If there’s a word to sum up the feeling at PayExpo this year it might be ‘momentum’ – and that’s not just the swift-flying arguments taking place in the Payments Punchup arena.* With the adoption of new payment technology like contactless gathering pace in Europe especially, banks taking their first steps with blockchain over the past year, growing partnership between incumbents and fintech startups plus the advent of legislation like the Payment Services Directive 2 it feels like the right pieces are falling into place for change to happen in the payments industry.
Yes, adoption of emerging technology like wallets, bank challengers and biometric authentication is still comparatively tiny but many of these services have barely launched and it’s also not news to anyone that change happens slowly when it comes to habits and behaviours in financial services.
Speaking in one of the first sessions at the conference taking place this week in the London Excel Centre, the Payment Systems Regulator (PSR)’s head of policy, Paul Smith repeated an observation that is being repeated more and more: “If you look at futuristic movies from 30 years ago you will see ideas that are becoming reality.
“That suggests they were always great ideas, we were just waiting for them to become viable.”
In markets like the UK in particular, he says there is now a perfect storm because advances in technology around mobile and computing power have created conditions for innovation that could not have existed before.
A core driver of change is consumer appetite for something new and Smith pointed to consumers being more open and responsive to new ways of doing things with the adoption of contactless payments a good example of that. He also points to the government’s creation of the PSR in the first place as playing an important role in helping create conditions for innovation.
2016: Is the payments industry on track?
In the first panel of the day, Fiona Ghost, a partner at Addleshaw Goddard asked panellists to reflect on how their businesses and the wider payments industry have evolved in the past year. Kicking off with user experience she asked a panel including Western Union, PayPal, Lloyds, the GSMA and Fintech Circle what the main enablers for improving the customer journey in the last year have been.
Aaron Baker, senior manager in the digital payments division of Lloyds Banking Group said that from the banks perspective, launching on Apple Pay and Android Pay has been one of the biggest steps forward in user experience for Lloyds.
“In store cards are pretty good and wallets are on a par,” says Baker. “But the really interesting thing for me is the online and mobile experience. What Apple brings is the in-app experience. It is a very smooth, good user experience. In a prepaid world particularly there has always been friction and this is best I have seen.”
Meanwhile, head of Western Union Business Solutions Kerry Agiasotis pointed to the opening up of legacy infrastructure as a key catalyst for change.
“What has been one of the biggest drivers of change has been how organisations in financial services are opening up their core systems,” he says. “You can’t come to one of these events and not talk about APIs and other technologies opening up traditional systems. Financial services in particular are encumbered with legacy platforms and APIs are opening up possibilities for better experiences by fusing old and new. It means startups can work with people like us who have been around for a long time.
Responding later to question on the momentum in blockchain, he said “the first level of disruption was a disruption in thinking”.
“In financial services we are always used to there being an operator that coordinates transaction flow,” he said. “But when you think about for example cross border than transaction flow is very complex – there are the participating parties, multitudes of banks and corresponding regulators. Technology has the opportunity to remove significant overheads from the process.”
Ghosh also highlighted to the central role of financial regulators in paving the way for change in this sector: “There has been a mindset change among regulators even compared to their thinking 24 months ago for example in relation to things like social media. That also comes from a political drive around tech standards and open banking. Hopefully it leads to sea change in regulation of emerging payments architecture.”
Meanwhile Claire Masten, financial services relationship manager at the GSMA, pointed to the importance of customers being on board. “We have focused mainly on technology, but something that is absolutely pertinent is consumer appetite: people have gained confidence.”
Clearly, many hurdles remain in the evolution of the payments industry not least the looming possibility of a Brexit for UK companies in particular. But from a technology, cost, regulation and appetite point of view it seems the opportunities for change that new payment technology has promised for so long is getting closer to delivery.
Stay tuned for more coverage from PayExpo 2016.
*Watch out for our highlights from the debates tomorrow!
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