BOSTON—This year expect greater challenges in the payments space but look for alternative lenders to face significant headwinds.
Those are two predictions from Aite Group for 2016, as the financial consulting firm outlines its Top Ten Trends in Retail Banking and Payments.
Aite noted that unprecedented change marks the dawn of 2016 in retail banking and payments globally.
“Regulation is affecting nearly everything in the United States and paving the way for market disruption in Europe. Well-funded technology companies around the globe continue to chip away at core services, challenging incumbents,” the company said. “Clouds loom as cyberattacks run rampant and fizzling IPOs hint at a possible tech-bubble burst. And through all this, players are scheming to reduce friction, streamlining the user experience to win wallet share.”
Amid that backdrop, the company details the trends to watch this year:
- Payments sublimation accelerates: Payments will increasingly fade into the background in favor of taking place automatically. This represents opportunity for merchants and challenge for issuers and networks.
- API banking gathers momentum: The era of third parties linking their systems to FIs via APIs will begin to transform the industry. Through this process, banking will become steadily more virtual and digital.
- FIs orchestrate authentication: A coordinated authentication approach for all delivery channels should match the level of friction to the risk of the interaction, improving customer experience and transactional security.
- Alternative lending disruptors are disrupted: Rising interest rates, regulatory scrutiny, and intensifying competition from FIs will slow the growth of the alternative lending market.
- Blockchain use expands: The expanding use of blockchain technology will begin to transform and disrupt many areas of financial services, lowering costs, reducing barriers to entry, and disintermediating incumbents.
- Disruption in cross-border remittances increases: 2016 promises to be a time of accelerating disruption in the cross-border remittance market as emerging players reduce costs and increase speed.
- FIs streamline customer onboarding: First-mover FIs and technology-led startups differentiate with vastly improved customer onboarding processes.
- Rising interest rates drive mortgage IT investment: In the United States and Europe, lenders leverage compliance drivers to justify broad upgrades to mortgage technology.
- Havoc erupts in the digital wallet space: 2016 will be a year of chaos for mobile payments, but by the end of the year, the industry will see a clearer path to separate leaders from laggards.
- The personal data illusion comes to an end: Driven by the increasing threat environment and regulatory scrutiny, FIs and merchants evolve their security routines to assume that consumer data has already been compromised.