Today’s consumers expect a simple, seamless payments experience. And that expectation can lead to tremendous growth in the fintech industry.
For many traditional financial services, such as consumer banking or fund transfer services, meeting the demands of today’s mobile-first and tech-savvy customers can be a challenge. One common issue within organizations are internal silos. If the customer service department isn’t aligned and communicating with the product development or IT departments, valuable customer feedback is lost and opportunities for innovation are overlooked.
Another challenge is resource limitations. Increasingly, many large organizations are being forced to focus their resources on meeting compliance standards. This has impacted IT spending as well. According to a recent report from Juniper Research, spending on “reg-tech,” or regulatory technology, is set to increase dramatically from 4.8 percent in 2017 to 34.4 percent by 2022 for traditional financial institutions.1 Every dollar spent on compliance is one dollar less that can be spent on optimizing the user experience.
As a result of these challenges, many financial services companies have begun collaborating with, or sometimes even acquiring, technology startups at a rapid rate. According to a global survey of the financial services industry by PwC, 82 percent of traditional financial services company respondents expect to increase their fintech partnerships in the next three to five years.2 This openness to investment has led to major innovation in a number of areas, including with money transfer technology and the contactless payments space.
Money Transfer Technology Evolves
With the proliferation of peer-to-peer payment services apps, sending and receiving money from your phone is made easier. What used to be a more labor-intensive process that may have involved one or more trips to the bank can now be accomplished by simply sending a text message.
The competition to provide the most streamlined fund transfer process has been intense. While some large firms have made their mark by acquiring peer-to-peer funding apps, others have focused internally.
Contactless Payments Get Smarter and Faster
One of the more dramatic examples of fintech innovation has been the explosion of new payment options available to consumers. Payment providers and hardware developers have collaborated to give consumers the ability to pay for items in a variety of convenient ways, including, but not limited to, contactless payments.
Between mobile payments and wearable technology, the practice of tapping a device to pay for an item is becoming increasingly common. According to a report from Grandview Research, the global contactless payments network will reach a transaction value of over $2 trillion by 2025.3
Invisible Payments Expand
A huge technology company made waves earlier this year when it released a video detailing the grocery store visit of the future. In the video, a customer walked into a store, selected their items, placed them in a bag and walked out without ever seeing a cashier. All of their items were recorded by an app in their phone and the funds were automatically deducted from their account. This stunning, but rapidly approaching scenario, is just one example of how invisible payments will radically shift consumer experience.
A step further than contactless payments, invisible payments imagine a world where your payments happen almost magically with little necessary interaction. This dramatic change will require merchants and service providers to rethink the entire transaction experience, moving away from a payment-focused transaction to one that is built more intuitively into the customer experience. It’s a challenging but exciting puzzle to solve and one that will undoubtedly lead to even more growth for emerging fintech companies.
Whatever the category, consumer demand for simplicity will continue to drive innovation and growth in the fintech space, and that means major opportunity not only for startups but also for traditional firms.
1 “Regtech Spending to Exceed $76BN by 2022, as Compliance Costs Soar,” Juniper Research, October 2017.
2 “Redrawing the lines: FinTech’s growing influence on Financial Services,” PwC, 2017.
3 “Global Contactless Payments Market Size, Industry Report, 2014-2025,” Grand View Research, October 2017.
The information provided herein is sponsored by Discover Global Network. It is intended for informational purposes, and is not intended as a substitute for professional advice.