Although there is stiff competition to be crowned the hub of fintech innovation from the likes of New York and London, if 2016 showed us anything, it is that in 2017 we will see increasing levels of payments innovation from all corners of the world.
Global innovation trends for 2017 will centre around integrated payments and increased collaboration. Both meet the relentless consumer demand for convenience. For some markets, this means making a payment seamlessly in an app using fingerprint authentication. For other regions, such as India, Africa and LatAm, convenience means a more fundamental thing – financial inclusion and access to digital services.
Regional trends in 2017
In established markets, we’re seeing the entire payments value chain, from fintech start-ups to incumbent banks, create ever-more seamless payment experiences. This is a direct result of the disruptive effect of digital technologies and mobile devices. Tech-savvy consumers are increasingly demanding the one-click convenience they’ve grown used to through tech companies such as Amazon, Uber and Spotify.
These consumers seek channel-agnostic and completely seamless payments. They know frictionless payments are technically possible and they fully expect the market to cater to their demands. With Strategy Analytics estimating more than 100 million people around the world have used an NFC-enabled mobile handset to make a purchase in 2016, the opportunity both for innovation and business growth is clear. The better the experience on offer, the quicker consumer uptake will be.
In other parts of the world, payments evolution will take a different form. Markets traditionally regarded as less mature are beginning to leapfrog countries with more established electronic payments systems, and may even come to lead the pack when it comes to innovation.
This is made possible due to several factors. The GSMA forecasts that global smartphone subscriptions will increase by 2.5bn by 2020, largely driven by uptake in high growth markets. High growth markets are also unencumbered by legacy systems and can adopt mobile-first digital solutions.
India is a prime example of a country that is demonstrating world-leading payments innovation. India’s payments sector is in a growth phase, fuelled by the country’s intense smartphone growth. Indeed, with 220 million users, India is now the second largest smartphone market in the world and is still growing.
As the leading payments services provider in India, we can see first-hand that the country is home to many of the necessary market ingredients for payments evolution. These include a progressive regulator that is open to adopting a legislative framework that promotes innovation, dynamic funding options, the latest infrastructure and increased partnership opportunities between banks and start-ups.
India is perfectly primed to bite at the heals of more developed fintech markets in 2017.
It is a well-established practice for banks to engage with start-ups to further their product and service innovation. However, in 2017 we expect the most progressive payments markets will be home to collaboration that successfully engages the entire payments value chain.
Collaboration must go beyond banks and fintech start-ups, and occur between all players in the payments ecosystem for innovation to truly flourish. This holds true across both established and high growth markets.
Innovation requires the support of regulators, merchants and consumers. Only time will tell which markets make this a reality, and which can do so quickly.
Financial inclusion in 2017
A final point to note is that, in high growth markets, innovation has the potential to have a bigger meaning, focus and impact in 2017 and beyond. Payments innovation can – and will – herald the opening of new opportunities by enabling unbanked populations to participate in the market economy like never before.
The increasing focus on developing seamless, convenient mobile payments we’re seeing in high growth markets is changing the lives of the some 2bn people in the world without a bank account.
Innovative digital payments services now allow people to use their smartphones as mobile wallets, even if they don’t have a traditional bank account. This is a huge development that is changing the lives of millions of people worldwide.
We must not lose sight of fintech innovations that can solve big societal needs in high growth markets, while mutually offering strong business cases to innovate.
2016 was one of the most dynamic years yet for the global payments industry. It was the year we witnessed increasing levels of payments innovation, not just within the mature banking and payment sector of the Western world, but from all corners of the globe. In a sector motivated by the demand for convenience, the key to payments firms' success in 2017 will be how well they understand the local market dynamics that shape the adoption of new technologies.
Laurent Le Moal, CEO, PayU