Traditional finance institutions and modern day fintechs have often been at odds for the last several years, battling with one another to develop and maintain the latest innovations of the payments landscape.
Alan Irwin, VP of Product and Solutions, Europe at Global Payments, believes this competition will only intensify, as he writes for Payment Expert on how the role of the emerging Super App will only create further divisions between the two sectors.
Irwin also shared his other predictions for 2024, such as his thoughts on Open Banking becoming more consumer friendly, the need to constantly evolve the e-commerce journey, and the need to uphold greater security measures.
Open Banking in 2024 will be all about the consumer
2023 has been a huge year for Open Banking adoption, surging 68.2% from the previous year to hit 4.2 million users in the UK in July.
Open Banking enables consumers to provide third-party providers (TPPs) with secure access to their payments account, meaning that payments can be made through these TTPs directly from their payments account and without the need for cards.
With more people using Open Banking for payments, in 2024 consumer expectations of Open Banking are likely to increase dramatically. Consumers will demand higher levels of speed, convenience, and security around Open Banking as a payment method.
As a result, there will be a renewed focus on the availability and performance of APIs and user interfaces. Without improving these features, TTPs will see growth in Open Banking payments stagnate and even struggle to compete with digital wallets and standard cards.
2024 will also see a stronger emphasis placed on consumer protection from fraud and scammers. With £239.2 million lost to authorised push payments (APP) fraud in the first six months of 2023, security is front of mind for businesses and their customer bases.
A key differentiator for Open Banking and card payments is the liability protection offered by cards through the disputes and chargeback processes. Merchants and consumers alike want the power to protect themselves with tools and processes to limit financial exposure.
As such, to grow in the coming year, TTPs will need to develop and implement enhanced risk and fraud prevention tools to help drive confidence in the payment channel and mitigate concerns around exposure.
Competition between old and new banks will intensify around convenience
Growth in consumers’ desire for a financial ‘super app’ experience will put a great deal of pressure on traditional financial institutions and increase competition between neobanks and legacy banks in 2024.
A financial ‘super app’ is a single mobile application that can be used to manage all aspects of your financial life, including services that range across savings, investments, mortgages, and payments, for example.
Neobanks, such as Revolut, are creeping into ‘super app’ territory: providing a range of services, from shopping discounts and savings pockets to instant currency conversions and stock investing, all on a single mobile application. So far, these developments are almost exclusively in the consumer banking space.
However, in 2024 we will see the neobanks push their payments offerings further up the value chain into the B2B world, challenging traditional banks on another front.
E-commerce checkout enhancements
In 2024, payments providers and their clients will place a fresh emphasis on customer experience, as demand for convenient and slick payment processes continues to increase.
Currently, 69.57% of online shopping carts are abandoned and less than one fifth (17%) of retail, leisure and hospitality transactions are made through digital wallets, showing that much more needs to be done to offer smoother payment infrastructure online and in-store.
As such, in 2024, businesses will focus on customer experience as a means of increasing customer loyalty and slashing cart abandonment rates in the process.
Moving away from slow, clunky payment experiences to offer customers the ability to pay for something with a few clicks through biometrics, which allow customers to pay with a simple face or fingerprint scan, and digital wallets, which store customer payment information, is the primary method that businesses should be using as we approach the new year to tackle this issue.
Data Storage and Keeping Customers On-Site
Providing a top-quality payments experience will go hand-in-hand with ensuring that consumers feel safe at the checkout, especially with soaring cybercrime.
Next year, we’re likely to see more use of card data storage and tokenisation to further reduce cart abandonment rates as they allow consumers to store their card details for future use, making their next purchase at the e-commerce store much faster.
Network tokens in particular, which are tokenised payment details saved for a specific card and merchant pair, drive higher approval rates for merchants and offer a more secure form of payment than raw card data entry.
In addition to this, continuously updating customers’ card data further reduces friction in the checkout and drives better cart conversion.
What’s more, customers are also put off payments when they are redirected to another (3rd party) site to complete it, as it is unfamiliar to the rest of the checkout process, often doesn’t carry the merchant brand and thus deemed insecure. Therefore, reducing site changes as much as possible and using clear branding and UX to ensure customers are aware that they’re still on this same site is key to instilling a sense of security.
Similarly, real-time data validation built into the payment form can prevent bad data from being entered in the first place, such as invalid PAN, expiry date, or security code, as well as keeping out bad actors from spamming through card data en masse.