Panagiotis Kriaris has spent his career in the borderline between business and technology with a leadership background at an international level. He brings senior expertise across Financial Services, Banking, Payments, FinTech, Retail and E-Commerce. Innovation, strategy, business development, strategic partnerships and building businesses and products from scratch have been at the center of his work and attention throughout his career. Being a recognized voice in the financial services industry, he has contributed to various publications and podcasts and is often invited as a public speaker at events around the globe.
During the past two decades, payments have changed like no other business in financial services. And yet the most disruptive part is still ahead of us.
To understand the magnitude of change, consider the following: 20 years ago, a 3-year-old company named Confinity had just changed its name to PayPal, Alipay and WeChat would launch 3 and 10 years later respectively, mobile payments did not even exist (the iPhone was first released in 2007) and Amazon had finally turned its first profit in Q4 – $0.01 on revenues of more than $1 billion.
Fast forward to today and technology has drastically transformed how payments are conducted with strong regional flavours: mobile payments in Europe, SuperApps in Asia and QR codes in Latin America. What’s more, an outbreak of a rare coronavirus in 2019 has led to a global pandemic that has, in effect, accelerated major behavioural shifts: adoption of instant payments, contactless payments becoming a norm, drastic decline of cash and a huge boom of e-commerce.
Payments have evolved from a traditional, static model with limited, pre-defined payment options, i.e. cash, card or cheque, to a dynamic, all-digital environment. Cashless, mobile-first, omni-channel payments powered by multiple inter-connected devices are the new norm.
Technological advancements like biometrics, the Internet-of-Things, tokenization and cloud computing have been at the forefront of this transformation, affecting not only the consumer interaction but also the underlying set-up, for example biometrics gradually replacing traditional credentials as an authentication and authorization tool.
In terms of impact and reach two things stand out in particular: the emergence of real-time and the transition to an open approach. Changes brought about as a result, include on the retail side concepts such as digital payments, peer-to-peer (P2P), account-to-account (A2A), bill pay, scheduled payments or deposit capture, whereas on the corporate side topics like payroll, sweeps, positive pay, treasury, cash forecasting, liquidity and integrated payables dominate the agenda.
All these have had profound repercussions on the competitive landscape: as incumbents struggle to adjust to the new reality, FinTechs, BigTechs and other market disruptors have found the opportunity to challenge the status quo by introducing novel payment methods on the basis of convenience, speed and flexibility, powered often by a platform approach.
Ever-changing customer requirements, new service offerings, innovative propositions, new entrants, consolidation, novel business models and shifting dynamics create a mix that makes it especially challenging to predict what’s coming next. However, if I would have to bet on a number of future plays, most of my money would be placed on the following trends and developments:
- The platform-based, ecosystem model will be further dominating the new reality by means of offering solid competitive advantages – network effects, control of the customer experience, reduced disintermediation and new revenue streams.
- The more payments take an increasingly central-stage role in diverse offerings by means of embedded financial services – and here is the great paradox in the next phase of the evolutionary journey – the more they will be moving in the background and become invisible. In this set-up the most promising revenue pools will evolve around holistic, end-to-end offerings.
- Future payments will look much more versatile, open and seamless and will be dominated by specialized players that rely on economies of scale but at the same time are agile enough to swiftly adapt their business model to evolving customer requirements.
- The rise of alternative payments will continue from virtual mobile wallets to PayLater (BNPL) schemes to P2P money transfers and to cash payment models, there will be an increasingly diverse number of payment methods beyond cards and cash, boosted by the ascend of e-commerce, technologies like 5G and IoT, more mature open banking use cases and the emergence of new payment platforms.
- Digital wallets have already become the world’s leading payment method for both ecommerce and POS transactions and their ascent will undoubtedly continue: the number of unique digital wallet users will exceed 4.4 bn globally by 2025 (Juniper Research) and will reach 5.6 bn or 65% of the global population by 2030 (ARK). It is not by accident that digital wallets are today core to the strategy of most major tech and payment players across the globe, influencing the re-bundling of financial services, which has been playing out under the catchy term «the SuperApp race». In a less obvious side of their impact, the evolution of digital wallets will be playing a crucial role in the mechanics behind connecting buyer and seller ecosystems.
- As the global payments landscape becomes increasingly complicated and cluttered, the appeal of account-to-account (A2A) payments as a means of circumventing intermediaries and achieving efficiency and transparency gains will increase. Regardless of whether this will be facilitated by Open Banking or via existing (A2A) schemes around the globe, A2A payments will claim an ever-growing stake of the global pie.
- The quest for the next wave of payment infrastructure will intensify but the outcome is likely to consist of a mix of new and old capabilities in a multi-rail set-up where cards will co-exist with real-time, account-to-account payments (as per the previous point). In such an environment, traditional incumbents like Visa and Mastercard will be fighting to re-define their role in the industry alongside an increasingly versatile array of players (FinTechs, new payment champions, BigTechs and e-commerce giants).
- The B2B segment will be one of the main growth drivers going forward, with the current challenging macroeconomic environment having only added to their potential. Estimates converge that B2B payments constitute on a global scale a $120 trillion market and have significantly more connected opportunity compared with B2C.
- Software is not only becoming much more entangled with payments, but it is developing into a powerful and undisputable (payments) delivery channel on its own right, creating new business models and impacting the entire industry value chain along the way.
- The Internet-of-Things (IoT) will redefine disruption in the industry. From watches to light bulbs, to thermostats, to cars and to trains, the number of connected devices is projected to reach 41.6 billion globally by 2025 (source: IDC). Payments triggered from such devices are expected to reach USD 5.4 trillion by 2028 from an estimated USD 155 billion in 2021, growing at a CAGR of 66% (source: Introspective Market Research).
Notwithstanding all the above, what stands out in the evolution of payments is the fact that what was once seen as a complementary, boring, and low-potential business has transformed into the most fascinating and attractive part of financial services, dictating, to a large extend, how the entire industry is evolving. Technology will not only continue to be the main driver behind this continuing transformation but will also significantly (further) shorten and condense the innovation cycle(s).