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HOW WILL WE PAY IN 2021?

Nick Corrigan, UK & Ireland Managing Director, President of Global Payments.

 

As 2020 began, there was already much conversation about the pace of change in the payments space. Driven by regulation changes and enabled by advances in technology; new players and established organisations were able to broaden out their proposition with things like Open Banking. But the Covid-19 pandemic has catalysed change and innovation at an unforeseen pace, out of pure necessity. With customers no longer frequenting physical stores, reluctant to handle cash and relying heavily on online services to feed, clothe and entertain themselves, the payments industry has had to adapt quickly. The question is, which of these changes are here to stay, and what trends will dominate the conversation in 2021?

 

Brands go direct-to-consumer

It goes without saying that the pandemic has forced us to re-evaluate our relationship with physical stores, irreversibly changing how we view them. Good examples include Nike, Brewdog and Harry’s, whilst Shopify has seen dramatic success in the small merchants needing to go online. This year, we’re going to see an increase in the ‘direct-to-consumer’ play. Brands big and small who previously had a distinct distribution channel e.g. through supermarkets, multi brand outlets or dedicated stores for example, will look more deeply at their distribution models and use technology as the enabler for this. As part of this, they will ramp up efforts around their social presence and communication, apps, loyalty programmes and websites. They will embed the payment process, making it almost impossible for consumers to want to visit a third-party physical store.

Nick Corrigan

This will in turn fuel the subscription economy and we’ll see consumers increasingly harnessing the opportunities there now are to have things like razors or fitness juices delivered to their doors monthly via an app, as opposed to shopping for them in a supermarket. This movement of reclaiming direct consumer interactions and cutting out distribution partners presents massive opportunities for brands. They will now have the data – and the resulting insights – gained from controlling more of the payment flow to strengthen relationships, and in turn, strengthen their revenue.

 

Tech players ramp up payments prowess

In 2021, we’re going to see tech giants continue to increase their efforts when it comes to payments and broader financial services. Amazon Pay, for example, is fast becoming a standard payment method for purchases outside of its own website. While at the moment it is mostly limited to Amazon storing your card details to enable one-click payments, we’ll begin to see tech giants start to come up with their own payments products so that they can control the complete flow of the payment.  The natural next step from consumers using the platform merely to access their card, is that they might have a credit line with the platform in question and offerings beyond buy now pay later as the tech firms disintermediate the traditional financial services supply chain.

 

Open Banking gains pace

Most consumers are still unaware of this new service, but as more merchants have an opportunity to offer this solution and integrate into their payment options, they have a great opportunity to reduce their costs for payments by not using the traditional routes under Visa and Mastercard. While these entrenched payments rails have a very important place, offering protection for bigger purchases like a TV or a holiday, they aren’t needed for many consumer purchases. It’s unlikely you’re going to seek a refund and have to have a chargeback raised for a cup of coffee or an insurance renewal, which is what these big networks are so vital for facilitating.

When you take these types of credit and debit card purchases, about 30% of them could sit outside of the typical network ecosystem. This is why we’re seeing banks quickly launch their Open Banking services, specifically for these types of scenarios. In 2021, Open Banking is really going to start doing what it was intended to do: increase competition.

 

Looking ahead

The way we pay was already evolving due to Open Banking, BigTech and the explosion of ecommerce. But adapting to the pandemic meant rapidly adapting to new technologies, and nobody is likely to look back. The economic impact of 2020 means that budgets and purse strings will be tighter in 2021, and companies will be looking to find ways to make their payments infrastructure cheaper without compromising security. The promise of new opportunities to monetise data will also bring in new players and new technologies as businesses seek to own more of their payment lifecycle. This had been a year of intense change, and 2021 shows no promise of slowing down.

 

Finance

HIVERA BRINGS REGULATORY RISK SCORING TO FINANCIAL SERVICES

Financial services Chief Risk Officers and Heads of Compliance can now, for the first time ever, visualise and mitigate the regulatory risk in their entire unstructured data estate, thanks to hivera, a new regtech platform for financial services firms, designed to bring regulatory risk under control.

A new platform from data solutions provider, Automated-Intelligence, hivera enables clients to observe their unstructured data, assigning a tailored regulatory risk score based on the financial services firm’s risk appetite to that data, and automating the identification and remediation of threats to help mitigate associated risks.

Demonstrate Control
An estimated 80 percent of all data is unstructured. Until now, due to the challenges associated with discovering, analysing and managing unstructured data, this has created a significant challenge for compliance professionals, who are under increasing pressure from regulators to demonstrate compliance against policies and regulatory standards over all of their data.

hivera solves this problem. It indexes text-extractable content, providing users with advanced search capability to categorise personal information and commercially-sensitive data through metadata, security, keyword, phrases, and regular expression pattern matching.

Meanwhile, through the hivera dashboard, firms are presented with a risk score which correlates to the regulations they are subject to. In-depth insights enable them to visualise and address key compliance and regulatory risks within their data, whether retention related, security-related or a matter of personal and sensitive data. Moreover, with its user-friendly reporting modules, compliance professionals can quickly and easily provide compliance updates within the organisation or to regulators.

Automate Regulatory Risk Mitigation

In addition to significantly reducing regulatory risk and minimising human error, the hivera platform also offers huge resource, time and cost savings through automation. This is achieved through the application of fully-audited polices to categorised data, which enables ongoing data compliance and remediation. Policies applied against categorised data can perform deletions or archiving according to organisational retention schedules.

“hivera is transforming how financial services firms view unstructured data,” comments Simon Cole, CEO at Automated Intelligence. “By providing greater visibility and control over their unstructured data estate, we’re improving data analysis, data privacy, data protection and risk mitigation capabilities of our clients.”

 

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Finance

FINANCIAL INCLUSION WITHIN DIGITAL PAYMENTS

NICK FISHER, GENERAL MANAGER, SALES AND MARKETING UK, JCB INTERNATIONAL (EUROPE) LTD.

 

The shift towards an economy that removes physical cash has long been on the horizon in many regions. Sweden is an example of a country rapidly heading this way. Two years ago, just 1% of Sweden’s GDP was circulating in cash compared to 11% in the Eurozone, and research by the Swedish Retail and Wholesale Council showed half of the nation’s retailers saying that they probably would not accept cash after 2025.

 

In 2019 in the UK, cash payments decreased by 15%, although physical money was still the second most frequently used method comprising of 23% of all payments. The Financial Inclusion Commission in the UK states that there are over 1 million people that do not have a bank account, and the World Bank estimates that there are some 1.7 billion adults globally that still lack access to a bank account.

 

The finance industry has collaborated over the years to develop various credit products for affluent communities. These customers are considered a lower risk. However, institutions should continue to prioritise the advancement of services to serve an audience which remains – ‘unbanked’. Research by EY showed that financial inclusion could improve GDP by up to 14% in more rural, developing economies like India, and by 30% in frontier markets like Kenya. While the positive reasons for fully embracing digital payments and eliminating physical cash are plentiful, including lower payment processing costs for the retailer and customer convenience, physical cash provides the ‘unbanked’ with the ability to function day-to-day with a legal tender.

 

To establish digital solutions for the unbanked, payment players should adopt an inclusive mindset. The race towards a digital cash society will naturally get closer to the finish line with the passing of each generation, but governments could lend a hand to the unbanked by encouraging financial institutions to sponsor organisations that provide legal quasi digital cash products. In my opinion, the financial industry has an important part to play in developing low cost solutions to support the unbanked with authentication tools – such as biometrics and risk tools to manage real-time credit risk reporting with anywhere accessibility.

 

In both developing and developed countries, QR codes can play a superhero role as they offer simple, low-cost ways of processing payments on basic mobile phones. In June last year, we collaborated with FIS to enable cross-border QR codes in the APAC region. The ‘Worldpay from FIS 2020 Global Payments Report’ found that digital wallets, at the time, accounted for 58 % of regional ecommerce purchases and were expected to reach almost 70 % percent by 2023.

 

In developed regions, we are issued with a formal identification when we are born, no matter our circumstances, and this comes in the form of a birth certificate or, later in life, a passport. This does not always happen in developing countries as resources are often limited. Yet, advances in biometric technologies, such as fingerprint or palm vein may offer a solution to the requirement for proof of identity to open a bank account or to create a mobile wallet. Biometric organisations, payment leaders and innovators, such as Google Pay and Apple Pay, have partnered to make this a reality, despite the initial cost implications for development.

 

In summary, understanding the reasons for why some prefer physical cash, and others prefer digital cash, provides holistic learnings to achieve a society that ultimately uses digital cash only. Empathy is paramount for building customer-centric commerce. For me, at least, a world without physical cash cannot be considered responsible, or fair, until everyone can be accommodated.

 

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