This has been a year of significant progress in payments. Several initiatives announced or launched in 2015 were improved upon and pushed forward in 2016, although they remain far from complete. That means progress in 2017 will be even more important.
For me, the most compelling trends of 2016 have been:
Mobile, frictionless commerce: Most industry experts had an opinion about how quickly mobile payments would diffuse throughout the marketplace and which of the “pays”—Apple Pay, Android Pay, Samsung Pay, Chase Pay—pick-your-favorite-pay—would gain the most traction.
EMV: A huge effort was put forth to implement the massive deployment of EMV in the U.S., especially given other factors that had to be addressed such as PCI compliance and security. The switch to EMV was especially daunting for retailers whose POS systems have undergone little to no change in years, and also challenging for the companies helping retailers implement the new systems.
Blockchain: We heard many prophesies about how blockchain represents the beginning of the end for financial institutions as we know them. Perhaps, blockchain will ultimately revolutionize the financial world, but it has yet to progress to the point of becoming a threat.
Big data: Everyone talked about how to create a strategy to lasso and use big data. What people discovered is that it’s relatively easy to collect tons of data but difficult to apply it intelligently.
Fraud: It continues to plaque the industry and there is no let up on the resolve of fraudsters to steal and the innovative ways they ply their trade to create chaos.
Financial inclusion: This big topic resonated well in 2015 and carried over into 2016 as providers look for ways to provide greater access to electronic payments.
The Next Step
I believe the overarching theme of 2017 will be shifting the progress of 2016 to focus on connecting innovation to consumer value propositions. In other words, instead of chasing flashy technology, executives will further turn their attention to executing plans and employing technology that makes consumers’ lives more convenient, safe and easy. As a provider of much of the technology that will drive improvements for consumers in 2017, we at FIS expect to enable our clients to focus on running their business, connect with their customers, and, ultimately, grow through the deployment of our solutions. We expect to see a lot of investment in the following areas:
Fraud: Solutions in this area are expected to gain the most traction in 2017, including new fraud-fighting technology that enlists consumers to expand the fight against fraud. For example, mobile applications can push alerts to card users when transactions fall outside the rules, thus giving consumers the opportunity to instantly confirm their identity and ensure a transaction is valid. Additionally, fraud-fighting technology will migrate to proactive, real-time fraud monitoring and away from legacy models based on historical information.
Incorporation of artificial intelligence (AI), machine learning, cognitive computing into consumers’ daily lives: IBM’s Watson—a question-answering computer system that responds in one’s native language—created a staggering amount of traffic at Money 20/20 this fall, and now use cases are rolling out. Recently, General Motors reached an agreement to integrate Watson into its infotainment system to provide restaurant recommendations, order prescriptions, set reminders, locate gas stations and even pay for gas on the vehicle’s screen. This sort of cognitive computing will grow in acceptance in 2017.
Consumer advocacy and convenience: Look for convenient, engaging technology to help consumers— especially tech-oriented millennials–create better money habits. Examples include:
- The FIS Faye app used in the PYMNTS.com Alexa Challenge, which turns Alexa into an everyday financial coach by using Echo’s voice.
- The recently launched Erica chatbot from Bank of America employs AI, predictive analytics and cognitive messaging to enable consumers to make payments, check balances, pay down debt and save money.
Continued deployment of EMV as the payoff in reduced fraud at POS is proven: Recently released statistics from MasterCard show a 54 percent drop in counterfeit fraud costs among U.S. retailers that have adopted EMV, but a 77 percent increase in costs at large U.S. merchants that have not migrated to EMV. Expect EMV compliance to rise in 2017, resulting in a drop in noise around its use.
Big data swapped for actionable data: What the financial industry is really trying to do is create actionable data—information that better connects financial institutions with their customers and drives revenue. At FIS, the emphasis already has shifted from collecting “big data” to using actionable data for a variety of purposes, including proactive fraud protection, enabling our customers to give deals and offers to their customers, and helping our clients with prospecting and acquiring new business.
Continued execution of digital solutions that provide value to consumers: Mobile payments in the U.S. have not dominated the landscape as quickly as predicted. That’s largely because people underestimate the amount of effort it takes to change consumer behavior. Mobile payments adoption should pick up steam as value-added features make paying via mobile wallet more appealing and, in turn, habituate use. For example, the successful rollout of FIS Cardless Cash has reduced fraud and increased consumer safety at ATMs. Now, large banks are following the early adopters to add this solution for their customers.
Meanwhile, solutions such as real-time person-to-person payments, real-time rewards redemption and delivery of digital “cards” to mobile wallets provide tangible value to consumers. Being able to deliver these digital cards also benefits issuers by removing the expense of physical card production, yet making cards immediately available to consumers so they can make transactions and start accumulating rewards right away.
Continued improvement regarding financial inclusion: Continued product innovation in prepaid has boosted financial inclusion around the world. It also has narrowed the gap between prepaid and traditional banking products. Safer than cash, prepaid helps consumers budget better and lays the groundwork for financial stability. Globally, GPR prepaid instruments and mobile access act as a gateway to financial inclusion.
The Critical Bottom Line
The market is evolving from being dazzled by the flashy lights of innovation to buckling down and implementing plans to address the opportunities ahead. Emphasis is shifting from talking about the cool stuff to driving adoption of the most actionable innovations.
One question we must answer is: How will we take all of these great products and ideas we’ve created and integrate them into consumers’ daily lives? I also foresee sharper focus on profit and loss in the coming year, which begs the second, critical question before us: How do we provide value to consumers in ways that still allow financial institutions to make a profit?
In Viewpoints, payments professionals share their perspectives on the industry. Paybefore presents many points of view to offer readers new insights and information. The opinions expressed in Viewpoints are not necessarily those of Paybefore.