LONDON–A forecast for payments in 2020 suggests traditional forecasts will play out differently next year.
Sam Murrant, senior payments analyst at GlobalData, said that while much of the conversation around payments in recent years has been on “big buzzword technologies” such as artificial intelligence, blockchain, biometrics and the Internet of Things, he believes the “most transformative technology for payments in 2020 will not be any of those.”
Instead, Murrant expects the game-changer will be found in bank-to-bank payments systems, says GlobalData, a leading data and analytics company.
“The ability to send money in real time between bank accounts has obvious applications for remote payments, and many popular online and P2P payment services in the developed world rely on these systems to underpin their fast, cheap domestic transfers,” Murrant said. “However, the real prize is electronic payments at the point-of-sale, which has been long dominated by cards. Instant payment systems can offer much lower processing costs than cards, making them attractive to merchants. They can also offer functionality such as P2P payments and settlement speeds that card-based payments can’t match, making them attractive to consumers.
‘A Direct Threat’
“These factors make instant payments a direct threat to card-based payments infrastructure, albeit only within the markets where instant payment systems are available,” he continued.
Murrant said Visa and Mastercard are “already well aware of these existential threats to the business model” and have been making moves to buy companies and invest in technologies to retain relevance as instant payment become more popular and prevalent.
Mastercard, for example, took the opportunity to buy instant payments infrastructure specialist VocaLink back in 2016 – the company has since gone on to help build numerous instant payment systems, Murrant noted.
‘Already Proven’
“Instant payments has already proven itself in the U.S. – one of the last developed markets to adopt the technology – as shown by the popularity of the Zelle P2P payments service. Zelle is built on a private instant payments system maintained by Early Warning Services, a joint venture owned by major American banking brands,” he said. It does not cover all U.S. banking brands, but it has already overtaken Venmo in terms of number of transactions.”
Murrant added the biggest step forward made in 2019 for instant payments was the development of TIPS, a cross-border instant payment system based on the SCTInst infrastructure that not only allows for transfers between participating banks within the Eurozone, but it represents a step outside of domestic payments markets for these systems.