Global Payments & Fintech Trends Report: from A2A payments to Open Finance
The Paypers, one of the leading media tackling payments, Fintech and Open Banking/Finance-related topics, just released the very first edition of its “Global Payments and Fintech Trends Report”. This report notably focuses on the evolution of Account to Account (A2A) payments in Europe, Cross-border transactions, Open Finance, Embedded Finance and more. Here are our key takeaways.
A2A Payments as a viable alternative to traditional payment methods
As explained by Ludovic Francesconi (Chief Member and Strategy Officer, EPI Company), “2024 will likely become a transformative phase in A2A payments in Europe, predominantly influenced by two significant trends: instant payments and wallets”. He adds that these two major trends will be further catalyzed by the Instant Payments Regulation and PSD3, that will enable more Open Banking and Finance developments.
As more features and use cases arrive, enriching for instance the commerce experience for both merchants and consumers, “A2A payments are set to emerge as a viable alternative to existing digital and card payment methods.
“The real potential of A2A lies in its ability to address all payment use cases and offer added-value services and conveniences that existing systems cannot provide”.
Cross-border payments: 4 trends to watch
Mirela Ciobanu, Lead Editor at The Paypers, discusses the evolution of cross-border payments and shares the 4 trends for watch in 2024.
- Increased number of initiatives focusing on enabling real-time, interoperable, and cost-effective cross-border payments: Currently, “it takes between 5 and 10 days to receive or send cross-border payments”. And there are other hurdles (compliance requirements, various AML demands, lack of transparency, etc.). Several initiatives emerged to enable real-time cross-border payments: in Europe, the ECB and Sveriges Riksbank are actively investigating potential solutions for facilitating cross-currency instant payments involving the euro and the Swedish krona. Between 2022 and 2023, central bank governors from Singapore, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam pledged cross-border interoperability for real-time payment systems.
- More and more Fintechs to build payment infrastructure for real-time cross-border payments: as highlighted by the expert, “businesses and people need to move money internationally because they want to do trade cross-borders, travel, remittances or business payouts, or manage corporate treasury flows”. More and more Fintechs/PSPs are bridging cross-border payments with local wallets and payment methods. Their solutions that offer diverse capabilities notably enable seamless transactions for merchants, travellers and the gig economy that are living in a global world and therefore economy.
- CBDCs to become a game-changer for cross-border payments interoperability: The coordination of national wholesale CBDCs designs could lead to cross-border payments efficiencies as it would offer a secure settlement, reduce costly and lengthy intermediation chains throughout the payment process, and eliminate operating hour mismatches by being accessible 24/7. Retail CBDCs could promote financial inclusion: it means promoting innovation in the two-tiered financial system, offering a robust and low-cost public sector technological basis and fostering interoperability both domestically and across borders.
- Compliance and security take centre stage: as cross-border transactions are often targeted by cyber criminals due to the lack of standardization, notably, “adhering to evolving regulations, especially those related to AML and KYC procedures, will be crucial in 2024”. To do so, compliance departments could rely on Artificial Intelligence and Machine Learning, combined with human expertise. AI and ML can analyse huge amounts of transactional data in real-time to enhance payment security and compliance.
From Open Banking to Open Finance and Open Data
“As the world faces new regulations that aim to introduce Open Banking and Open Finance to consumers, the new financial services paradigm will extend beyond traditional banking services. Service providers will access new consumer data pools, such as those created from investments, insurance, lending, and other financial instruments,” first highlights Vlad Macovei (Senior Editor, The Paypers). He then discusses the topic of Open Data, which extends the principles of openness, transparency and data sharing to a wider range of information, including non-financial data.
INNOPAY experts Mounaim Cortet (Managing Director), Jorgos Tsovillis (Senior Consultant), and Thorben Peter (Consultant) discuss the findings of their latest Open Banking Monitor, highlighting what steps banks have taken, which general trends can be identified that will shape the industry’s future, and whether these have resulted in new and innovative features and best practices that demand close attention both now and in the future. They notably explain that “payment APIs continue to increase in number as well as in scope, now accounting for 34% of all observed API functionalities. This can be explained by the rise of more localised as well as specialised Payment APIs, such as Cross-border Payments, Instant Payments, BNPL, Recurring Payments/Standing Orders, Scheduled Payments, Request-to-pay, and Batch/Bulk Payments”.
Finally, Emanuel van Praag (Attorney-at-law at Kennedy Van der Laan, The Netherlands and Professor of Financial Technology and Law, Erasmus University Rotterdam) and Eugerta Muçi (PhD Candidate on Open Finance at Erasmus School of Law, Erasmus University Rotterdam) focus on digital inclusion. They state: “in existing various legislative initiatives, the European legislator pays attention to ‘the vulnerable consumer’ who risks falling further behind due to the ongoing digitalisation of financial services”. For instance, in the FiDA (Financial Data Access framework) proposal, it is mentioned that “‘Data users’ practices of combining new and traditional sources of client data within the scope of this Regulation should be proportionate to avoid creating a risk of financial exclusion for clients. Practices that lead to a more sophisticated or comprehensive analysis of certain vulnerable consumer segments, such as low-income persons, may increase the risk of unfair conditions or price differentiation, such as charging differentiated premiums”. And in PSD3/PSR, it is highlighted that “persons with disabilities, the elderly, persons with low digital skills and persons who do not have access to digital devices such as smartphones, should also be able to use the security tools for payment services (Strong Customer Authentication)”. The experts conclude by underlining that taking the interest of vulnerable customers into account is a key theme form financial companies: “A digital society is only a fair and morally high-standing society if it is a hospitable place for everyone”.
Source: The Paypers