Mid-Year Payments Reflections… And What 2018 Has Left Up Its Sleeve

The year so far…

AI – I need to do a word cloud on my favorite payment sites to comb through the number of times Artificial Intelligence (AI) is mentioned; I’ll wager it’s north of 1 BILLION mentions (and counting) in 2018. Whether it was the launch of Erica from Bank of America, which has garnered the most headlines, or use of AI in back office operations, the talk has been all about AI and the buzz is likely to grow. In hindsight, this should have been a trend we saw coming.

My esteemed colleague noted at last year’s Money2020 in Las Vegas that the primary trend line for banking is losing a letter each year. Two years ago it was API; the 2017 show was all about AI and his prediction is this year’s show will be all about ‘I’ (more to come below). But AI has been a top-of-the-fold news getter all year, and as the consumer experience continues to emphasize the digital channel, AI will continue to play a more important role in everything we do (both in and out of banking). I do find myself asking (or typing) “are you human?” (as if the AI couldn’t read right through that!)

Real Time (all the time) – I will be the first to admit, I didn’t see Zelle coming on as fast and furiously as it did. I will note that I had full faith in real-time payments in the US, but the volume data and number of connected accounts is growing faster than most, including yours truly, predicted. Looking outside my home country, the trend towards real-time is speeding up (I couldn’t help myself) with every corner of the globe witnessing go-lives of new central infrastructure or in-project to join the real-time party. The dawn of the #newpayments ecosystem is just starting, but 2018 has been a blockbuster year so far for real-time/instant/faster/more fast payments.

PSD2 and GDPR – I couldn’t write a mid-year report card and not mention what payment historians will look back on as two of the most important dates in our industry, January 13 and May 25. They will go down as the dates that everything changed. Pessimists will tell you that nothing changed other than compliance requirements… but optimists will tell you that nothing will ever be the same. The rest of us, well we’re somewhere in the middle, but I can tell you that these two dates will go down in history. Amara’s Law is perfectly applicable to this trend, “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” I think many folks are currently in the technology “trough of disillusionment,” though if the trend holds true, enlightenment is just around the corner, and these two regulations will truly mark the new era of banking (maybe I am an optimist!).

The countdown to 2019

“Open” Initiatives – With PSD2 entering into its next phase, I believe the next 6 months will see an increase in announcements around new value propositions/partnerships/initiatives from newly available services (and this won’t just be from Europe). New API ecosystems will play an outsized role in creating next-generation value propositions for banks and the influence that the innovation labs or groups will have on the future direction of banks will be immense.

Real Time at the POS – My wonderfully insightful colleague Dean Wallace has been discussing the implications of real-time payments at the point of sale through his insights on the Request for Payment topic. We know that alternative payment methods are dominant in some markets, notably China with Alipay and WeChat, however as the real-time story evolves, the global mobile POS experience is set to take off, unlocking value to consumers, merchants and banks with richer data and cheaper rails for payments to ride on. A lot has still to be figured out on the “unhappy path,” however much of the potential for the new payments ecosystem lies within this trend.

The “I” Trend – Back to the number one trend of the first half of the year, and why AI is leading to I. The personalization of banking is the top trend for me to watch these next six months. Artificial Intelligence is allowing banks to truly offer individual experiences that will set off a move to full customer centricity. The digital experience layer is where the “bank of me” will reside. And when you match this digital experience layer with some of the data trends and regulation (notably GDPR) we are seeing in the market, this trend starts to get really interesting. The individual begins to take true ownership of their data and experience.

So I hope you all enjoy the dead of summer (or winter), whichever side of the equator you are on. And I hope that we can all agree that 2018 hasn’t disappointed in the payments space – it doesn’t look like it will be letting off the gas anytime soon!