The payment industry is no stranger to innovation, but over the next decade, the speed of change will bring previously unseen levels of development, growth and diversification. With payments set to evolve thanks to new technologies and regulation, the payment sector is likely to look very different in less than 5 years time. Already, the signs of change are strong, with the likes of Open Banking regulations changing the playing field for financial organisations across the sector.
This blog explores 3 technologies, Request to Pay, Confirmation of Payee and Payment Initiation Services, looking at their potential in the future of payments.
The role of Request to Pay (RtP) in the future of payments
RtP schemes are set to multiply in 2020 with a diverse range of services designed to meet different consumer needs within the market. With access to these options, consumers could start to move away from direct debits, using RtP schemes to take greater control over how and when they make payments.
Beyond added payment options, RtP schemes will also help consumers who cannot access direct debit, enabling them to pay as they go, without incurring additional fees.
The greatest obstacle to the uptake of RtP schemes remains market education. Consumers and businesses alike remain unaware of their potential and the benefits they can offer. As a result, few are currently choosing RtP schemes over traditional direct debits, however, over time this will change. As the benefits become clear, both consumers and businesses will quickly take advantage of the opportunities RtP schemes present.
The role of Confirmation of Payee (CoP) in the future of payments
With adoption slow among established banks, the UK Payment Systems Regulator has now stepped in and obliged all high street banks to implement CoP by the end of March 2020. This means over 90% of payments in the UK will be covered by CoP, radically reducing fraud rates and making financial crime via deception much more difficult.
With that said, the remaining 10% of payments made via smaller banking institutions will not be covered by CoP obligations, and this is likely to encourage fraudsters to home-in on the group, increasing their risk and exposure to nefarious individuals.
The role of Payment Initiation Service Providers (PISPs) in the future of payments
Three years after the introduction of Open Banking, PISPs are finally set to make a significant impact in the payment industry. With the delivery of key payment infrastructure, PISPs are now primed to show the full potential of the benefits they can deliver.
With the technological foundation now proven, it’s likely PISPs will expand their capabilities, innovating and offering further benefits for businesses and consumers. This will create opportunities for financial institutions to create exclusive premium APIs that will help diversify from competitors. These premium APIs will deliver enhanced functionalities that will offer unique benefits to different subsections of the market. With multiple companies vying for a piece of the payment sector, the consumer will soon have a large variety of options and is more likely to find an organisation that delivers the exact capabilities they require.
The future of UK payments
With the arrival of new technologies and regulations, the payment sector is set to change dramatically. Forward thinking companies will embrace these new opportunities to deliver better quality services, potentially turning payments into a significant competitive advantage. Organisations that fail to tap into these new opportunities will struggle to keep up as superior options become available and better meet their customer’s requirements.