Is the Payment Industry on the Edge of Big Changes?
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The payment industry is going through a lot of shake up. A confluence of events is reshaping the payments landscape and the dynamic between service providers, merchants and consumers. The current geopolitical situation, energy crisis, growing regulatory structures, commerce expectations, technology advancements and rising interest rate are a catalyst for the changes happening now and prompting for a total rethinking of strategies for many industries globally. Changes are inevitable and with every shift in the macro environment, there are opportunities and obstacles for participants across the worldwide payments ecosystem to win customers, develop new solutions or claim more market shares.
But what does looking forward looks like in the midst of a poly crisis?
A panel of key experts at MPE from xxxx shared some insightful thoughts last month. Here are Paypr.work takeaways
Payment a standardised commodity?
The payment landscape has become increasingly competitive, with a growing number of payment options appearing in recent years. With the increasing rise of alternative payment choices, cards schemes like Visa and Mastercard are seeing their duopoly challenged from all sides. In uncertain times, customers are more demanding than ever before and are looking for stability and choices. To win and retain customers, payment services need to adapt to the payments trends dictated in local markets and put customers' expectations at the heart of their business strategy.
Adapting to local payments preferences
The accelerated shift from cash to alternative payments was led by an unfortunate global event, which contributed to the proliferation and adoption of new payments instruments. In commerce, there is an acceleration in channels like social commerce, supper apps, voice commerce, which require embedded payments and native wallets. There are significant country-level dispersion in consumers payments preference driven by a variety of factors. About 69% of shoppers abandon their shopping cart at checkout if their preferred payment options are not offered. The driver in the emergence of new payments instruments in local markets tend to be led by the local technological drive and capability, government push for financial inclusion and changes in patterns of consumers behaviours. PIX in Brazil ,UPI in India and Mpesa in Africa are strong evidence of these.
Technology that adapt to local culture and technology capability of the local market is of the utmost importance. Not all APMs offer frictionless experience and not well positioned to be embedded into a seamless flow. Have the notion of reality in the local markets is key to understand the need to access the total addressable consumers in those markets.
Payments Consolidation
Payment is still very fragmented markets. There are many players and countless of payments methods available to consumers. In recent years, we have seen a lot of major player being either acquired or entering into a merger as much as we are seeing lot of smaller players emerging onto the scene.
With about 50% of commerce happening cross border, there is a real question of relevance, coverage and connections between the services offering through global players vs local players. Partnerships and consolidation is a trend expected to continue to grow.
Some of the challenges are new
While new payment rails are designed to tackle some of the biggest legacy pain points of the financial services industry, an innovative infrastructure is also opening the door to new challenges. We now live in a global economy where the ability to make local or international transactions, for businesses and consumers, is almost taken for granted.
This impact operations, technology, networks, merchants etc.
Banks, networks and business payment systems are now making more structural changes and improvement to their infrastructure. For instance, banks are aggressively modernising their core systems to real-time, third-generation cores and updating their payments infrastructures, largely in response to the continued rise of instant payments, open-banking requirements, and cloud technology. In addition, with the continued growth of embedded finance, digital nativesβ expectations for how those services are delivered will continue to exert pressure on providers to modernise their payments infrastructure.
Butβ¦the industry remains resilient comparing to other industriesβ
Ultimately, the panel experts all agreed that the payment industry is resilient and that merchants have an opportunity to capitalise on the opportunities created by the new dynamics reshaping the markets to win more with :
Future-proofing their payments strategies
Aiming for global reach with a local approach
Keeping customers convenience above choices in mind
Challenging convention to thrive and survive
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