Payments in 2021 and beyond
2021 has not been an easy year for the payments industry. David Lambert, co-founder of Transaction365, dive into the most important events of this year and talk about what’s to come
Looking back over the past 18 months in the payments industry, it’s hard to recall a certainly more turbulent period over the past decade. As we head towards the end of 2021, in the wake of Brexit, the Corona virus and the Wirecard collapse, these huge moments and events form the tip of the iceberg as to the scale of the changes we have. encountered in such a short period of time. If there was ever an example of Chaos Theory in action, these three examples alone have turned everything upside down and we are at an inflection point, trying to envision what the new world of payments might look like. . As always, out of chaos comes the opportunity, but can the industry survive, in an ever-changing and consuming demand for more?
The challenges facing the industry today are enormous. Brexit has led to unforeseen complications regarding fees, licenses and the location of traders. The Corona virus has had a negative impact on some of the biggest industries such as travel, ticketing and point of sale. As the recovery of these sectors is gradual, compliance teams are under pressure to redouble their efforts to avoid further scandals within the payments industry.
There are winners and losers and today we are at a crossroads, where the old meets the new, where the analog approach is chased by all that is digital. New types of businesses, new technologies and new payment methods are all the rage. We are feeling it all around us with the clearest sign of change shown by Visa’s acquisition of Tink, Currency Cloud and Mastercard, reacting in kind with their strategic investments in Fincity and AIIA. When the two biggest card systems start to look to emerging technologies (such as Open Banking), it becomes clear that even they are creating insurance policies for change.
At the same time, traditional banks face the growing threat of a new tidal wave of challengers. This gradual change has taken place since the 2008 financial crisis when, once again, with confidence in the traditional banking sector at an all-time low, the whole landscape has been turned upside down. Do people now trust the exciting emergence of digital banks more than long-established players? Interestingly, traditional banks are looking at all new digital proposals, like card systems that have embraced Open Banking. Are traditional platforms and disruptive newcomers all looking to provide a centralized platform for acquisition, broader payments, and banking? This could be an important moment as these huge companies start to branch out into other areas outside of their core business.
In and among it all, digital currencies, NFTs, Defi, Blockchain, and tokenized assets lurk, preparing to become the commodities and currencies of the future. Are NFTs and smart contracts now poised to disrupt almost any industry like never before, all relying on a digital payment mechanism? Just 18 months ago, Bitcoin was around $ 10,000 and yet this week it threatens to break all-time high again. Bitcoin is here to stay ever closer to the mainstream. Emerging players have broken the mold by offering this bridge for consumers to spend BTC in a retail environment. There will be many more innovative Blockchain-based payment solutions in the coming years. No clearer picture of the evolution of Blockchain and BTC than this tribute below from May 2021:
Today marks the eleventh anniversary of Bitcoin Pizza Day. The day became synonymous with the first official BTC transaction, with Laszlo Hanyecz buying two pizzas for 10,000 BTC. May 22, 2010, Florida man Laszlo Hanyecz spent 10,000 BTC at Papa John’s pizza to buy two pizzas.
10,000 BTC at the time of writing is now valued at $ 633 million …
There seems to be an unstoppable fatality around this behemoth of change. Open Banking, digital currencies, huge strategic acquisitions in banking technologies and a massive shift in payments towards a fully-fledged unified digital economy are the backdrop to the current landscape. The dominance of card systems will remain for the time being, but it could be threatened in the years to come. Surely this is the reason card schemes are exploring the banking industry more than ever? The loss of revenue from system fees as more merchants and consumers turn to instant bank transfers is a potential time bomb for revenue.
In fact, the only real obstacle to the wider adoption of alternative payment methods like Open Banking remains the consumer himself and a change of mindset. How to educate the end consumer to adopt it as an established payment method? Imagine if companies like Paypal had initially referred to âwallet bankingâ, it might not have been as successful. If Open Banking can be produced at a level where end consumers understand it, then much like writing a check, (online) card payment may well become a thing of the past in the years to come. .
As we emerge from the pandemic and look to 2022, the industry feels vibrant in a different way than in previous years. Despite acquisitions and consolidations, competition has never been stronger. We are all looking to globalize our solutions beyond card payments, to centralize our reconciliations and to create sustainability that was not necessary before. It is much easier for merchants to switch between solutions as new technologies facilitate the rapid integration of additional payment platforms. Demand is higher than ever before and our role is to continue to develop our systems to meet current demands while serving merchants centrally, scalable and digitally. 2022 will undoubtedly see larger valuations, acquisitions and opportunities, but as long as we stay ahead of the curve, we can’t lose.
About David Lambert
David Lambert is the co-founder and chief commercial officer of Transact365, an emerging global fintech platform. A seasoned payments professional, he has worked with acquirers, payment service providers and payment facilitators in both a business and advisory capacity. Specializing in payments in the financial services industry, his mission statement for Transact365 is to bring together all facets of the payments ecosystem in a robust and scalable multi-regulated platform. David’s expertise extends beyond online payments in challenger banks, cybersecurity and complex fraud management.