Guest Post: Omni-Channel: What Can We Learn from Other Countries in Payments?

Benjamin Hurley

Payments are evolving more rapidly today than ever before.  While the United States is undoubtedly leading the way in disruptive innovations in areas such as peer-to-peer (P2P) and disruptive services such as Uber and AirBnB, the traditional payments ecosystem here in the U.S. is lagging somewhat in terms of innovation.  Specifically, we’re still deeply entrenched in the transition to using EMV chip cards, while around the world new trends in payments are taking off and we could soon see them making their way into our payments ecosystem.  Here are a few trends that we’ve seen in other countries that could be beneficial if adopted here in the U.S. in the years to come:

Real-Time Payments.

We’ve been working towards faster payments here in the U.S. but in western Europe and Asia, real-time payments are quickly becoming standard. Automated Clearing House (ACH) will soon need to adopt real-time payments in order to meet market demands for U.S. and global real-time payment transactions bi-directionally, making both payments and refunds nearly instantaneous.  A few innovators have begun to adopt this and there are positive developments driven by some of the card brands for direct debit payments via modern and robust API’s, but this concept has not been adopted by the mainstream.  Where we see adoption of real-time payments is within the disruptive crowd service applications such as transport, money transfer, and P2P services.  Existing merchant-focused payment systems in the U.S. are still deeply rooted to more traditional risk assessment solutions that implement fund holding and next-day deposits.

Growth of International E-commerce.

More and more digital businesses are expanding into global markets. Everything from disruptive P2P service models to digital content delivery are blind to the obstacles of nation borders.  Historically, companies seeking to operate in new markets have needed to set up accounts in multiple countries to be able to take payments across borders in local currencies and deposit these funds.  Innovative payment companies are addressing these challenges by setting up dynamic currency conversion—servicing a single merchant account to enable simple global business transactions.  Businesses in the e-commerce space will need to evolve to capture this market model and legacy approaches of jurisdiction-specific processing and settlement are being tested by new entrants into the e-commerce domain.

Transition to Cloud Banking.

Traditional banking, typically heavily regulated, is perceived as slow to adapt to the rapid changes in the FinTech space. Banking is now being driven by up and coming innovators in the digital financial services domain.  We are seeing the shift to cloud-banking accounts as they continue to gain momentum, even though the start has been metered.  More banks are shifting to online models that reduce the number of physical branch offices to lower expenses and offer more modern banking services to increasingly savvy digital customers.  An interesting area under scrutiny right now would be the financial services markets in the United Kingdom post-Brexit.  The idea that physical presence matters in a world of increasing connectivity, mobile services, AI support models, and digital- or platform-driven payment infrastructures is challenging older finance-based business models.  As need drives innovation, I suspect we will see new entrants stepping in to take advantage of these changes.

Crowdfunding will Embrace New Markets.

We have noticed a trend in Nordic markets with an increased use of micro-investors for mortgages. This new model moves away from traditional banking and extends the sharing economy to loans, making it easier to both fund and obtain loans for collateralized lending like buying a home or a car.  We could see this trend shortly in the U.S. as people continue to embrace the sharing economy as an alternative to institutional services.  This approach is also driving a new business model of cloud investing where risk is marginalized and distributed across multiple micro-parties—providing not just new innovative financing options for consumers, but investment opportunities in areas not typically open to micro-investment.  While the U.S. market has seen a burgeoning startup scene for crowd-based business finance or non-traditional lenders providing finance in the corporate sector, we have yet to see this movement in personal finance as compared to other global markets.

Cash is under threat.

Cash is becoming less and less relevant in many major economies. A ready example can be found in India, where cash has been reduced from circulation in an effort to increase debit and credit card penetration and provide elevated visibility to government regulatory bodies to oversee the flow of money and tax revenue.  Many economies are trending this direction and we are seeing governments support this to reduce the costs of supporting fiat currency and currency circulation overheads.  While paper money may never completely go away, recent steps in Norway, Finland, and northern Europe point in a direction that could ultimately move to a near cashless society in top economies.

These are just a few of the global trends that we have noticed and predict will be gaining traction in the coming years.  It is critical for payment industry leaders to keep an eye on global developments so that the U.S. market can continue to evolve and grow.

Benjamin Hurley is Apriva’s senior director of mobile product management.  Ben brings over 15 years of product development experience in a career that has progressed from application development to product design.  He holds several patents in mobile application design, and has served in senior product roles in Europe, Asia, and Latin America before coming to the U.S.