This past year has seen a number of significant changes in the payments industry. From new transfer methods to the PSD2 push, the demand for faster, smarter, and safer transactions has reached a fever pitch. Still, 2017 seems almost like it was a primer, setting the stage for the game-changing payments progress promised in the coming year.
Based on what we've observed over the last 12 months here at Hyperwallet, here are five trends you can expect to see in the payments industry in 2018:
Partnerships outside the payments ecosystem
One of the key trends that emerged through 2017 was the increase in competitive partnerships between alternative payment methods and the more conventional payments ecosystem. PayPal, for example, expanded its partnerships with Facebook and Skype to include peer-to-peer payments, enabling users on these platforms to send money via instant message.
Traditional financial institutions across the European Union, in order to become compliant with the impending PSD2 legislation, have begun to implement 'Open Banking' in order to make their payment accounts accessible to a diverse range of third parties. After PSD2 comes into effect early next year, we can expect to see a surge in new and innovative partnerships between banks and service providers.
Intuitive payments and the Internet of Things
The Internet of Things (IoT) is coming, and 2018 could be the year that it transforms payments in a significant way. While the popularity of mobile and contactless payment methods continues to grow worldwide, companies are focused on ways that they can improve the security of transactions and remove friction from the payment process. Both Visa and MasterCard have spent the past year positioning themselves as leaders in IoT payments through partnerships and acquisitions - 2018 is when we'll see those efforts make a real impact on the industry.
The ongoing improvements to personal AI assistants like Apple's Siri and Amazon's Alexa (not to mention the planned introduction of these technologies to business environments) add another spectrum of opportunity for IoT payments in the coming year. Voice payments are quickly becoming familiar, and Amazon recently announced that it will make Amazon Pay available to Alexa developers. What they do with it remains to be seen.
Installment payments and earning flexibility
This past year saw a number of major airlines and travel companies introduce installment payment products - that is, short-term loans that allow vacationers to pay for their trip over the span of several months, with interest. It's an idea that is gaining ground in the sharing economy, where independent online sellers and car-sharing drivers are increasingly being given the option to pay a little to get their earnings ahead of schedule, or borrow money to cover business costs. Uber, for example, helps its drivers lease vehicles directly through the platform.
Fintech start-ups have quickly emerged to address the demand for installment payments, with companies such as Affirm and Uplift offering financing to qualified users. As for sharing economy marketplaces, it seems inevitable that they'll become more deeply integrated with their payment providers if they want to provide credit options on-platform.
Instant Payments in the EU
Obviously, the launch of the Single Euro Payments Area (SEPA) Instant Credit Transfer (SCT Inst) scheme late in 2017 was a big deal. With more than 600 participating payment service providers from eight European countries, the initiative enables near-instant, cross-border payment transfers at any time of day and year. More payment providers from additional EU countries are expected to get onboard in the near future.
The ability to send money across Europe in real-time has serious implications for 2018. Existing technologies that were previously difficult to utilise on the continent, such as peer-to-peer payments, becomes commonplace. Importantly, it also means that sharing economy platforms can distribute payments to their freelancers same-day or even real-time, putting European marketplaces on par with their counterparts in other parts of the world.
Demand for Chinese wallets in the West
China is making its presence known in the world of fintech, and companies like WeChat have started making serious efforts to court users in the Western world. The Chinese social media giant launched its payment service, WeChat Pay, in the United Kingdom late this year, with plans to establish an office in the country. Tencent, WeChat's parent company, has set down roots in San Francisco and plans to expand WeChat Pay in the United States.
Given the increasing flow of both population and capital between China and the developed world, look for adoption of Chinese payment services in the EU and US to grow significantly through 2018.