The payments industry continues to modernize and evolve under the influence of new payment innovations and changing consumer preferences for convenient and quick transaction processing.
For many, these new waters can be challenging to navigate, and we continue to see countries react to these demands in different ways. In Canada, desire continues to grow for faster, frictionless payments from both consumers and businesses yet, it has traditionally been a country slow to adopt new payment methods.
To supply this demand and with the rise of fintechs over the past several years, we have witnessed a considerable shift in digital and mobile payments to industry consolidation and collaboration. With major tech players now entering the payments space, such as Facebook and Google, businesses can find it challenging to sift through the noise and find the solution best suited for their needs.
So, with 80% of businesses demanding more payments options, how will the industry react in 2020? We have shared our top predictions for 2020 below:
Increasing Digital Payment Options
Customer experience is becoming more of a priority for businesses as consumers continue to drive brand value and competition. Now more than ever, consumers are opting to conduct payments through direct account-to-account transactions, as opposed to traditional credit card processing. This is illustrated through Payments Canada’s 2019 report which found that electronic payments accounted for 73% of Canadian consumer financial transactions in 2018.
As such, in 2020 we will see increased competition and availability of digital payments options for consumers, leading to a busier marketplace and an intensified need for businesses to differentiate.
Growth of Open Banking
Open banking addresses consumer demands for enhanced speed and a seamless, streamlined payments experience through opening internal bank data and processing to external parties through digital methods. This year, North America has witnessed an increase in growth in open banking services due to ongoing innovation from fintechs transforming interactions between banks, incumbents and consumers.
In Canada, consumers continue to choose banking institutions over fintech disruptors with a recent report from Ernst and Young finding that only 50% of Canadian respondents were fintech customers compared to 64% of respondents globally. However, a PYMNTS and Green Dot survey found 57.5% of consumers are interested in banking with companies that are not FIs so in 2020 we could witness Canadians shift away from traditional banking methods to embrace fintech offerings.
With this in mind, we expect to see banks facing increasing challenges when it comes to competing for consumer attention in an increasingly digital environment.
Fintech & Bank Collaboration
In order to be able to offer the improved digital payments options consumers have come to expect, in 2020 banks will need to collaborate and establish strategic partnerships with fintechs. This will enable them to utilize behavioural data insights to enhance offerings and build a better payments experience for consumers and businesses alike.
A collaborative banking environment would also help to strengthen consumer trust as consumers can remain with their banking institution while benefitting from the improved customer experience that fintech technologies can provide. Therefore, as we enter a new decade, we predict that more banks and fintechs will start forming and leveraging strategic partnerships in order to deliver the financial services expected from an increasingly digital-savvy set of consumers.
Overall, it is anticipated that 2020 will be a year of restructuring for payments globally and both businesses and consumers alike will be able to take advantage of the benefits, including safer data sharing, increased choice and enhanced services.