PAYTECH FOCUS: FUTURE OF PAYMENTS
Where to now? It’s commonly assumed that COVID-19 sparked a dramatic directional shift in payments. But it was already happening, say Ray Brash from PPS and 11:FS’ Simon Taylor, as they predict more twists and turns ahead The rules of the payments game have changed, with the next generation of consumers more likely to have grown up playing Minecraft over Monopoly. Instead of coins, notes and cheques, digital finance is now the default. Today’s consumer places more worth on experience and getting the best deal over loyalty, so traditional financial services need to keep up. And, while COVID-19 has undeniably accelerated changes to payments, major shifts were already under way, pre-pandemic. So, where are we now, how did we get here and, more importantly, what could lie ahead? The first ‘real shift’ was characterised by the arrival of operators like online payment processor Stripe, and Square, which offers both online and in-store processing, in 2009/2010. These changed the payment acceptance landscape to make it developer-friendly and software and Cloud native by default, says Simon Taylor, co-founder and chief product officer at challenger consultancy 11:FS. “When payments became API-first, it didn’t mean doing what we used to do with XML, it meant being API-first businesses,” he explains. “[Stripe and Square] unlocked a whole world of innovation for developers. And when you empower developers, new, amazing things start to happen.”
All of the same suppliers, ecosystem and infrastructure were there underneath, but developers could suddenly use them in a way that made more sense, in modern software stacks. “I think a lot of the innovation we’ve seen on the acceptance side has come from that,” he adds. A similar trend can be seen on the payment execution side, with companies like e-money institution, digital banking, issuer and payments processor, PPS; payment processing solutions platform GPS (Global Processing Services), and digital banking service fintechs like Railsbank, also focussing on developers, says Taylor. The entrepreneurs and builders of these new experiences changed the default, the expectation and what people needed to do. PPS CEO Ray Brash agrees that ‘the tech has usually been sitting around for years and then someone decides how they can move in’. Mobile phones, for example, were not a form of payment mechanism for quite some time – until banks realised it was the single most important way they would talk to their customers. Regulators have also played a role in accelerating the move away from analogue, particularly for companies such as PPS, says Brash.
“From our perspective, electronic money was designed to allow payments to be used by non-banks in business applications,” he says. “That’s where the first pre-paid cards came from, and where guys like Monzo, Monese and Revolut all started – as e-money institutions. It was a way of getting into payments without being a full bank.” Did COVID-19 change the conversation around payments? Not necessarily. “The future was already here; it’s just not evenly distributed. What the pandemic did was just make everything faster, similar to a lot of inflection points in history, whether it’s television, radio or the internet,” explains Taylor. “All of them were there before they had hockey-stick growth.
Direction of travel: The payments compass points to digital all the way
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Issue 11 | ThePaytechMagazine
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