Money20/20: Crystal ball gazing the changing Payments paradigm

After just 4 weeks from SIBOS, it is time for Money2020. From the Transaction and Investment banking world of pinstripe suited bankers in Geneva, I am heading to Vegas in to the world of payments, a landscape that is being impacted by powerful disruptive forces. The contrast is quite visible between the two events. At SIBOS even with Innotribe, the talk was all about controlling RISK and identifying the next big thing to DEFEND banks position. In addition, there were discussions on how trends like distributed ledger and data analytics would reshape the financial services industry.

However, Money2020 is all about the innovations within the Payments industry – DISRUPTION rather than risk control would be the overriding theme of the event. That’s where the likes of Tokenisation, Apple Pay and other disruptive forces reshaping the payments ecosystem will be discussed and debated. I like what it says on the Money 2020 website “Money20/20 is the world’s biggest, boldest and best event covering payments and financial services innovation for connected commerce at the intersection of mobile, retail, marketing services, data and technology”. ‘Intersection’ is the key word here. I see many of the other areas such as mobile banking, mWallets, eDommerce and mCommerce will be converging in the near future, and will be part of the larger payments landscape.

Payments by itself is not a Value Added activity (except maybe for banks, for whom its big business). It’s a Value Transfer activity and like all such activities the key aspect is removing friction from the transaction. And hence, there has been a logical movement from bulky cash to plastic and now to mobiles. It will be interesting to see what would be next on the list of removing friction from the transaction. Sessions at the event around Distributed Ledgers and alternative schemes would surely provide more insights on how this space will be evolving in the near future.

Another topic that will catch interest of the attendees would be ‘Faster Payments’ scheme in the US. That’s a massive change for the banks but there is no real business case for the banks. The adoption of real-time payment systems is fast catching up and proving to be a viable alternative to CASH. If you see trends in some of the countries, the consumer and economy as a whole definitely benefits from the real time payments adoption, but it has largely been a regulatory driven initiative.  It is not hard to surmise that banks will not adopt it, unless regulators force them to. But it would be interesting to see how its adoption will pan out in the US.

Merchant driven innovations is another interesting area that would offer immense potential to disrupt the payment ecosystem. With MCX dead, it would be interesting to see how merchants will be collaborating with Fintechs to combine their value proposition and payments. The merchant community had tried to develop payment systems themselves, but failed as they not able to understand the inherent complexities of managing a payments ecosystem. The recent deals by Chase Pay with Shell and Starbucks on the traditional side looks like an arrangement where a merchant wants to partner with a Bank to deliver their value proposition to customers in exchange for access to their data.

All in all the payments industry is in a flux and at an evolutionary stage where the next level of innovations will completely reshape the payments landscape. Money 20/20 event will no doubt provide us an opportunity to crystal ball gaze the unfolding future!