Big-picture trends in the payment industry are coming into focus and will characterize the market for 2020.
We spoke with five of our industry leaders and experts to get their take on the top payment trends in 2020 to watch.
The Trend: Digital Wallets Will Continue to Explode Globally
The Expert: Konrad Chan, president, Asia Pacific at Global Payments
The digital wallet momentum will continue in 2020. We have seen this trend in China with Alipay, which grew out of Alibaba's online marketplace, and WeChat Pay, a way to purchase while using the popular social media platform. Each has around 1 billion users.
In Indonesia, Gojek, started in 2010 as a courier delivery and two-wheeled ride-hailing service. Now its app has broad appeal in five Asian countries, offering more than 20 services. There's WhatsApp Pay, which is in the pilot phase in India and has already reached impressive levels of penetration. And HSBC's PayMe digital wallet is gaining significant traction in Hong Kong.
"This trend gain increased momentum with the announcement of Facebook Pay in November, 2019," says Chan. Facebook Pay takes a page from what's already happening in Asia, where the payment infrastructure is essentially a smartphone with a QR code.
"Payment providers will stay relevant in this new world by offering customers various options to accept the exploding number of digital wallets globally," says Chan. “They'll also be able to use artificial intelligence (AI) to look at fraud and transaction patterns to protect merchants."
The Trend: Bundled Financial Services in the Wake of Regulation
The Expert: Chris Davies, president, Europe at Global Payments
In addition to the overall explosion of new form factors and methods of payments, Davies predicts that we'll see more services bundled together in 2020. As banks and payment providers comply with the European-mandated second Payment Services Directive (PSD2), account information service providers (AISPs) will have more opportunity to curate financial services in a Netflix or Spotify-like interface. Curve, for example, is a London-based startup that has rolled out an app in the United Kingdom that consolidates multiple bank cards into one place. With these apps, users can switch from one card to another very easily and see aggregated information through the exchange of banking data via APIs.
"In the wake of PSD2, we're going to start seeing different wallet and payment solutions coming out, often blended in a streamlined way that adds additional value for the customer. We're not going to see a sea change, but it will be an ongoing evolution." Davies says.
The Trend: Embedded Payments Will Accelerate
The Expert: Frank T. Young, president, vertical market software solutions at Global Payments
Merchants and consumers no longer think of payments as a stand-alone service but one that is deeply embedded into the buying process whether they are paying online or in-store. This trend toward “embedded payments" is the logical extension of “integrated payments" and will continue to make inroads in 2020, says Young.
Embedded payments represent the next wave of technology, blending payments functionality with the software that a business uses to facilitate a user journey from purchase intent to after-sales service. The ability to deliver these seamless interactions was once the domain of large enterprises in developed markets with significant IT budgets but are now ubiquitous enough to be available to small and midsize businesses across the globe.
In today's highly competitive market, most merchants will no longer look for point solutions that simply facilitate a transaction, Young says. They will look for solutions that help them establish loyal, on-going relationships with their target customer that covers the full life cycle of pre-purchase, purchase and post-purchase interactions. To tie this all together for merchants and consumers requires solutions that embed payments into the software that merchants use to run their businesses. In the coming year, businesses will increasingly seek out and utilize solutions that are relevant to their verticals and extend well beyond a cash register ring and into all aspects of running a business including marketing, operations, supply chain and service and support functions.
The core payment transaction needs to be seamless, convenient, secure and reliable. But in 2020 these characteristics will be table stakes. Young says, “True value for merchants and their customers will come from more than facilitating a payment — how did the customer find you, how did they discover what to buy, and post-purchase, how do you service that customer?" In 2020, businesses will accelerate their efforts to work with partners who can deliver the core payment transaction but beyond that, help them answer these questions to help them compete more effectively and ultimately grow their businesses.
The Trend: Industry Will Raise the Bar on Vendor Security Compliance
The Expert: Stacy Hughes, senior vice president, IT, risk, governance, and compliance at Global Payments
Hughes predicts that as payments technology becomes even more embedded with broader software applications and solutions for businesses, these businesses will need to be more vigilant about the security posture of software vendors.
“The Software Security Framework, a new set of standards that have been issued by the Payment Card Industry (PCI) Security Standards Council in 2019, will offer merchants another way to measure the level of sophistication of a software vendor's security measures," says Hughes. “We, collectively in the industry, will focus on protecting our customers and validating those layers of security as technology evolves."
The Software Security Framework listings roll out in early 2020.
The Trend: More Compartmentalized Money and Value-Based Ecosystems
The Expert: Kelley Knutson, SEVP and president of Netspend
According to Knutson, individuals will continue to move their money away from their core banking relationships into compartmentalized branded ecosystems to get greater access to new products, better services and value-based solutions, as well as loyalty, discounts and a more complete user experience.
We first saw this trend emerge with low-value transactions in services such as Starbucks and iTunes. Now, it's Amazon enticing people into its broader ecosystem with free delivery, streaming video and even discounts at Whole Foods for its Prime members. Apple has also recently created its own money ecosystem with the Apple Card, offering 1% cash back for purchases and a 3% discount on its limited set of core products.
Knutson says that a wide variety of similar, compartmentalized branded ecosystems will follow, centered primarily around a virtual account embedded within that ecosystem — this will arguably become the central hub, driver and repository for detailed transaction information, payment behavior trends and rich sources of overall customer insight.
"When it comes to enabling these money and value-based ecosystems, lack of friction and the end-to-end customer experience will be key. Payments providers need to have the ability to help branded ecosystems authenticate and approve individuals quickly and easily," said Knutson. “The data that some of these partners already have can serve as a means to help pre-authorize and pre-approve individuals and get them through the customer identification process in a more streamlined fashion."
Looking Toward the Next Decade
In 2020, these trends will impact payments across the world. We can expect more payment types and devices, integrated solutions, a need for a frictionless experience with greater regulation all calling for increased security. It is important for merchants and enterprises to keep up-to-date, and work with a forward-thinking partner they can trust.