In the payments space, digital transformation is thriving. Consumers today have high expectations for real-time payments (particularly cross border) as well as a range of services, from lending through to foreign exchange, which is driving FinTechs and Payments businesses across the globe to innovate. Coupled with an increase in FinTech investment, this means the sector has come on leaps and bounds. For example, Request to Pay, Buy Now Pay Later (BNPL), and using AI to combat money laundering are three new trends creating real excitement in the industry. Here’s everything you need to know.
Request to Pay
Request to Pay – a new standard for requesting a payment – is being built on top of existing payment infrastructure throughout Europe. Essentially, it is a messaging framework that sits on top of and has been designed to complement existing payment infrastructure. Put simply, it allows companies to easily request the amount they need from you and complete real-time direct account-to-account payments. There are already a number of exciting Request to Pay schemes across the global markets, including initiatives from PayUK and The European Payments Council who are leading the way, and this is set to soar in the coming years.
That said, as with any emerging trend, the success and adoption levels of Request to Pay schemes will be dependent on whether the industry and regulators get behind the initiatives. In particular, banks will play a pivotal role in the transition and will need to lead when it comes to customer take-up.
When it comes to consumers, we expect to see them following the lead of their bank. As soon as banks make the feature available to their customers, built-in to their digital services, we’ll really be able to see increased adoption.
Buy Now Pay Later
Spurred on by the pandemic, as people turned to e-commerce during lockdown, BNPL schemes have become increasingly popular amongst consumers in recent years. Professionals in the payments space agree that adoption will continue to increase over time, however, whether BNPL providers will be regulated is a different question and one that could impact growth.
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Indeed, B2C (business to consumer) BNPL schemes have come under scrutiny. New research from Citizens Advice revealed young people don’t always realise they are taking out loans, which has led to regulators keeping a close eye on this. It’s not all bad though, and in the B2B (business to business) space, the payments trend is adding revenue to online marketplaces by offering trade credit-like payment settlement terms spread equally over a period of time. One advantage for B2B BNPL is flexibility on both sides of the payment process, and it’s set to become an increasingly popular option in the growing number of B2B eCommerce marketplaces.
AI in AML
AI (artificial intelligence) has become a buzz word amongst the tech community, but what many don’t know is behind the scenes, it is transforming the way Banks and Financial Institutions approach AML (anti-money laundering). And it couldn’t come at a better time. Just last month, a report by Kroll revealed AML fines sky-rocketed at the beginning of this year to a staggering £716 million.
As technology gets more advanced, so do criminal tactics. We need emerging technologies like AI to help combat this very human problem. AI can alleviate admin heavy processes while enhancing fraud detection far beyond human capabilities. In addition, it cuts down false positives – of which it’s well known the industry can see rates of up to 99%.
Though the trend is on the up, some Financial Institutions and regulators are still uncomfortable with the idea of actually using AI – or they don’t understand how it fits in with their approach. As such, it’s important to think holistically about the role of AML and compliance within the broader framework of digital transformation across the industry. The introduction of AI is not a means to replace humans with robots, but instead empower individuals.
It’s clear that Payments and Financial Services are undergoing an incredible period of innovation – from a consumer point of view, as well optimising back-office processes. When Request to Pay, BNPL and AI in AML get further buy in from regulators, they will surely thrive. It’s certainly an exciting industry to be a part of, with the next trend just around the corner.
Written by Anders la Cour, CEO and co-founder at Banking Circle