Steve Villegas, FinTech and Partnerships Leader at PPRO
Retail has increasingly become a mobile function to meet the needs of a constantly on-the-go consumer base, especially with the rise in popularity of mobile E- wallets. The introduction of 5G will only enhance innovations in retail technology and in turn, benefit the consumer.
While still in its infancy, there is an expected global 5G rollout coming soon which will lead to a more interconnected global economy of merchants and consumers. Faster internet speeds and a decrease in latencies will lead to even faster, more seamless payments made via a mobile device and usher in a new era of innovation. Mobile payments are an increasingly popular payment method and the arrival of 5G will only fuel and further accommodate the growth of this trend.
The Rise of Mobile Shopping
Across the globe mobile payments are on the rise. According to PPRO research, 45% of global e-commerce transactions are completed on a mobile device. From Europe to Asia, we are seeing very high adoption of e-commerce being completed on a mobile device, at 43% for Western Europe and 55% for the APAC region. Faster 5G speeds will only enhance these shopping experiences leading to unprecedented rates of mobile transactions.
Consumers worldwide are looking for easier and faster ways to shop. If they see a new game their friend has or an interesting looking jacket on the train, they want to be able to instantly make that purchase on the go. With broader coverage areas and faster speeds, 5G will turn these preferences into a global reality.
Faster Speeds Create Seamless Experiences, For Consumers and Retailers Alike
Faster internet speeds and lower latencies will lead to better consumer online transaction experiences; this is especially for true mobile shoppers. 5G is expected to speed up data three times compared to 4G/LTE. So, utilising mobile payment methods will lead to a smarter and more customised payment process for consumers. This will be the key for retailers and online merchants to capitalise on the benefits of 5G.
Commerce is quickly shifting towards mobile. Faster data with less latency will result in an ever-higher adoption of mobile payments due to ease of use. A consumer will be able to see a product in an ad and instantly purchase it online, no matter where they are. Faster internet speeds will open the door to vast mobile retail possibilities.
The Role of E-Wallets
Increased internet speeds will lead to higher volume and ease of online, mobile transactions. Mobile E-wallets are already a widely adopted payment method and majority have direct access and interfaces specifically for mobile adoption. The popularity and adoption of these payment methods will only continue to rise with the arrival of 5G.
According to PPRO research 23 % of US e-commerce payments occur by e-wallet and this figure jumps to 49% in China. They are also the leading form of online payment across all of the APAC region at 40% of online transactions. E-wallets have become an increasingly preferred payment method due to their ease of use and seamless smartphone integration. Their adoption is very high in Asia and Europe already, while the US is not too far behind. With faster 5G speeds all regions should see a major uptick in mobile payment usage.
The two largest mobile e-wallets in Asia are Alipay and WeChat Pay, so offering these payment methods will be vital to reaching mobile, online shoppers. In fact, WeChat Pay had 980 million users in China and in 2017 was used by Chinese consumers at a rate of one million transactions per minute. These figures will rise even higher with the rollout of 5G.
By 2021, U.S. cross-border e-commerce will reach $203 billion. The introduction of 5G will likely inflate these figures even further as the ease and facilitation of shopping on a mobile device continues to progress. Retailers and Merchants that embrace these different mobile payment methods will be ready to take advantage of this growing opportunity.
Better Mobile Experiences Leads to Further Online Shopping
The launch of 5G will provide more internet access, currently there is only a 49% global internet penetration. This will lead to more online consumers worldwide and create even faster websites. Broken down this is a 10X decrease in latency and up to 100X more network efficiency.
Advancements with 5G will allow for easier online shopping experiences to an even broader spectrum of digital consumers. In fact, Adobe reports 5G will boost e-commerce revenue by $12 billion by 2021. Offering mobile adapted e-wallets will prepare retailers to take advantage of this trend.
After 5G, consumers will truly be able to pay and shop wherever and whenever they want to, with little resistance and receive instant confirmation of their purchases. Merchants should see a boost in revenue due to even more seamless mobile shopping. A combination of merchant and shopper apps and faster 5G speeds will cause consumers to naturally move towards mobile commerce. We are already seeing this adoption worldwide, as in France, mobile e-wallets comprise of 21% of online transactions and after the 5G rollout this percentage should shoot up.
Merchants who don’t jump to offer these consumer-friendly payment methods like e-wallets and realise the spike in transactions completed on mobile devices will miss out on a billion-dollar growth opportunity. 5G is the launching pad to worldwide mobile transactions, it is now up to merchants to embrace the mobile trend the same way global consumers have.
‘MOVE FAST BUT DON’T BREAK THINGS’ – WHY FINTECHS WILL COME TO LOVE REGULATION
Alex Johnson, Director of Portfolio Marketing, FICO
The guiding ethos of fintech is move fast and break things. It’s the fundamental advantage that disruptors have over the incumbents they’re disrupting — the ability to move quickly and make mistakes, learn from them and deliver innovative services to customers. Generally, this ethos is presented as a virtue. Banking is ‘broken’ so any investments in improving it are both notable and noble – even if there are bumps along the way.
Conversely, anything that stands in the way of this ‘march of progress’ is generally cast as a villain.
The most prominent villain for fintech companies is regulation. From their perspective, it’s a competitive moat, based on rules written for a different century, that protects banks’ ability to make money without needing to innovate and offer more or improved services to their customers.
So, it’s easy to see why a fintech company — believing fully in the virtue of its mission and faced with a litany of illogical and intractable regulations — might just say ‘we’re doing it anyway.’ That’s what Robinhood co-founder Baiju Bhatt reportedly did when his company tried to roll out a checking and savings product that it claimed was insured without confirming that with regulators first.
The problem is that while we may mythologise the ‘move fast and break things’ ethos in the abstract, consumers don’t love it when their stuff breaks in the real world.
And when fintechs and challenger banks aren’t constrained by regulation (as they mostly are in the U.S and Europe) the harm caused by this ‘move fast and break things’ approach can be much more severe than a service outage or a false claim of deposit insurance.
Stories from overseas
In China, online P2P lending exploded in popularity, with the number of P2P lenders growing from 50 in 2011 to 3,500 in 2015. Then the whole industry imploded when it was revealed that 40% of P2P lending platforms were Ponzi schemes.
In India, online lending companies raised a record $909 million in venture capital last year (the third-biggest market behind the U.S. and China). And those lenders are now using personal data from borrowers’ mobile phones to make lending decisions – which although illegal, is reportedly ignored by Indian regulators.
In the Philippines (another emerging market where venture capital dollars for online lending are pouring in), the National Privacy Commission is investigating hundreds of complaints from consumers about lending apps leveraging their personal data to shame them into making their payments.
A prediction for the decade to come
In the 2020s, I believe fintech companies will come to love – or at least quietly appreciate – regulation for two primary reasons:
Fintechs and challenger banks understand that brand recognition and affinity is key to their long-term success. Building their brands will be a challenge. A recent survey of 2,000 Brits found 40% don’t trust challenger banks at all and 67% said they are more likely to do business with banks that have branches on the high street. As Zach Bruhnke, co-founder and CEO of U.S. challenger bank HMBradley recently said, ‘We’re going to have to grow by word-of-mouth and doing the right things for our customers.’
Fintechs and challenger banks focused on the long-term task of building brand affinity and trust will, over the next decade, come to despise bad actors that skirt the rules and dress up get-rich-quick schemes in the same language they use to describe their own firms. Regulations that constrain and/or shut down these bad actors will be increasingly appreciated by legitimate market participants.
In the 2010s, we saw the beginning of a trend that will strengthen in the 2020s — regulations designed to foster competition between incumbents and new market entrants. To date, such regulatory action has run the gamut, from vague (innovation sandboxes and special-use charters) to hyper-specific (U.S. regulators’ cautiously approving the use of alternative data, or the Bank of England considering giving non-banks access to its 500-billion-pound balance sheet). Perhaps, most promising, has been the work done by the Competition and Markets Authority (CMA), which has been proactively driving the adoption of rules and standards around Open Banking for past couple of years. O
ver the next decade, through careful management of public perception and increased investment in lobbying, fintechs and challenger banks will further reshape the regulatory environment from a competitive moat to a more level playing field.
Reaching fintech maturity
’As a licensed broker-dealer, we’re highly regulated and take clear communication very seriously. We plan to work closely with regulators as we prepare to launch our cash management program’.
This was the statement issued by the chastened co-founders of Robinhood shortly after they backed away from their plan to launch a checking and savings product without government insurance. And here’s the crazy part — that’s exactly what happened! Less than a year later the company announced a new deposit product, this time insured by the Federal Deposit Insurance Corporation (FDIC).
As fintech companies mature in the 2020s and the focus of their strategic objectives shifts from growth to profitability, regulation will play a vital role in transforming the ethos of those companies into something a bit more sustainable. Call it ‘Move fast, but don’t break things’.
HOW TO MERGE YOUR FINANCES AS A COUPLE?
By Nelisiwe Ndlovu, Certified Financial Planner at Alexander Forbes
There is never a good time to discuss finances with your partner, married or unmarried, and one key issue that needs to be discussed is whether you should merge your finances.
Joining all your money matters can seem overwhelming at first, so you don’t have to combine every bank account and credit card from the get-go.
Start by having an honest discussion with regards to your individual money management and financial commitments before deciding to merge or co-manage your household finances while deciding if you want to fully merge all your finances. Detail all individual income, expenses, and all your financial commitments. The best way to achieve this would be to first take your individual budgets and combine them. This will tell you what you can and cannot afford as a couple. If one partner does not usually budget, this is a chance to start doing so as this will ensure that your household finances are under control.
Before you think about merging your finances, be open and honest about:
- How much you earn – what is the income that you will bring home? What is the frequency of your income? Are you permanently employed or a contractor?
- What are your current individual expenses and financial commitments? List your assets and your current debt.
- Your individual financial goals and money management techniques – don’t worry if you might have not figured this out at the time of merging your finances – the important thing to do is to be open and honest so that you both build a stronger money foundation
- Disclose your financial obligations, this becomes very tricky if left until too late and may cause unnecessary tension in the relationship
- What are your goals as a couple – what is the purpose for merging your finances?
Married couples can formally or informally merge their finances as detailed above where household expenses are split between the couple (the split could be 50/50 or any fair split agreed upon by the couple, which could be based percentage-wise depending on one’s income). Some couples tackle finances by adopting the ‘pick a bill’ approach, where one couple pays the water and electricity while the other covers the food.
Being married does not mean necessarily that you need to have one joint account. You may also just want to open one joint account where you each deposit money to pay just your monthly household expenses.
The top five things to remember when merging finances as a couple:
- Have the ability to manage your own finances before expecting another person to merge their finances with you.
- Be mindful of your potential spouse/life partner’s money management behaviour and skills so that there are certain things you can address together before considering merging your finances
- Always keep an open line of communication – honesty is the best policy
- Set a money limit which you can each spend without having to consult each other
- Don’t forget to change your wills and beneficiaries on pension or provident funds as required.
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