Long reads

Payments in 2021: Putting futureproofing to the test via digitisation, speed and data

Scott Johnson

Scott Johnson

VP, Product Development , Western Union Business Solutions

Following a turbulent and challenging 2020, businesses have been reminded with stark force of the need to be as prepared as possible for whatever lies ahead, futureproofing where they can. Future market trends are harder to predict than ever, with the growing influence of politics on financial markets and the addition of Covid-19 bringing a new dimension to global market analysis. Despite the challenges, the past year saw progress, with businesses pivoting at pace in the face of a crisis. Bearing this rapidly evolving landscape in mind, there are key trends we are likely to see develop, looking ahead to the rest of 2021.

Firstly, we’ll see more payment processes going digital. While the digitisation of payments has been hypothesised for some time, 2020 saw a sudden surge in the need for digitisation across all services. The abrupt stop in non-essential activity, resulting from the Covid-19 pandemic, forced the adoption of new technology and digitisation of working practices. Our own Global Services Trade Revolution report studied the impact of this sudden digitisation of the economy. It projected the value of international trade in services rising from $6.1trn in 2019 to $8.0trn by 2025 – accelerated by the adoption of new technology and remote working practices. At the heart of this, it found that financial services would play a critical role in the future digital economy – and hypothesised that digital transformation would enable the financial services industry to increase in value by 32% by 2025.

In particular, the report predicted that the USA will see the largest overall increase in services exports, the result in part of its investment in digital infrastructure and technological innovation. Other predicted ‘hotspots’ for digital services export growth over the medium term will include Korea and Japan, Australia and New Zealand, and Qatar and Saudi Arabia.

A growing digital economy requires a robust digital payments infrastructure and as more banks and countries adopt local and cross-border real-time payment systems, I predict that payments will continue to clear and settle faster throughout 2021. We’ll also see payments become more embedded in the business processes they serve, making the process of initiating payments faster and easier for end customers.

Speed and data – integral to a digital economy – are in themselves trends to be excited about. A new faster payments infrastructure holds the promise of being able to get money somewhere instantly. It’s where we’ve always wanted real-time gross settlement to be – and 2021 will bring this closer. Looking further ahead, we can expect to see a broad range of new business models redefine the possibilities for cross-border transactions, with developments such as 5G and fibre broadband further supercharging this. The products we will be able to build on the framework of faster payments will enable swifter processing and data transfer. Such automation will truly remove inefficiency out of procure-to-pay processes, unlocking a material impact on both the payments industry and businesses in general, and how they handle their receivables and payables.

While it may therefore be almost impossible for businesses worldwide to know exactly what lies ahead, the industries and global markets that adapt fastest to enabling seamless cross-border digital payments will be the first to recover, and ultimately thrive, economically.

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