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Payments in 2021 and Beyond

Looking back over the last 18 months in the payments industry, it’s hard to recall a more turbulent time certainly in the last decade or so. As we head towards the end of 2021, in the wake of Brexit, the Corona Virus and the collapse of Wirecard, these huge moments and events form the tip of the iceberg as to the sheer scale of change that we’ve encountered in such a short period of time. If ever there was an example of the chaos theory in action, just these three examples alone have shaken up everything and we stand at an inflection point, trying to envisage how the new world of payments might look. As always, out of chaos comes opportunity, but can the industry keep up with itself, in an ever changing and all-consuming demand for more?

The challenges the industry faces today are huge. Brexit has yielded unforeseen complications around fees, licencing, and merchant location. Corona Virus has negatively impacted some of the largest industries such as travel, ticketing and point of sale. Whilst the recovery of these sectors is gradual, compliance teams are under pressure to double their efforts so that they might prevent further scandals within the payments industry.  

There are winners and losers and today, we are at a crossroads, where old meets new, where the analogue approach is being driven out by all things digital. New business types, new technologies and new ways to pay are on overdrive. We feel it all around us with the clearest sign of change indicated through Visa’s acquisition of Tink, Currency Cloud and Mastercard reacting in kind with their strategic investments into Fincity and AIIA. When the two biggest card schemes begin to turn their attentions towards emerging technology (such as Open Banking), it becomes clear that even they are creating insurance policies for change. 

At the same time, traditional banks face the mounting threat of a new tidal wave of challengers. This gradual change has been coming since the 2008 financial crisis where, once again, with trust in the mainstream banking sector at an all-time low, the entire landscape has been turned on its head. Do people now trust the exciting emergence of digital banks more than the long-established players? Interestingly traditional banks are looking at all new digital propositions, like the card schemes have adopted Open Banking. Are traditional platforms and disruptive newcomers all looking to provide a centralised platform for acquiring, wider payments, and banking? This could be a significant moment as these huge corporates begin diversifying into other areas outside of their core business.

In and amongst all of this, digital currencies, NFTs, Defi, Blockchain and tokenised assets are lurking, gearing up to be the commodities and currencies of the future. Are NFTs and Smart Contracts now set to disrupt almost every industry like never before, all underpinned with a digital payment mechanism? Only 18 months ago, Bitcoin was sitting at around USD 10,000 and yet this week it is once again threatening to break the all-time high. Bitcoin is here to stay edging closer and closer to the mainstream. Emerging players have broken the mould offering that bridge for consumers to spend BTC in a retail environment. There will be plenty more innovative Blockchain based payment solutions in the next few years. No clearer picture of how Blockchain and BTC has evolved than this tribute below from May 2021: 

Today marks the eleven-year anniversary of Bitcoin Pizza Day. The day has become synonymous with the first official BTC transaction, with Laszlo Hanyecz purchasing two pizzas for 10,000 BTC. May 22. 2010, Florida Man Laszlo Hanyecz spent 10,000 BTC at Papa John's pizza for the purchase of two pizzas.

10,000 BTC at the time of writing is now valued at USD 633 million... 

There seems to be an unstoppable inevitability around this juggernaut of change. Open Banking, digital currencies, huge strategic acquisitions into banking technologies and a massive shift within payments towards a fully-fledged unified digital economy form the backdrop to the current landscape. The dominance of the card schemes will remain for now, but it could be under threat in the coming years. Surely this is why the card schemes are exploring the banking sector more closely than ever? Losing scheme fee revenues as more merchants and consumers turn to instant bank transfers, is a potential revenue time bomb. 

In fact, the only real stumbling block to wider adoption of alternative ways to pay like Open Banking remains the consumer itself and a shift of mindset. How do we educate the end consumer to adopt it as an established payment method? Imagine if companies like Paypal had, back in the early days, referred to ‘wallet banking’ it might not have been as successful. If Open Banking can be productised to a level where end consumers understand it, then rather like writing a cheque, so a card payment (online) could well become a thing of the past in the years to come. 

As we come out of the pandemic and as we look to 2022, the industry feels vibrant in a different way than in previous years. Despite the acquisitions and consolidations, competition has never felt stronger. We are all looking to globalise our solutions beyond card payments, centralise our reconciliations and create a stickiness that hasn’t been required before. It is much easier for merchants to move around from solution to solution as new technology makes it simpler to integrate additional payment platforms quickly. Demand is higher than it’s ever been, and our role is to continue to develop our systems to match the ongoing requirements whilst serving merchants in a centralised, scalable and digital way. 2022 will undoubtedly see more significant valuations, acquisitions, and opportunities but as long as we stay ahead of the curve, we can’t lose.

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