Following the introduction of many new and alternative payment channels one can definitely say that consumers find themselves in an increasingly Fintech has created an environment that gives space to new and innovative solutions for the whole financial services landscape. Developments are changing the way we use, move and make money. Furthermore, with customer expectations on the rise,financial institutions are forced to keep up to date with the latest trends in technology. It is necessary for financial services providers, from big banks to small sartups, to have a way to share knowledge, find each other and develop new ideas in order to keep up with the pace of the world is changing.
PCM: How did the payments landscape change in the past 10 years?
Don: Even though various regions deal with change at different speeds, the changes in the payments landscape during the past 10 years have been quite significant. The main obvious trend perhaps, is a transition from cash to cards, and then to digital. Ten years ago, the vast majority of people were predominantly paying with cash, e-commerce was still in its early days and digital payments were also very limited. But, as time went by, we saw that cards replaced cash, enabling digital apps and other solutions to be attached to the payment data flow. Now, we see that cards are slowly being replaced by online payments, whereby the contextual payment data becomes even richer.
With that in mind, it’s important to say that cards are still very dominant, even in the digital payments landscape. However, we are starting to see more developments and solutions that allow buyers to use digital wallets or have digital access to their bank account and move money digitally without the necessity of having any type of card. Regulatory changes also need to be mentioned, as there have been regulatory efforts to change the payments landscape in Europe. The introduction of the Single Euro Payments Area (SEPA) before, and now, PSD2, are very strong European initiatives to open up the market and develop new payments solutions that will improve the experience of consumers across the continent.
PCM: What are the current trends and developments in the payments and Fintech industry?
Don: Currently everyone is all over PSD2, open banking and instant payments. Mayor players across the whole industry are keen to follow and influence these developments; as they will change the way money is used and the role that different financial institutions will play in the future. For example, the discussion about screen scraping (which should actually be about credential sharing) is an interesting example.
PCM: How will these trends and developments affect the landscape as we know it now?
Don: Even though there are still a lot of questions and uncertainty about how is it going to be implemented, PSD2 is definitely going to have a big impact. It becomes more transparent who is a customer “advisor” and who is just providing product as part of that. Traditional banks will be increasingly seen as a payment backbone platform rather than a financial services provider, which means that the roles of some institutions will change far from where they want to be—customer facing.
This also leads to challenges for regulators and customers, who need to adjust their understanding of who they are dealing with. Nevertheless, it is very likely that we will see a slow process of implementation and a long transition period; this can facilitate things and give confidence to all players across the financial sector.
The principle of open banking and API’s represents a big opportunity for innovation and change. The possibilities that it unlocks can add a lot of value to the payments sector by allowing new talent to add solutions to the data that established financial institutions already have. Nonetheless, these developments also involve new risks; and regulators across functions need to work together to minimize them.
We should altogether stop looking at the financial industry stand alone, as increasingly industry or sector definitions will not fully cover all types of companies, and various types of parties that will be involved in financial services. Therefore, we need to look at the full digital ecosystem and create a level playing field regardless of whether you are in the financial services or in other digital services. The game should be increasingly the same for everyone; to allow all players with value, whether financial or not, to provide the best services to their clients.
PCM: What things will we see fade away and what things will we see rise in the next 5 years?
Don: We will see less cash and fewer cards. Bank branches will continue to disappear, opening the door for new hybrid models where financial services are combined with other (retail) services. Regarding online payments, we will see an increasingly seamless checkout procedure for the customer. Furthermore, we will see many value added services for merchants, reducing fraud and credit risks.
The value chain will be ever more fragmented and crowded, not only within financial services, but also throughout the full digital ecosystem. P2P payment solutions will finally take off and become common, just like integrated solutions for corporates will pop up increasingly.
PCM: What kind of (fin, insur, reg, etc.) techs exist now and what will we see more of in the future, based on peoples/businesses needs?
Don: This year is definitely the year of Regtech and security. Given the current geopolitical situation, the role of security is becoming more crucial. Besides that, the burden of being compliant has become so heavy that companies are keen on technology solutions that can help them be compliant, hence RegTech. As both solutions deal with similar processes with organisations, and that security is a strong part of regulations, both go well hand in hand.
In any case, this is short term. We need to keep in mind that in the long run all the industries (financial, security, regulation, insurance, etc.) will go through significant changes driven by technology, regulations and changing customer behaviour. It’s hard to predict which one will be the most eye-catching. The key lies in being aware that, sooner or latter, change will happen in any industry, and that even when change goes slow, adaption usually goes slower. So better start preparing for the future now!
PCM: Social Media is one of the biggest hypes nowadays, how will this affect the landscape in terms of consumer payments?
Don: Social media is a very large gathering of various online interactions that will all have their own dynamics. Google is not Facebook nor Twitter nor Amazon. However, as many of these organisations survive on advertising, they have a keen eye for payment data and control over the user experience in the full digital realm. But not all have the same strategy and capacity to play this role, especially without having to transform (part of) their business into a regulated entity.
What will happen,, is that financial services experience will get closer to the customer, very likely through social media, as they have the best insights to create a desirable customer experience. In the end, the question is: who has the power in the value chain?
As mentioned earlier in the interview, we need to stop looking at the financial industry as stand alone, we need to move to an integral view on the digital services ecosystem, as value is being transferred far beyond just monetary. Besides that, as newcomers –like social media platforms- move into the financial services experience of consumers or businesses, is important to ensure a level playing field. Otherwise it will be hard to secure a trustworthy (financial) services ecosystem, with impact worldwide.
PCM: How is Holland FinTech helping in shaping the future of the landscape?
Holland FinTech is making everyone aware of all the solutions that are out there supplied by all parties across the financial value chain. By empowering people to have the understanding of the available solutions and market dynamics, companies can, find potential solutions and costumers, and therefore strengthen their businesses for the future. For all actors in the financial value chain together, this helps to shape a healthy ecosystem that is ready for the challenges the future brings.
About Don Ginsel
Founder & CEO of Holland Fintech
Don Ginsel is trained as Civil Engineer and a former banker at ABN AMRO and Deutsche Bank, after which he become an entrepreneur and investor in early stage startups. He has been active as a mentor and coach for startups through several accelerators and incubators. He is a thought leader on Fintech and the digital evolution, and the founder and CEO of Holland FinTech.
About Holland Fintech
Holland Fintech is founded in 2014 in Amsterdam as an open platform & network for Fintech knowledge & business. Holland FinTech aims to bring together the full width of financial solutions in one place, and provides services to support their understanding of market developments and do business in the ever faster developing market. Its over 325 member companies range from large institutions such as banks and insurance companies, to small companies like investors and start-ups. The membership is open for all players in the ecosystem with an interest in Fintech and financial innovation.