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Digital payments usage to increase in 2019

An analytics software firm predicted that the usage of emerging digital payments solutions is expected to pick up further in 2019.

The increase in its usage will displace legacy payment options such as cash and credit cards.

According to a recent report, emerging payment solutions such as mobile wallets and peer-to-peer payment networks are incorporating themselves in the day-to-day lives of consumers, particularly the younger generations.

Fair Isaac Corp. (FICO) explained that big strides have already been made in Asia Pacific with mobile payment usage climbing 30% in 2018.

The trend, they predict, is only going to accelerate this year.

2019 will see a more mature emerging payments solutions. The companies will pay attention on educating their customers and adapting their fraud controls in order to counter threats from cybercriminals.

The Bangko Sentral ng Pilipinas (BSP) has been promoting the shift into a “cash-lite” economy to which the banks and other financial institutions in the country have responded by enriching and foraying into electric payments.

A “cash-lite” economy is where financial transactions veer away from cash and check and move toward electric fund transfers and digital wallets.

The main goal is to increase the share of electronic payments to 20% of all transactions by 2020, coming from a merely 1% share in 2013.

The organisation also predicted that apart from the maturing payment solutions, banks will invest on deposit pricing strategies as lenders might face issues from growing or at least sustaining their deposits base, given the “current rising rate environment.”

Several tools will give banks the ability to deliver smarter and more granular pricing that will enable them to compete effectively in this increasingly frenetic environment.

These sophisticated analytics tools, like optimisation, and the ability to rapidly deploy the models developed by these tools will definitely benefit the banks.

Banks that are undergoing digital transformation will eventually realise that they have a silos problem, as isolated business units and technology stacks for credit risk and fraud, work poorly when it comes to large-scale transformation.

Banks will increasingly recognise this and work to improve on the negative effects of silos as they shift from product-centric to customer-centric business strategies.

As reported, a global consulting firm released a paper with findings that banks are starting to partner with financial technology (fintech) companies because they have realised the potential of these emerging firms in the financial services industry.

McKinsey & Co. recently released a paper titled “Synergy and disruption: Ten trends shaping fintech”.

It showed that an increasing number of legacy financial institutions, or the incumbents, are recognising the benefits of combining their strength with fintech companies through partnership models.

Moreover, fintech firms are seeing the value of partnering with the incumbents as they reach the saturation point in their native digital marketing channels.

They have realised that the compliance and regulatory competencies of banks can be valuable to them.

Partnerships of financial institutions as well as fintechs are getting more common, with almost 80% of financial companies already into partnerships with fintechs.

Global venture capital fintech investment in 2018, meanwhile, has already reached US$ 30.8 billion from just US$ 1.8 billion in 2011.

Amid increasing partnerships, the incumbents are starting to lead the charge to upgrade digital experiences in their core banking products in order to match services provided by fintech firms.

The firm noted that as legacy financial institutions are stepping up to improve their digital platforms, the better user experience provided by fintechs is no longer enough to capture more customers.

Today, most financial institutions have transformed their retail user experience, offering full mobile functionality with best-in-class design principles.

Customers, as a result, require more reasons to switch to new fintech offerings.

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