In attempting to determine future trends in the payments industry, a good question to ask is, “What are customer expectations?”. I believe we can all agree that customers want the payments they send and receive to be realized in real-time with minimum fees. They also want the option of which payment service provider they choose to send and receive payments, depending on their own unique needs.
The world has never been more connected than it is today, especially in the international business community. Essentially any product that an individual wants to purchase, no matter where it’s located throughout the world, is only a click away. The continued growth and evolution of E-Commerce are going to directly increase the number of international payments we see in the next year.
With more customers seeking new ways to send and receive payments, we’re also going to see increased competition amongst companies in the industry. This has the potential to be a win-win for both sides. Competition will help push companies in the industry to distinguish themselves amongst others and become more innovative, safer and more dependable.
As companies in the industry improve their operations from top to bottom and using alternative payment services becomes more commonplace, customer trust in these alternatives will also increase. There are always going to be individuals who are hesitant to trust others with their money, understandably so. In the past, there were individuals who feared banks and thought they would be better off keeping their money at home in a safe or burying it in the back yard (ok, that last one may just be an old wives’ tale). However, as time went by and banks implemented better systems, many of those same individuals began to trust banks with their money.
As industry trends take form, they’re undoubtedly going to have an effect on a number of compliance aspects. As more Company’s enter the industry and their overall customer base grow, Compliance Program requirements are going to evolve as well and they’re going to subject to increased scrutiny by State and Federal regulatory agencies. This is going to grow the need for consultants that have a vast knowledge of the industry and experience with assisting new and existing companies with any and all of their compliance needs (Compliance Program development, risk management, Training, State Licensing, etc.).
Not only is there going to be an increased need for compliance consultants, demand for Customer Identification Program/Know Your Customer (“CIP/KYC”), Sanctions Screening, and Transaction Monitoring services are going to increase as well. There will be a higher level of pressure for these service providers to innovate and provide next-level controls that another service provider may not offer. To keep up a high level of customer trustworthiness and to adhere to increased State and Federal laws, a Company is going to go with the service provider that offers the best service and most importantly, peace of mind. The ability to be nimble and offer customized services will be more important than ever as competition for market share increases.
As we move into a new decade, it’s exciting to think about what the next innovations in the industry might be. It’s hard to look over the benefits and potential of blockchain. Customer expectations of how quickly they should be able to receive a product and/or service are steadily increasing and this is no different when dealing with their money. Customers also don’t want to pay high fees, which are often times associated with cross-border payments. For the payments industry to move forward and be able to meet customer demands, I believe blockchain is the best thing going. Blockchain would offer a faster and also cheaper alternative for customers to choose from. Yes, there are potential issues with the technology and concerns with security. With that being said, blockchain technology is still relatively new and there’s going to be issued with any new technology. As time goes by and we learn more about how the technology works and how to make it safer, the benefits could potentially change the entire payments landscape.
Regulatory Technology, or RegTech, is another area that I believe will help lead to innovations in the industry. RegTech’s main purpose is to use advances in technology to help solve regulatory issues in the financial industry. With more transactions taking place electronically and new forms of buying/trading/selling currency, it can be extremely difficult to know what the laws are, and which regulations apply. RegTech companies work alongside regulatory bodies and financial institutions where they all three exchange information utilizing cloud computing. The cloud allows them to quickly share large amounts of data with each other no matter where they are located. This ensures that they all have the most up to date information available.
RegTech companies can take the data and incorporate it into a plethora of analytical tools to help identify potential areas of risk and areas where financial institutions could improve on. The data is important, but it’s the technology of the analytical tools that helps make sense of it all. The evolution of RegTech will be one of the primary reasons for the improvements or setbacks of payment systems going forward.
2020 will definitely be a year of change and innovation for the payments industry. It will be interesting to see where technology takes it. No matter what this year holds for the industry, there will be an impact on regulations and compliance. The industry must embrace change and adapt their internal controls to support what inevitably will be new laws and regulations.
Written bu: Matt Summers and Brandi Reynolds, CAMS-Audit
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