The payments industry is on the brink of a significant transformation as it accelerates into the year 2025. Capgemini’s latest research has pinpointed critical trends that will shape this evolution. These trends are categorized into three core themes: Customer First, Enterprise Management, and Intelligent Industry. Each theme delivers insights into how the industry will adapt to technological advancements and changing customer expectations to achieve sustainable growth and competitive advantage.
Customer First
Open Finance
Global regulatory changes and new market opportunities are facilitating open finance, which allows seamless financial data exchange across institutions and third-party providers. This trend is expected to result in numerous new use cases in the payment industry by 2025. Open finance will enable consumers to have more control over their financial data, leading to more personalized and efficient financial services.
The adoption of open finance will also drive innovation in the payments industry. Financial institutions and fintech companies will be able to develop new products and services that cater to the specific needs of their customers. This will create a more competitive market, ultimately benefiting consumers with better options and lower costs. Implementing open finance will foster a more inclusive financial ecosystem where even traditionally underserved populations can access customized financial products tailored to their circumstances.
Instant Payment Adoption
As consumer preferences shift towards instant payments over traditional checks and debit cards, banks are well-positioned to benefit from lowered transaction costs. Instant payments also promise stronger relationships with small businesses and provide strategic advantages in corporate partnerships. The convenience and speed of instant payments will become a standard expectation for consumers and businesses alike.
The widespread adoption of instant payments will also lead to the development of new business models and revenue streams for financial institutions. By offering value-added services such as real-time fraud detection and personalized financial advice, banks can differentiate themselves from competitors and build stronger customer loyalty. Furthermore, with enhanced efficiency, financial institutions can develop innovative services that offer more significant rewards and services to users, thus tapping into previously unaddressed market segments.
POS Innovations
The growth in online sales necessitates innovative payment options. Straightforward integration from expanding open banking and faster payment rails are predicted to lead to tangible benefits like low maintenance costs, increased flexibility, and improved revenues in 2025. Point-of-sale (POS) innovations will play a crucial role in enhancing the customer experience and streamlining payment processes.
Innovative POS solutions will also enable businesses to offer a wider range of payment options, including contactless payments, mobile wallets, and cryptocurrencies. This will not only improve customer satisfaction but also help businesses attract and retain more customers by providing a seamless and convenient payment experience. Additionally, companies will likely invest in technologies that integrate loyalty programs, personalized discounts, and other engagement tools directly into POS systems, thus promoting customer retention and increasing sales.
Enterprise Management
Cross-Border Payments
A rise in cross-border transactions necessitates new payment models that empower fast and efficient payments. The development of multi-territory instant payment corridors emerges as a significant trend. These corridors will enable businesses to conduct international transactions with greater ease and lower costs, fostering global trade and economic growth.
The implementation of cross-border payment solutions will also require collaboration between financial institutions, regulators, and technology providers. By working together, these stakeholders can create a more efficient and secure global payment ecosystem that benefits businesses and consumers alike. Effective cross-border payment systems will facilitate smoother immigration processes and paves the way for increased financial inclusivity for enterprises and individuals in developing economies.
Composable Cloud-Based Payment Hubs
Legacy payment systems are often plagued by fragmentation and inefficiency. Thus, financial organizations are increasingly adopting composable cloud-based payment hubs that centralize payment activities, optimize costs, and enhance process time. These hubs will enable banks to streamline their operations and improve their overall efficiency.
The adoption of cloud-based payment hubs will also provide financial institutions with greater flexibility and scalability. As the payments industry continues to evolve, banks will be able to quickly adapt to new technologies and market demands, ensuring they remain competitive and relevant in the rapidly changing landscape. Moreover, by leveraging cloud technology, institutions can expedite the rollout of innovative payment services, thereby enhancing their digitally integrated customer experience and gaining a competitive edge.
Multi-Rail Payment Strategy
Multi-rail payment strategies, which enable the integration of multiple payment methods, are set to gain popularity. Such strategies can foster real-time payments, capture enriched data, and offer new avenues for collaboration with card operators. By leveraging multiple payment rails, financial institutions can provide a more seamless and efficient payment experience for their customers.
The implementation of multi-rail payment strategies will also help banks reduce their reliance on traditional payment networks, lowering costs and increasing operational resilience. This will enable financial institutions to better serve their customers and respond more effectively to market changes and disruptions. Integrating these diverse payment platforms will allow for more comprehensive financial services and foster innovation, enabling banks to offer a richer array of products tailored to varying consumer and business needs.
Operational Resilience
Given the impact of global technology outages on digital transactions, banks must prioritize operational resilience through robust risk management frameworks, incident reporting, and resilience testing to meet new regulations. Ensuring operational resilience will be crucial for maintaining customer trust and confidence in the payments industry.
By investing in advanced technologies and implementing best practices for risk management, financial institutions can minimize the impact of disruptions and ensure the continuity of their services. This will not only protect their reputation but also help them maintain a competitive edge in the market. More importantly, building operational resilience will involve a proactive approach, where financial service providers regularly update their disaster recovery plans and actively participate in industry-wide resilience exercises.
Intelligent Industry
Decentralized Identity (DID)
Decentralized identity (DID) technology will address growing concerns about privacy and security in digital transactions. DID allows for identity verification without the need for central authorities, thus providing users with more control over their personal information. This trend is expected to become increasingly important as the payments industry continues to evolve.
The integration of DID technology will enable financial institutions to offer more secure and private payment options, building consumer trust and confidence. Additionally, DID can help reduce fraud and identity theft, providing a safer environment for digital transactions. The adoption of decentralized identity solutions will be a crucial step towards ensuring the security and privacy of customers’ financial data in the rapidly changing payments landscape.
Artificial Intelligence and Machine Learning
The role of artificial intelligence (AI) and machine learning in the payments industry cannot be overstated. These technologies are expected to revolutionize the way payments are processed, offering enhanced accuracy, speed, and security. By leveraging AI and machine learning, financial institutions can improve their fraud detection capabilities, offer personalized financial advice, and streamline their operations.
AI and machine learning will also enable financial institutions to better understand their customers’ needs and preferences, allowing them to offer more tailored products and services. This will help banks build stronger customer relationships and improve their competitive positioning in the market. The adoption of these technologies will be critical for financial institutions looking to stay ahead of the curve in the rapidly evolving payments industry.
Blockchain
Blockchain technology is set to play a major role in the future of the payments industry. By providing a decentralized and secure way to record transactions, blockchain can help reduce fraud, increase transparency, and improve the efficiency of payment processes. Financial institutions that embrace blockchain will be better equipped to meet the evolving needs of their customers and stay competitive in the market.
The use of blockchain in the payments industry will also enable the development of new and innovative payment solutions. For example, smart contracts can automate and streamline payment processes, reducing the need for intermediaries and lowering costs. Additionally, blockchain can facilitate cross-border payments, making it easier and more cost-effective for businesses to conduct international transactions. The adoption of blockchain technology will be a key driver of innovation and efficiency in the payments industry.
In summary, the convergence of these three themes is set to redefine the payments industry, driving it towards a future characterized by innovation, efficiency, and superior customer experiences. Stakeholders in this space must stay attuned to these trends to harness the opportunities they present and maintain a competitive edge.