Payments: an evolution in motion

The evolution of the international payments space has been well-documented. From the proliferation of mobile payments across Africa, to the growing ubiquity of e-commerce in Europe, the changing face of payments can be felt internationally. Yet questions remain as to how changes will manifest in the future, and what impact this will have on existing and new payment infrastructures, writes Chris Dunne

The evolution of the international payments space has been well-documented. From the proliferation of mobile payments across Africa, to the growing ubiquity of e-commerce in Europe, the changing face of payments can be felt internationally.Yet questions remain as to how changes will manifest in the future, and what impact this will have on existing and new payment infrastructures, writes Chris Dunne

With this in mind VocaLink, the international payments specialists, and Cognizant, commissioned the Financial Services Club to undertake research examining the attitudes of the financial services industry towards this evolving payments ecosystem.

The research has identified current beliefs and anticipated trends in the future of global payments. One key finding is that the UK is currently at the tipping point for mobile payments. 42% of respondents believe that now is the make-or-break moment for this alternative payment method to be fully adopted.

Payment via a mobile is set to be a great success – 57% of those surveyed believe that mobile payment transaction volumes will then exceed online transaction amounts within the next five years – representing a significant change for the payments industry. In doing so this raises questions about the processes supporting payments – the regulation, infrastructure and security.

Regulatory changes in the payments space are already in process. The European Union has introduced significant changes in payments with the Single European Payments Area (SEPA) and the Payment Services Directive. Both regulations aim to encourage the simplification and internationalisation of European payments – necessary features in the ultra-mobile payment future. Yet there is still space for regulation to improve.

The research unearthed the industry belief that the future of mobile payments lies in the hands of new players – 70% believe that in the future there will be specific mobile payments processors, as traditional processors will struggle to adapt to the increase in low value payments.

It is unsurprising, then, that many expect the future ecosystem of payments to be one in which a number of payment infrastructures, both retail and wholesale, coexist. 42% bank respondents currently use between one and three infrastructures, and this is expected to grow to 51% by 2022.

If the industry does experience an influx of new, mobile-specific payment processors, this will bring with it new challenges for regulators.

Payment security remains paramount, not just to the industry but also to consumers, and any lapses will significantly damage the success of mobile as a ubiquitous payment method across the globe.

Consumers are demonstrating an appetite for mobile payments – already 33% of smartphone owners in the UK use them to shop online. As such we know that mobile will greatly impact the consumer relationship with payments and will shape the future of the industry.

How soon we can expect to witness these changes is still debatable, but 58% of industry respondents view mobile as the most important technology in payments in 2013. While a huge amount of industry preparation has occurred, particularly on the regulatory side, questions still remain around security and new payment players. There is still some evolving to do.