The payments industry has been rapidly transforming in the last few years. Increasing shifts to digital, consumer preferences changes and evolving regulations lead to the emergence of new payment trends. What can we expect in 2018?
Here is an overview:
1). Artificial Intelligence
AI is one of the most commonly used terms when talking about the digitalization and the future of the financial industry. In fact, AI can be used in numerous areas of financial services. The application of AI in payments is expected to reshape how consumers and transactions are monitored and analyzed, especially as payment processes move closer to real-time. Currently, AI is being used in fraud detection and anti-money laundering.
One of the most potential applications for AI is biometrics. The technology allows to easily making mobile payments and provides security from fraud at the PoS. Mastercard has recently announced that by 2019 all consumers will be able to identify themselves with fingerprint or facial recognition. So, banks are required to provide their customers with biometric solutions.
Blockchain is one of the main technologies transforming banking and financial services. It has almost become a mainstream. The reason is its ability to significantly simplify financial transactions.
Some banks already cooperate with various early-stage companies on pilot or proof of concept projects that use Blockchain for its greater performance, efficiency, and safety.
Last year, the leading credit card companies American Express, Mastercard, and Visa announced the introduction of Blockchain-enabled payments.
3). Instant Payment
For years, The European Central Bank has been driving forward the implementation of instant payment. The main goal is to provide a fast, simple and intuitive payment method.
The ECB is now getting ready to launch a new settlement system (Target Instant Payment Settlement, or TIPS) in November this year. Banks are asked to speed up the implementation of the technology which will allow conducting real-time transactions. The system is expected by the ECB to become an alternative to Blockchain.
4). Open Banking
The most significant modification of the EU payment system is the Second Payment Services Directive (PSD2).
PSD2 enables bank customers to use third-party providers to manage their finances. Banks, on their side, are obligated to provide third-party providers access to their customers’ accounts through Open APIs. This will enable third-parties to build financial services on top of banks’ data and infrastructure.
The revised regulation came into force on 13 January 2018.
5). Bank-Fintech partnership
The relationship between fintech and banks have been often called as ‘love-hate’. However, the situation is changing. Both parties have recognized the great benefits of the mutual cooperation. According to Global FinTech Report 2017 by PwC, 82 percent of banks plan to increase the number of partnerships they have with fintech companies over the next 3-5 years.
For this reason, 2018 is expected to become a year of fintech-bank cooperation. Regional and community banks will use the collaboration with fintech in order to meet the needs of their customers who demand services on their computers, tablets, and smartphones.
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