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Industry: Payments

Banking and Payments Experts Share Sector Forecasts for 2024

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Banking and payments experts
share sector forecasts for 2024

The Retail Banker International tapped industry experts including Frode Berg, Managing Director of EMEA for Provenir, to garner insights and predictions for 2024.

In this article, Frode shares his thoughts on net-zero banking trends and what organizations need to do to become more customer centric in the coming year.

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Infographic: The Intersection of Credit Cards + Buy Now, Pay Later

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The Intersection of Credit Cards + Buy Now, Pay Later

How to Work Together to Accelerate Growth

62% of current Buy Now, Pay Later customers think it could replace their credit cards. But where does that leave credit cards? Discover how BNPL and the credit card industry can work together to encourage responsible lending, financial inclusion and profitable growth.

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Spreading the joy (and payments): How POS lending is heating up this winter

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Spreading the joy (and payments):
How POS lending is heating up this winter

The seasonal TV adverts have been launched, the countdown to Christmas has begun and many consumers are kicking into high-gear shopping mode! With Black Friday and Cyber Monday complete and the festive season almost upon us, online shopping volumes are set to continue to rocket. Initial figures show that spending in the UK hit over £4bn during the discount week; sales volumes are up 7% compared with last year, while sales value rose 16%.

It’s a time for tradition and gift-giving, yet there’s nothing traditional about how many consumers are choosing to pay.

The end of cash?

In the UK, the volume of debit card transactions overtook cash for the first time in 2017. The gap is set to widen, and it’s predicted that cash will be overtaken by credit cards by 2026 and only makeup 9% of all payments. But it’s the rise in popularity of installment payment methods that are creating waves, with customers looking for a way to spread out online purchase payments without using a credit card.

Younger consumers, wary of credit cards and seeking a more convenient, one-click checkout experience with less friction, are fuelling an increase in installment transactions, preferring to ‘Klarna’ it, over other traditional methods. In fact, Klarna has been so successful in its expansion across Europe that it now holds a 10% e-commerce market share in the region, and processes over 1 million transactions a day globally via 190,000 merchants and 60 million end-users.

Growing e-commerce market attracting new players to the payments industry

It’s not just the opportunity to jump on the growing demand for alternative financing options that’s attracting new firms to the payments industry, it’s also the potential offered by the rapidly growing e-commerce market. Online shopping spending across Europe is forecast to hit 621 billion euros by the end of this year; that’s a 13% uplift from 2018.

As a result, there’s an increasing list of ‘buy now pay later’ firms expanding their coverage of the market. Alongside Klarna, this now includes Afterpay, Laybuy, Laterpay, as well as Clearpay who already have 200,000 UK customers following their launch in June.

The concept is also gaining popularity across Asia Pacific, with Australia, Singapore, and China being the early adopters. Afterpay and Laybuy in Australia are offering convenient credit financing options for a large proportion of online shoppers. Hoolah from Singapore is offering such services by partnering with more than 50 merchants across furniture stores and high-end electronics, whilst Ant Financial offers a similar service on online purchases made via its Alibaba website.

A growing middle-class population, widespread smartphone adoption, and rising internet penetration are all set to drive the Asia Pacific e-commerce market to over USD 2tn by 2020. However, ASEAN with over 630 million inhabitants, more than 50% of the population remains unbanked, with no access to credit cards. Up to 70% of e-commerce consumers would abandon their carts after adding items to it, this poses a massive missed opportunity for retailers.

Credit cards still holding their own

But, don’t expect credit cards to disappear any time soon, in the UK alone, there were 3.2 billion payments made using credit cards in 2018, an increase of 4% over the previous year that reflects a more general growth in unsecured lending. Some of this growth can be attributed to the bounty of rewards available to card users that typically use their cards and pay off in full each month. But with more retailers adopting the buy now pay later and installment model, credit card issuers may need to get more creative and offer more than rate reductions, rewards or purchasing promotional periods to stay relevant in a world where consumers have more choice than ever before.

Taking the risk out of payments for merchants

One of the major benefits POS firms like Klarna offer to merchants is a simple payment option with zero risks. Platforms like Klarna and Clearpay assume all financial risk when lending to a customer, making them even more attractive to retailers. With the volume of applications and transactions set to increase across POS credit and card products, accurate, robust and fast risk decisioning remains crucial. So, what technology do POS lenders looking to grow in an increasingly competitive market need to have in place?

The technology to power instant decisions

To facilitate an exponential increase in e-commerce transactions, new entrants and existing players looking to expand their global reach need to deploy country-specific processes that deliver speed, credit risk accuracy, and a frictionless mobile-first customer-experience.

As POS firms grow, their risk technology and modeling rules need to be future-proofed and configurable to allow for fast customer and merchant onboarding and instant credit decisioning, allowing wide data access and integration to internal systems. Having the technology in place that delivers on functionality, flexibility and agility are paramount to enable the processing of hundreds of transactions per second, coping with periods of spiked activity such as Black Friday and converting previously abandoned cart purchases.

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The Benefits and Risks of Emojis in Payments ‎😃🤫🧐

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The Benefits and Risks of Emojis in Payments ‎😃🤫🧐

You and a friend are heading to the cinema, but your friend finds that he doesn’t have enough cash for the ticket and forgot his wallet. You pay for his ticket, which he promises to pay you back for in a few days.

Two weeks later and your friend still hasn’t paid you back. What now?

It’s a bit awkward to suddenly turn your friendship into a loan servicer-debtor situation. Many people would want to avoid turning their relationship sour by essentially engaging in straightforward collections with a friend. (ie., “Hey, about that money you owe me…”). Sending a friendly picture to jolt their memory and allow them to pay you instantly turns a potentially awkward situation into a fun social interaction.

It’s a bit awkward to suddenly turn your friendship into a loan servicer-debtor situation. Many people would want to avoid turning their relationship sour by essentially engaging in straightforward collections with a friend. (ie., “Hey, about that money you owe me…”). Sending a friendly picture to jolt their memory and allow them to pay you instantly turns a potentially awkward situation into a fun social interaction.

Companies like Zelle, Square, Venmo, and Facebook have all earned popularity based on the use of emojis in the transaction experience. For example, Venmo reports that its average user checks it two or three times per week, often just to see what their friends are up to.

While emojis have rapidly gained steam in recent years as a quirky shortcut and supplement to texting on smartphones, they’ve now become ubiquitous across nearly every communications platform.

Now emojis are also found in frequent business use in industries including marketing, advertising, content in films and on apps, and even as part of website URLs.

Why Platforms Benefit From Emojis ????

What makes emojis transformative and value adding for businesses is two-fold:

First, emojis are essentially a modern hieroglyphic. Emojis allow ideas, messages, and feelings to be conveyed through a representative and easily understood picture. Especially for commonly used phrases or types of communication, such as acknowledgments or reminders, they allow people to engage in time saving shorthand that skips what otherwise might be needless repetition.

Second, emojis humanize and can greatly add to our communications. By supplementing, or even replacing, mere text with additional faces, expressions, and symbols, emojis allow our messages to build a more complete picture of the ideas, thoughts, and feelings involved.

It is only fitting that they’ve now have begun to be used for distinct user interface functions in the payments industry.

Emoji-based payment transactions are not only useful for individuals seeking to increase collections efficiency from covering for their friends after a night out, but also can be useful for business-to-consumer and B2B purposes as well.

For businesses that want to increase user interest in their payment platform or service, emojis are certainly one way to do it.

By providing users with a sleek and modern user interface system, businesses may be able to better facilitate user understanding of their payment products and obligations, as well as increase interest, use, and volume in user-to-user, business-to-user, and B2B transactions.

Emoji Risks

However, emojis certainly come with risks as well.

1. There is no “universal emoji language” or set of common emoji definitions, which makes miscommunication a worry. Also, the lack of standardization might create internal complications for payment providers seeking to translate emoji-information across their accounting and risk-management systems.

With more emojis being created by the day, undoubtedly the communications entanglement may eventually become problematic despite the growing business opportunity.

2. Furthermore, emojis also have not been universally adopted. While many people, ranging from Millennials to baby boomers, greatly enjoy using emojis, not everyone is onboard with this trend. Perhaps as time goes on even more users will adopt emojis, but at the moment many users may still favor a platform or service not exclusively oriented around them.

Nonetheless, emojis are a rapidly growing social trend that looks to have sticking power. Businesses across a variety of industries are already integrating emojis into their platforms and seeing significant boosts in activity and revenue.

With the payments industry a natural fit for emoji-use, undoubtedly we shall see more payments services exploring how to use emojis to boost their customer lists, user activity, transactions volume, and payments efficiency.

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Who Will Rise to Claim Payments in Southeast Asia?

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Who Will Rise to Claim Payments in Southeast Asia?

The Southeast Asia marketplace economy is booming, with arguments over whether Thailand — with 11 million online consumers expected to double every three years — or Indonesia, expected to have a $130 billion e-market by 2020, is truly in the lead for the region. Beyond those two nations, there are a number of e-commerce and marketplace economy startups in other Southeast Asian countries, including 270+ in Singapore and over 30 in Vietnam.

The landscape for payments in Southeast Asia is particularly intriguing because it’s a potentially huge market with no one payments player dominating the region. China, has seen Alibaba and WeChat Wallet split their payments economy. The U.S. has PayPal and Venmo (now the same company), and Africa has M-PESA. But despite nearly a trillion dollars of potential value in Southeast Asia, no one has risen to the top. 2.5 billion people globally don’t have a bank account, and a hefty chunk of those reside in Southeast Asia. Most payments systems in the first world are tied back to bank accounts; even the ones that don’t, like M-PESA, tend to have solid local reach.

The Challenge of Payments in Southeast Asia

Perhaps the biggest challenge with creating a regional payments platform throughout Southeast Asia is that each country has a very unique culture. The adoption of e-payments or mobile payments varies greatly among the individual countries that make up the region. Take for example Singapore, 74% of the population still prefers card payments over other options. Whereas only 27% of payments are completed by card in Indonesia. Creating a payments platform that fits the cultural needs of individual countries in Southeast Asia will be key to creating a payments service that gains regional traction. Companies can and are choosing to tackle this problem in a number of ways:

  1.  A country by country expansion backed by local teams with a deep understanding of the local market
  2.  Strategic partnerships with payments businesses in target countries
  3. Purchasing/investing in local payments providers

Which method will drive the most success has yet to be seen!

Contenders Vying for Payments Dominance

So what payments companies in Southeast Asia are standing out in a crowded, locally-driven marketplace economy? Who could rise? We explore four innovative companies looking to succeed in Southeast Asia below.

The contenders:

  • Grab
    Grab, the Southeast Asian decacorn that originally started as a ride sharing app, is now headquartered in Singapore after originally launching in Malaysia. It jumped into the payments industry in 2016 with the launch of GrabPay. Now available throughout Southeast Asia, Grab offers a variety of financial services through its digital wallet, including payments, with plans to expand into micro-loans, insurance, and monthly post-payment options. Grab is using strategic partnership to expand its footprint in Southeast Asia and has partnered with Maybank, OVO, and SM Investments Corporation, to expand its footprint. GrabPay is expected to launch in Thailand in 2019.
  • Go-Jek
    Go-Jek is another Southeast Asian company that started life as a ride hailing app and expanded into the financial services scene. Go-Jek powers payments through its Go-Pay digital wallet which is Indonesia’s leading e-money wallet.
    Go-Pay has made significant inroads into Southeast Asia and has purchased three fintech companies—Kartuku, Mapan, and Midtrans—to help provide the foundation for its financial services and facilitate its expansion. The addition of these business gives Go-Pay access to technology and talent in the payments, lending, and savings spaces to help power their spread throughout the region.
  • Ant Financial
    Ant Financial, which originated from Alipay, is another financial technology company that could rise to take the payments crown in Southeast Asia. With a large and loyal consumer base in China, its home country, Ant Financial is making deliberate steps into the Southeast Asia region. Ant has made strategic investments in companies offering mobile payments wallets in the region to extend the reach of it services. Through investments and partnerships in local businesses Ant Financial now powers payments services in both the Philippines and Thailand.
  • Singtel Dash
    The Dash Platform is an all-in-one mobile payments solution from Singapore’s largest telco Singtel. Singtel has developed the Via alliance, which builds partnerships with other e-wallet and payments platforms around the world including Southeast Asia. As a result of the continuously evolving alliances Dash platform subscribers can now or soon will be able to pay for goods and services using their Dash wallet in a number of countries including Indonesia, Thailand, the Philippines, Malaysia, Indonesia, India, and China. Singtel is using these partnerships to bridge cultural differences between the countries within Southeast Asia to create a cohesive regional payments solution.

Mobile-First

One of the reasons for the crowded payments space in Southeast Asia is that it’s genuinely a mobile-first part of the world. Consider the case of Indonesia:

Further evidence that Indonesians have embraced mobile-first initiatives comes from social media, with Indonesians having the highest mobile Facebook usage rate worldwide, with 63 million users in 2015. Further projections put Indonesians’ future Facebook access via mobile being almost 99 percent by 2018, showing a real dominance over desktop platforms. The mobile-first path that Indonesia has taken also allows retailers to focus on creating mobile functionality, presenting unique opportunities to dominate in the retail space.

Because some countries in Southeast Asia have massive populations (Indonesia, for example, is north of 250 million), the mobile-first movement is a huge deal. This allows the seller side to have hyper-personalized data and tailor their products even more, as opposed to generalized swaths of information about a huge population. That’s also why so many companies are rushing into the payments space — it’s a relatively low barrier to entry, and the inherently mobile nature makes for better decision-making around what users want.

70-80% of Southeast Asians should be on smartphones by 2021, which would approach U.S. and Japanese levels. But there are already major payments players in those spaces, and not so among the southeastern Asian economies.

Uniquely Southeast Asian

It should also be noted that one quirk of the Southeast Asian marketplace economy is that e-commerce developed before payments or logistics, meaning it spent years as a series of informal markets on platforms like Instagram. Only recently have payments been formalized in the area.

Also critical to understand in Southeast Asia: if you analyze net promoter score, a quality metric for customer advocacy, local payment systems — if fragmented — consistently score higher than major enterprise options based elsewhere. For example, in Indonesia Tokopedia (local) has an NPS of +7 while Amazon’s NPS is -24.

To fully understand how the sharing economy might impact and affect Southeast Asia and other regions where it’s not fully emergent, it helps to more broadly understand the landscape of the sharing/marketplace economy.

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