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Without a doubt in 2021 we shall continue to see a lot of developments in business and technology as companies build on trends that started or that accelerated in 2020. As a Fintech operating in the payments space, I shall focus on uncovering insights that people outside of the industry won’t necessarily be aware of.
The payments industry is one which changes very quickly due to the constant technological, financial and compliance developments as well as due to other macro forces that impact the sector. In 2020, as a result of the COVID pandemic we experienced the acceleration in the digitization of payments. Cash usage has decreased across the board with contactless payments, e-Banking, and e-Commerce all becoming more popular. As a result of all this change, operating in the payments space has become increasingly challenging, but also filled with opportunities to stand out in the market.
A significant long-term trend which is shaping the Payments industry is a stronger emphasis on developing one’s own proprietary technologies and products.
There are currently almost 400 electronic money institutions (EMIs) in Europe making it a very competitive industry, which in itself competes with traditional banks. Consequently, relying on price or customer service as differentiating factors has become decreasingly sufficient.
A number of payment service providers, many of which run on white-labelled systems, are now developing their own custom-built products that can better serve their existing and growing customer base. This is resulting in more differentiated and targeted product offerings in the market, and as a consequence, industry players relying on generic white-labelled systems will experience a material disadvantage when competing in the market. At Paymentworld Europe, over the years we have become increasingly serious about product development. For us to offer our customers the best possible products and services, we use the knowledge that we have gained from serving clients and apply that to build and continuously improve our offerings. In fact, it is no accident that our technology team is one of the fastest growing departments in the company.
Another major trend that we are seeing is that card schemes (e.g. VISA & Mastercard) are becoming more strict with their rules, consequently forcing many merchants to direct their attention towards alternative payment methods (APMs) as a way to receive payments. Alternative Payment Methods include various digital wallets, prepaid cards, as well as bank transfers. The fact that card schemes have also been accused of charging excessive fees and taking advantage of consumers’ reliance on credit cards during the COVID-19 pandemic has continued to fuel this trend. Credit card payments remain a very popular payment method with consumers in the UK and Europe, but alternative payment methods are growing in popularity and they are shaping the future of e-commerce.
When speaking about trends in the payments industry, there are many others that are often mentioned. These include growing compliance demands by the EU and local regulatory institutions, the spread of real-time payments, Request-to-Pay technology, peer-to-peer payments, Open Banking, data monetization using Big Data, and much more. 2021 will be a year which forces EMIs to move quickly, invest in innovation, and rethink their USPs, as we start seeing increased consolidation in the market.