The speed of technological and business change has held to its usual blistering pace this year, and with the turn of the new year it’s time for us to highlight some trends we’ll be watching closely as 2019 unfolds and 2020 approaches. From our perspective as one of Canada’s leading digital payments platforms, we see these trends in particular that will have an impact on how our customers live and do business in the near future.
Real-Time Payments Pushes Forward
Our economy depends on the inexpensive and reliable transfer of payments from buyer to seller and from financial institution to financial institution, as well as to and from governments. We’ve already seen a huge shift from a world in which cash and cheques were the sole forms of payment, to one where credit and debit cards, mobile and online transfers, and automatic recurring payments are an ever more dominant part of the payment mix.
In 2019, we are going to see the benefits of ongoing initiatives pushing for increased information content in transactions (like invoice details and location), a rebuilding of the core clearing and settlement system, a universal real-time payment system for lower-value transactions, and the adoption of the international ISO 20022 standard. Watch this Payments Canada’s modernization overview video for more details.
Open Banking Goes Live Around The World
Application Programming Interfaces (better known as APIs) have been around for some decades, and in recent years the financial services industry – along with its fintech partners and competitors – has begun to embrace the possibilities they raise by bridging between institutions and other organizations. This year’s implementation of Open Banking in the UK, the Payment Services Directive 2 (PSD2) in the European Union and Australia’s Consumer Data right coming into effect in 2019 – has only accelerated this trend, by mandating that financial institutions provide some level of access to customer accounts through APIs to third-party applications with the consent of those customers. A budgeting app, for example, would be able to pull data from a user’s bank account to populate an up-to-the minute cashflow dashboard. Services unbundling can play out in many ways and has yet to unfold.
For different perspectives on this from three open-banking fintech CEOs, see this McKinsey article.
Open banking will naturally require strong (yet easy to use) security measures, and digital identity will be a core part of the solution – obviously you wouldn’t find a new app very compelling if it required you to visit its headquarters and show your identity documents before using it. Yet beyond open banking digital identity will have a range of applications, from enabling more efficient and effective health care, to widening the categories of goods and services that can be purchased online, to simplifying and securing our interactions with the host of services and platforms for which we currently write down (or lose) passwords.
Read some of our primers on digital identity and its uses.
Ethics and Artificial Intelligence
AI has been in the forefront of technology news for some time, but its most important achievements are less about human-level intelligence and more about the accurate interpretation of our meaning and our needs. Natural language processing, for example, continues to make the automated engagement of customers ever more efficient and convenient. Our patterns of behaviour, meanwhile – the transactions we make and when we make them – offer AI a rich mine of data to exploit. Products and services (and the payment mechanisms most appropriate to them) will be increasingly customized by person, location, and time, pushing us ever closer to a seamless world of commerce that acts as if it anticipates our needs – because it does. As organizations increasingly leverage AI, in 2019 you will see a greater push for companies to establish their own ethic frameworks as it is related to AI.
For additional commentary on this subject, read MIT Sloan’s blog post on “Every Leader’s Guide to the Ethics of AI”.
IoT meets 5G
Although 5G, the fifth generation of wireless promising faster download and upload speeds isn’t expected in Canada until 2020, the push is on for better understanding the impact on the consumer level – especially for IoT enabled devices. 5G gets us closer to automomous driving enabled by enhanced vehicle and network communication.
Check out Accenture’s whitepaper on “Canada’s Path on the Race to 5G”.
Blockchain POC’s Continue
While standards like ISO 20022 are critical to enabling the smooth flow of payments between diverse parties and across borders, distributed ledger technology (more familiarly known as blockchain) is being implemented by both fintechs and mainstream financial institutions as an improved infrastructure for such flows. Blockchain promises to eliminate the need for intermediaries in making, clearing, and recording exchanges and transfers – and holds out the possibility, for example, of international wire transfers being made in seconds rather than days. And the anticipated use of “smart contracts” – in which contract terms are encoded and then executed automatically by a blockchain after the occurrence of a trigger event – promises to drive down the costs of financial and trading relationships even further. In 2019, look out for more proof of concepts leveraging blockchain in the payments space and organizations grapple with how best to leverage this technology.
Here is a look at JP Morgan Chase’s first-at-scale blockchain payments solution, from the Financial Times.
Photo by noor Younis on Unsplash.