Artificial intelligence (AI), partnerships and payment factories have all been featured in the media recently, underscoring some of the key trends in the payments industry.
In an article in Let’s Talk Payments, market research analyst Elena Mesropyan predicts that AI could become the defining technology for the banking industry. She polls a number of industry experts who believe that companies will harness this technology to make better decisions and improved solutions. Banks are already using techniques like ‘deep learning’ and real-time analytics to combat payment fraud. Interestingly, the use of AI is not that new – in 2011, Charles Schwab starting applying chart pattern recognition designed to simplify complex trading activities and provide a more intuitive experience for active traders.
Schwab benefited from being among the first-movers and some banks are also reaping rewards from grasping the technological revolution taking shape. BBVA, for example, writing in Technology Review, sees the next step in finance as ‘exponential banking’. What exactly does this mean? It’s basically drawing on so-called ‘exponential technologies’ that expand the area of contact with customers and information about them. Or, to put it another way, ‘banking that multiplies both the variety and the quality of services we offer’.
BBVA says clients demand agile, rapid service, ideally in real time, with competitive pricing in a safe environment. “The technologies that make it possible to offer all that already exist,” insists BBVA.
The technologies – all of which impact the payments sector – include mobile computing, biometrics, cloud computing and, of course, blockchain. BBVA’s conclusion certainly captures the zeitgeist: “In the final analysis, what matters is earning and keeping our customers’ trust, as that is what will determine who succeeds in the financial industry of the future.”
That future looks set to accelerate the unbundling of banks in the developed world. The Harvard Business Review claims that fintech companies will provide billions of people with more banking options. Some are “proving that they can create a workaround for the infrastructure of developing countries. They can develop flexible products tailored to the lives of the people in those markets”.
Harvard Business Review says that very few consumers in developing countries enjoy the luxury of a regular pay cheque. It is the community that leads more chaotic and purely cash-based lives that fintechs can benefit. “They can play an important role in bringing the two billion consumers into the digital world and improve both their lives and their countries’ economies.”
While fintechs are emerging with some answers to deep-rooted problems, they are also working more closely with the banks that they were supposedly setting out to replace. Forbes says there has been a “seismic shift in fintech and big banking’s relationship” and that the two are “no longer adversaries”. Indeed, Forbes adds that banks and fintechs are reliant on each other. “For fintechs, banks come to the table with deep pockets, massive customer bases, vast amounts of real world infrastructure and big data.”
Payment factories are an area that has long been championed by banks and bobsguide recently discussed four key considerations for a successful payment factory initiative. One of the four factors is the ability to streamline global payments. “It is common practice in international cash management to minimise the use of cross-border payments in favour of low cost, more reliable domestic payments.” bobsguide also points to robust multi-bank connectivity, the prevention of fraud, and more secure controls and standardised processes as the main benefits of the payment factory concept. The article cautions: “Inefficiencies in payment processing and cash management can make or break a business. There are many ways organisations can streamline processes to give their business a competitive edge.” It concludes that payment factories are an option worth considering “in every annual review”.