Cross-border payments and transfers reached new heights this year, with key firms in the space taking away nearly $500 million in total funding in the last two months.
The expectation is that the space will continue to grow, drawing in new players (large and small), achieving new levels of consolidation, and producing new technologies. Specifically, we can look out for three types of changes in 2018.
Banks and fin-techs on the same side
One of the biggest reasons why fin-techs so quickly devoured market share from banks when it came to payments was because of a gap in customer experience. Up until very recently, banks were the only players in the game, and the game dealt with business clients, not individual customers. Banking services then, including when it came to payments and transfers, were geared toward businesses and designed for them. This is why retail consumers always found international money transfers to be complicated, slow, and expensive.
Fin-techs, on the other hand, were created for retail consumers and in the process of servicing a new demographic, found a whole new market.
As banks find it easier to acquire rather than compete with fin-techs, we’ll start to see banks buy out their more nimble competitors and expand their retail suites that way.
Regulation typically follows industry change, and with all the changes we’ve been seeing in the space, we’ll see regulation play catch-up and tend more toward modularization.
Previously there were a finite number of charters, licenses, certificates. As more transfers and payments fin-techs cross boundaries and blur their services, there is a growing development toward an ‘à la carte’ style of regulation. And despite some calls for it, it’s unlikely we’ll see deregulation in the space. With emerging technologies such as blockchain becoming more mainstream, there is very much a need to ensure safety, soundness, and consumer protection within our financial systems. As new fin-techs are created to better service evermore specific demographics and population cohorts, evermore specific regulation is necessary to maintain quality and stability.
While at times the industry has felt like a public battle that sees fin-tech as anonymous and risky, we are starting to see that the underlying technology has made fin-techs more able and willing to comply with regulation with less cost and disruption to the customer journey than the traditional players, not the other way around.
More access points
Making payments and transfers are no longer limited to your banking website or app – most recently, we’ve seen these capabilities move to chats and other social platforms such as WeChat, Facebook Messenger, and iMessage. These new platforms, or ‘access points’, will continue to expand depending on where the consumers are (in terms of the technologies they are using) and what their demand is – think home devices, wearable technology, etc.
The expansion of access points is the reduction of the physical wallet as we know it, and much of this change will be driven by fin-techs who are nimble enough to test out and apply the newest technologies. Increasing access points are also a sign of increasing competition, which benefits the consumer by offering ever lower prices and better service. Of course, the addition of new access points pose parallel changes in identification security, and we can also expect to see new forms of authentication such as biometrics (voice, face, etc) proliferate across the board.