FIS Modern Banking Platform
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October 12, 2017
Serena Smith, FIS | Division Executive, International Payments
As payments technologies continue to evolve, we are seeing the boundaries between nations quickly disappear. It has been and will continue to be an amazing transition as we watch payments technologies expand their reach around the world and allow more consumers access to the same capabilities regardless of where they are. Soon, how a consumer pays anywhere in the world will look and feel the same way, no matter their location.
Here are nine ways in which payments are breaking down geographical barriers:
1. Mobile technology transforms cash and cards into digital payments. By converting cash and cards into digital payments, not only do institutions save on producing and managing those payment forms, but consumers are given the ability to gain access to goods and services beyond their immediate locales. In countries ranging from the U.S. to India, discounted or, in some cases, free mobile phones and broadband service are speeding up market penetration of digital payments while providing wider access to low-income populations.
2. Social networks take on e-commerce. WeChat, a Chinese app with more than 800 million active users, integrates payments with social media and online shopping. An average user dedicates more than an hour each day to using it. Meanwhile, Alipay is considered the app to use to make large payments in China. Alibaba’s Taobao mobile app allows users to join chat groups, read the news, book travel and, of course, buy things. Seeking greater social media presence, Alibaba has invested in Snapchat and the Chinese Twitter-like platform Weibo as well as buying the video website Youku Tudou. Globally, social media giant Facebook has nearly two billion users, with the highest penetration –72 percent – in North America – but the highest percentage of users –37 percent – in Asia. The company is increasing its investment in e-commerce by rolling out its mobile buy-and-sell tab “Marketplace” to 17 countries in Europe. In the United States, nearly 20 million items are posted on Marketplace and about 550 million people visit “buy-and-sell” Facebook Groups each month. The successful pairing of social media and e-commerce demonstrates that consumers are integrating shopping into their routines vs. treating it as a separate activity.
3. Mobile wallets expand their global reach. Apple Pay, Samsung Pay, and Android Pay continue to extend their reach into more countries. Apple Pay claims the most coverage in terms of countries while Samsung Pay – not wedded to NFC – claims the most coverage in terms of retail outlets. Alipay reports 450 million users worldwide – the majority of whom are in China – and recently completed the groundwork for its acceptance at four million retail partners in the United States. Business Insider’s research service projects that in-store mobile payment volume will grow to more than $500 billion by 2020. Soon, consumers will be able to use their mobile phones to pay anywhere and, thanks to tokenization, safely.
4. Faster payments benefit governments, businesses, and consumers from Bahrain to the United Kingdom. During the last decade, an increasing number of fast retail payment services have been deployed around the world, with many more under development. But, real-time payments aren’t just about instant gratification. They are about transforming the payment process – from sales through reconciliation – into frictionless, seamless transactions regardless of where sellers and buyers reside. With the advent of faster payments comes the potential to add innovative services on top of immediate payments. For example, coupled with innovative P2P solutions, faster payments could enable anyone to become a merchant. Vital remittance data can be added to payments, which simplifies invoice reconciliation and, in turn, opens borders.
5. Contactless payment technology replaces dipping with tapping. About one in 10 card transactions in the UK are now contactless and, with a mandate for every terminal in the UK to accept contactless payments by 2020, penetration of NFC will soar. Most of the terminals at Australia’s grocery, fast food and drugstores are contactless and most Australians use NFC at least once per week. With 70 percent of Canadian retailers accepting contactless payments, Canada’s percentage of NFC transactions also are rising rapidly. The current low penetration of contactless payments in the United States is expected to change. Merchants accepting Apple Pay (based on NFC) more than doubled last year to 36 percent and contactless card shipments to the U.S. are projected to rise from 25.7 million last year to 229.6 million in 2021. Consumers around the world will soon tap instead of dip.
6. Wearables roll out across the globe. To date, watches outfitted with Apple Pay, Android Pay, and Samsung Pay apps have grabbed the attention in payments, but startups offering more affordable payment wearables to consumers will expand the market for digital payments into low-income areas. One example is the Contactless Companion Platform (CCP), launching across countries in North America, Europe and Africa. Tokenized for secure payments, CCP allows consumers – even those with no bank account – to load funds into wearables such as wristbands, key fobs, watches, and smart rings.
7. Cross-border payments deliver more for less by becoming faster and cheaper. Cross-border payment startups such as Circle, Abra, Transferwise and WorldRemit are ready to disrupt the current remittance model of high fees and slow times associated with cross-border payments. TransferWise pairs up people needing to send money in opposite directions so the money doesn’t have to go across borders. Abra uses agents – “human ATMs” – to remit payments to recipients who don’t have bank accounts. Circle for iMessage enables iOS10 users to send and receive P2P payments across borders without fees. In the future, most cross-border payments will become as frictionless as P2P payments.
8. Payments become borderless to accommodate global e-commerce. Consumers are not only shifting their dollars away from brick and mortar and toward e-commerce, but they also are shopping globally. A recent survey of consumers in 24 different countries found that 57 percent of those with Internet access had shopped from an overseas site in the past six months. In a few countries, more than 70 percent of online users had made purchases from other countries. In the end, payments companies and online retailers will need to simplify the cross-border purchasing process to accommodate global e-commerce.
9. Prepaid cards assist in the march toward cashless societies. Countries that have historically been cash-centric have now opened collection points to enable consumers to convert cash into prepaid cards, which are used to shop at physical stores and even online. As more shoppers migrate to buying online, more low-value cash transactions will shift towards prepaid cards.
As boundaries around the world disappear and we move towards a more connected world, three elements are integral to payments success. Find out more on how each of these – inclusion, convenience and advocacy – affect payments in our three-part series.
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