefit from fintech-fuelled changes. While the banking industry is traditionally more “conservative” to change – certainly fast-moving change – any hesitation or ambivalence here could be costly, particularly as new technology introduces not just new solutions, but also potential contenders to banks’ long-standing reign as payment processors. In order to position themselves at the centre of the payments industry of tomorrow, banks must act today to understand, interact with, and cherry-pick from the full smorgasbord of fintech developments.
The range of options to choose from is broad and diverse. As the number and type of fintech players, developments and offshoots gather pace, the emergence of new tools and solutions (such as digital currencies and biometric security) are in turn gaining traction and reaching the market with ever-greater speed. To date, the impact of these new entrants has been far more profound in the retail and consumer payments space (more of which in the following pages), yet these new payment capabilities and ideas are already diffusing into the area of corporate payments, as personal preferences influence corporate demand. Furthermore, in the continually-evolving payments sector, the impact of the fintech “revolution” isn’t something occurring in isolation. It is important to remember that the corporate and wholesale payments industry isn’t static, and that technology is already being leveraged to drive industry-wide improvements with regard to harmonization, standardization, centralization and the development and application of increasingly sophisticated solutions.
Following on from our wider analysis of the payments industry, this report hones in on the influence of fintech, to assess the direct (and indirect) impact of new technology on payments; the way in which it is molding client behavior and fuelling expectations for better, faster, more innovative solutions across the payments spectrum, and how industry changes are set to re-shape the corporate payments landscape. This report also examines what these advances mean for banks, and the strategies they should now adopt (in particular, far closer engagement with the fintech community) in order to understand and access these exciting developments, and thereby future-proof their long-held position at the heart of global payments.
“Without a doubt, the 'era of fintech' is upon us and banks can’t merely be mindful of this, they must also have a clear plan in place…”
Fintech is changing the face of global payments. Global investment in fintech ventures tripled in 2014 to US$12 billion.1 As new payment capabilities come to the fore, cutting-edge technology is transforming how transactions are initiated and processed. This is no longer just a case of new currencies or faster payment methods, but an entire rethinking of transfers of “value” and how these are undertaken. This presents both a challenge and an opportunity for banks.
A new breed of non-bank payment provider has kick-started a surge in payments innovation, ranging from fintech start-ups (those looking to leverage technology to bring advancements to the payments space) to established non-payments industry operators (such as Facebook and Apple). More fintechs are graduating from the ranks of start-ups to multi-billion dollar listed companies: at least 4,000 fintech start-ups are active and more than a dozen of these are valued at over US$1 billion.2 These new players are seeking to improve the payments experience of their customers in order to support their core (non-payments) business. From all angles, they are leading the charge in taking payments to the next level in terms of speed, convenience, efficiency and multichannel accessibility.