Top 5 FinTech Payment Trends For Banks to Watch
When most people think of fintech, they picture crowdfunding or online loans. While that is part of the fintech equation, the truth is that the fintech industry encompasses so much more. In fact, payment fintech solutions comprise some of the most valued and innovative fintech services.
There is a growing trend among major banks to create alliances with fintech firms, chiefly for the sake of expanding payment services. Here are the top five fintech payment trends in 2017 for banks to watch.
1. Digital Payments
We tend to think that most people make their payments online today, but this isn’t necessarily the case. A 2017 Fintech Disruptors report revealed that nearly half of the 42 billion transactions in the UK are cash payments. Fintech trends in making digital payments easier to access are making the lives of both consumers and their financial services companies much simpler.
Digital payments reduce transaction costs for banks and make systems more efficient. These solutions are also in demand by consumers who want the convenience of using mobile devices and contactless point-of-sale (POS) systems to make simple payments. Contactless payments alone have grown 60% in the past year.
2. Instant Payments
In the past, we were used to a waiting period before an electronic payment was processed. Thanks to fintech, this is no longer the norm. Instant payments are real-time or immediate payments that are a simple and fast way to split a dinner bill, the rent, or make a payment. There are more than 20 instant payment systems now live around the world, with many others in the development phase.
As a bank, this is one more service that can be delivered to new and existing clients. Banks that partner with a first fintech bank possessing one of these payment solutions are one step closer to delivering a superior customer experience.
3. Cross Border Payments
Banking and financial services today is a global business, so having the ability to quickly and efficiently trade across borders can allow a bank to grow and prosper. By 2025, the volume of global trade flows is expected to reach $85 trillion thanks to the internet and other digital technologies. This creates a need to streamline processes to deal with the volume of international transactions.
Some of the fintech cross border payment solutions involve blockchain technology, which has several benefits. Blockchain reduces both the time and cost of transferring funds. It also improves access to liquidity. As more banks and financial institutions adopt GPII, these cross border payment solutions will become even more valuable.
4. Open APIs
Europe is implementing a Revised Payment Services Directive, or PSD2, which comes into effect in 2018. This idea is to make access to banking and financial services across platforms faster and more efficient. Open APIs allow the development and use of financial application across a variety of platforms, technologies, and geographies.
This public interface developed by many fintech firms allows financial services companies to collaborate and provide more seamless services to their clients. Open APIs are gaining traction worldwide, from Silicon Valley to banks across India and the UK.
Consumers no longer feel comfortable giving a financial services company their personal data. In just the past three years, there have been more than 160 data breaches in the financial services industry in the U.S. alone. In February 2016, hackers infiltrated the Central Bank of Bangladesh and quickly transferred $81 million out of the bank.
The increase in such things as banking trojans and ransomware has made the need for better cybersecurity systems a must. Whether new security measures are put in place by law or not, they are needed worldwide, particularly with open banking objectives such as PSD2. Fintech companies are working to develop more robust security models that incorporate such things as fingerprint and retina scans as well as two-factor authentication.
There are multiple directions for growth in the financial services industry in the coming year and beyond. Both fintech firms and traditional banks want to reach more customers while improving their bottom line results.
By bringing these innovative payment solutions through the doors of established banks, both parties will be able to accomplish their goals while providing a better customer experience at the same time.