January

As lockdowns, social distancing guidelines and a wave of uncertainty swept the world in early 2020, experts at McKinsey predicted that global payments industry activity could drop by as much as 8% to 10% of total revenue due to the then-emerging COVID-19 pandemic. Instead, the opposite occurred.

by Jairo Riveros, Chief Strategy Officer and Managing Director for the USA and LATAM, Paysend

Between 2020 and 2021, the global digital payments industry grew $5873 billion, a compound annual growth rate of 16.1%. In addition, we saw a record amount of funding with payments startups raising an estimated $31.9 billion in 2021.

The growth of digital payments and digital money transfers shows no signs of slowing. As we enter a new year of exciting growth in the space, we can continue to trace the path that digital payment innovation has taken since the industry’s explosive growth in 2020.

How we got here

With social distancing in effect, it’s no surprise that the COVID-19 pandemic helped digital payments skyrocket in popularity. However, what’s important to note is that three trends contributed to digital payments’ spike in utilization: rise in online consumer spending, the move to digital currency and the shift from brick-and-mortar to digital storefronts.

First, digital payments were already growing in popularity. In 2019, Americans spent about $360 billion on eCommerce transactions, and 77% of people used one or more types of mobile payments. While the pandemic caused digital payments to soar in popularity, the stage was already set for the rise of digital payments even before March 2020.

Second, physical money lost favour worldwide during the pandemic. Globally, cash use decreased to account for only 20% of all face-to-face payments. But in the U.S., it just wasn’t available—the U.S. Mint lowered its coin production from March to June 2020 to keep Americans from being exposed to COVID-19. A national coin shortage ensued that summer, but many businesses stopped accepting cash as a form of payment.

Third, lockdowns and stay-at-home orders forced us to take our financial needs from physical storefronts to digital storefronts. While this led to an uptick in eCommerce, lockdowns affected far more than just retail—60% of international and domestic cash transfers, for instance, took place online in 2020.

The trends we’ve seen

Digital payments carried this momentum into 2021 – 82% of Americans used some form of digital payment in 2021, up from 78% in 2020.

In addition to digital payments as a whole, several practices within the digital payments umbrella term have also grown more popular. The rise of the “buy now, pay later” option on eCommerce has struck a chord with consumers – about 33% of shoppers between 18 and 37 in a survey said that the option to pay in phases influenced their choice to complete their online purchase.

Further, remittances as a whole have increased in 2021, with the World Bank predicting in November that remittances would increase by 7.3% in 2021. But sending them digitally is also popular among those issuing remittances. In fact, a 2021 Visa survey showed that digital payments were the most popular method for sending money outside of the country. 23% of survey takers reported that they’d used digital payments to send money outside of the country, while 65% said they planned on doing so for the 2021 holiday season.

Digital payments have become so widespread that it’s causing some to purposely leave their wallets at home. For example, 15% of digital wallet users reported that they regularly leave their residences without bringing their physical wallets with them. With the federal government discussing standards for digital driver’s licenses, consumers will truly be able to live day-to-day without bi-folds, tri-folds, or clutches.

Where we’re headed

In 2020, digital payments became a necessity that also increased the efficiency of payments. By 2022, streamlining digital payments even further has become a hallmark of the sector’s evolution. It’s an exciting time for the digital payments industry, and we can expect several trends in digital payment innovation to emerge or continue in 2022.

Catering to customers as a whole will continue to be a focus for fintech companies as they improve their product’s user experience. Because digital payments already make financial processes more efficient compared to in-person processes, we can expect this efficiency to increase even further. For example, startups will begin to make fintech services a more seamless experience for users, as embedding financial services into non-financial companies becomes more commonplace. Additionally, both payments and credit processes are poised to become even more efficient for consumers.

Furthermore, we can also expect efficiency to be extended to international banking. Digital technology has made places around the world more accessible than ever before. Fintech is already doing its part to grow this global accessibility, with multiple banks beginning to offer multi-currency digital wallets to enable greater financial flexibility for global citizens.

At the same time, it will be important for the sector to address immigration and financial inclusion. One way the sector can innovate in this area is by introducing instant, low-cost and hassle-free remittance transfers in Latin America since digital transfers are still a budding practice in the region. Making digital payments in the region easy and inexpensive will let remote, low-income households in the region make and receive payments both quicker and more securely.

The biggest issue plaguing consumers right now are expensive transfer fees. Take the U.S. as a prime example. Consumers who don’t utilize traditional banks spend about $140 billion per year on unnecessary fees. In order to promote financial inclusion for all, it’s imperative that providers lower service fees.. We’ve seen some movement on this front within banking recently – Capital One announced in December that it was giving up $150 million in annual revenue to do away with its consumer overdraft fees.

Lowering service fees won’t impact digital payment ROI, as the global digital payments industry is expected to hit $2.9 trillion in 2030. Digital payments are also poised to continue their stark ascent in usage – one study estimates that by 2024, cash will account for under 10% of U.S. payments and only 13% of payments worldwide. Meanwhile, the same study estimates that digital wallets will be used in 33% of all in-store payments.

It’s an exciting time for the digital payments industry, and if the past two years have shown us anything, it’s that the sky’s the limit for innovations in the field.

Commodities have long been considered a good hedge against inflation and, true to form, with inflation in many countries now at its highest level in decades, those businesses that failed to invest in minerals, energy sources, livestock and foodstuffs face a financial squeeze to keep their supplies chains operating.

by Paul Macgregor, Head of Sales, NovaFori 

Yet, even for those businesses with foresight, that have planned and hedged, the current inflation-based pressure points on the global economy are accentuating stresses and strains that already existed in global supply chains and business value chains. Long-standing inefficiencies were exposed by the pandemic and became even more visible with the onset of the post-pandemic period. These inefficiencies could be significantly reduced by harnessing intelligent digital marketplaces.

In the world of commodities, this is particularly noticeable. It shows the use of traditional analogue as a way for businesses interact with customers, suppliers and intermediaries to be outdated and in need of a rethink. For this sector, a new way of offering efficiency, transparency and good practice is needed.

The rate of inflation in the UK reached 5.4% year-on-year in December, a 30-year high, and is sure to rise further in April when a 54% rise in the UK fuel price cap takes effect. In the US, meanwhile, consumer prices rose 7.0% in December, the highest level since June 1982. Against that backdrop, coffee, crude oil and aluminium prices have risen well over 100% in the past year, while cattle, copper and gas are up more than 50%.

Most eye-catching is lithium, up by close to 500% since the start of last year. Demand for lithium has jumped as demand for electric vehicles (EVs) has soared. Lithium is used in the batteries, which typically also include nickel and cobalt, prices of which have also risen significantly – nickel up over 30% in the past year and cobalt up almost 100%.

Fusion of analogue and digital marketplaces

Taking metals as an example, the value chain can go from mining to processing and then on to fabrication, transportation, storage and consumption, and finally, it is hopefully recycled. The more verticals within the chain that a business owns, the more scope there is to benefit from significant efficiencies.

There are points in the value chain where most businesses deal with intermediaries or brokers to advise them on both sales and purchases depending on where they fit into the cycle. These intermediaries play an important part in the process with their local knowledge, business relationships and understanding of the metal in question. Their involvement is typically in a more traditional analogue form.

Three key metals used in batteries are nickel, cobalt and lithium. All three are mined in remote parts of the world; The Democratic Republic of Congo is the world’s largest cobalt producer. The world’s largest reserves of lithium are in Australia, Argentina and Chile, while significant amounts are to be found in China and sub-Saharan Africa. Major deposits of Nickel are found in Indonesia, Canada, Russia and Brazil.

Amid the rapid growth of the EV sector globally, demand for lithium-ion batteries has soared. The rate of increase in the price of nickel, cobalt and lithium reflects, to an extent, the nature of the market in which each exists.

Given the geographies, the logistics and the local market complexity, such as grade of materials, shipment times, insurance, pricing and other local issues, intermediaries play a key role, by utilizing digital marketplaces to grow the geography of their client base. It may seem counterintuitive, but their analogue processes can in fact complement digital marketplaces with their local knowledge. The two go hand-in-hand, expanding access to the market, increasing the number of participants and adding liquidity. The result is greater price competition and a more efficient market.

Digital B2B marketplaces trusted to transact billions

Digital business-to-business (B2B) marketplaces are trusted to transact billions of dollars worth of goods annually across a wide variety of industries, including vehicle sales, leasing and re-leasing through to luxury goods and food products. They have a role to play in improving marketplaces for physical commodities.

Digital B2B markets widen distribution networks, help to ensure competition and liquidity in the marketplace, and enable price discovery using various auction methodologies. At the heart of it, buyers compete for goods or services by bidding incrementally upwards before finalising the price. The bidding process can be open or closed, during which it’s possible to capture every activity of potential buyers, including lots searched or browsed, bids submitted, and lots won or lost.

Once in operation, B2B markets can incorporate data science in the form of machine learning with the capability to make recommendations on products, buyers and timing, thereby helping sales teams to operate more efficiently.

Recommendation algorithms also point buyers to possible substitute products if they exist. For example, with EV batteries it could recommend another supplier with a similar specification and price. This enables sellers to satisfy customer demand where previously the transaction would not have been completed. The use of data science in such a way can broaden understanding of the marketplace and the wider industry.

It is fair to say that for some industry sectors, including the EV battery sector, without an efficient and digitised supply chain, achieving the end goal of a carbon-zero future becomes a far greater challenge. The issue goes beyond what is good for business, it has a real societal impact too.

In the post-pandemic environment, the commodities sector may retain some of its traditional characteristics that smooth the works of the market, but they will also have changed for good with increased digitalisation. As the world eyes the prospect of ‘building back greener’ with net-zero emissions targets, digitising the multi-billion-dollar commodity value chain has a part to play. Markets will be created where they didn’t previously exist and enhanced where they do exist. Inevitably, there will be disruption, but that will be accompanied by opportunities for those who embrace change.

Buy Now, Pay Later (BNPL) – a new form of credit giving consumers increased flexibility when paying for goods and services – has seen growing popularity over the past year.

by Amon Ghaiumy,  CEO and Co-founder, Ophelos

With BNPL allowing customers to pay now, later, or in instalments when making a purchase – the service has seen a recent surge of use as people use it to purchase goods, or when facing difficult financial situations, as an alternative to high-interest credit cards. According to TSB, this has seen one in five adults in the UK now using it at least once a month, and one in ten using it weekly.

Whether a FinTech revolution or simply a shift in spending habits, it’s clear that BNPL is here to stay. However, regulatory changes are on the horizon with implications for both providers and consumers. Demand for BNPL will no doubt continue to rise in the long term, but as with any form of credit offering, there comes the unavoidable risk of debt.

In light of this, it is worth addressing changing trends in the BNPL space, how impending regulation could shape its future, and why BNPL providers should be putting the financial care of vulnerable customers at the forefront of their operations – particularly when it comes to debt resolution.

The growth of BNPL spending

The combination of necessity, accessibility and the fact it is a cheaper alternative to credit cards and payday loans is seeing customers increasingly opting to use BNPL products.

Following its surge of use in 2021, data is already pointing to a further increased uptake in 2022. A recent survey from BNPL provider Splitit for example found that over half of UK respondents (54%) are planning on using BNPL services in 2022.

BNPL’s increased availability is largely contributing to this growth. Gone are the days when product-specific credit would be used exclusively for ‘big ticket’ items such as appliances, electronics, cars or holidays. Nowadays, it’s possible to use BNPL to pay for all manner of consumer goods including everyday essentials, clothes and even food.

Banks have also jumped on the growing BNPL trend. Monzo, for example, became one of the first UK banks to begin rolling out a BNPL service to its customers, whilst its rival Revolut confirmed it was “at the early stages” of developing a BNPL feature for Europe last year. Similarly, Santander is launching its own BNPL app called Zinia across Europe this year, starting in the Netherlands.

However, it’s not just convenience that has led to a surge in BNPL’s use. Against the backdrop of the living crisis in the UK, we are seeing more people use BNPL for everyday purchases they need but can’t necessarily afford.

Research from TSB shows that one in four customers say they rarely have the money in their account to pay in full for the things they are buying, and also suggests that some are worryingly resorting to BNPL when they are struggling financially.

With many BNPL providers being observed to have little or no affordability checks – concerns are rightly being raised around already-vulnerable customers ending up in positions where they are struggling to manage financially.

This lack of diligent screening alongside growing supply and demand has pricked the ears of the FCA and the regulator is expected to introduce new rules as early as 2023.

What could these regulations look like?

It’s early days, but initial research from the FCA has indicated that as many as half of the people who enter into BNPL are already behind on payments, so it’s possible that regulation may call for stricter vetting from providers on customers to minimise risky loans from the outset.

With BNPL products currently unregulated, customer screening is largely done on a provider-by-provider basis, with some taking more measures than others. Under FCA guidance, this will likely change and should do, being vital that providers detect and protect vulnerable customers from the outset.

Also, many customers who miss payments are unaware of the implications it might have on their credit rating. As such, providers may be required to better communicate risks to their consumers at the point of purchase.

Either way, the FCA aims to implement rules that protect the consumers first and foremost, so providers should think about how they can get ahead of the curve now.

Using debt resolution as an asset

A simple change that providers can make today should be to reimagine their debt collection processes.

While fintech has given rise to innovations in customer experience at the point of purchase or lending, debt resolution is yet to adopt cutting-edge technology or modern ethical standards.

Still today, businesses often rely on outdated debt collection agencies who find it difficult to recover outstanding debts, spend too much resource on inefficient operational processes, or lack the tools, intelligence and insights to support financially vulnerable customers.

Meanwhile, financially vulnerable customers lack control throughout the debt collection process due to inflexible repayment options, an absence of digital tools for managing their debts and antiquated communication methods used by traditional collectors.

At Ophelos, we blend behavioural science with AI to help businesses identify and manage vulnerable customers who may be facing issues with debt. This approach ensures that customers can help devise their own bespoke payment plans, communicate with their providers in a way which suits them, and ultimately feel more secure in the arrangement.

As the cost of living crisis continues, how BNPL providers manage their approaches to debt resolution and vulnerable customers will increasingly be in the spotlight. Utilising technology to aid them in this process and partnering with ethical organisations in the space, will allow them to maintain their reputation among their customers, while also increasing their yield.

And so, while BNPL certainly has a place in our lives – providing convenience and flexibility at a lower cost when it comes to our finances – the businesses providing it must think carefully about the care of their customers. The question is: will it take regulation for firms to make this change, or will they lead the change themselves?

There were 208 US bank deals with an aggregate deal value of $77.58 billion in 2021, the highest level since 2006, according to S&P Global Intelligence. Having a clean data environment prior to a merger is crucial. Strategic technology partners can be beneficial during this time, as they can help banks get a holistic view of their data, while saving them both resources and time.

by Bob Kottler, Executive Vice President and Chief Revenue Officer, White Clay

What are the reasons behind the surge in M&A  activity? Bank executives are trying to offset losses triggered by the pandemic. Net interest margins are down to record levels due to the large demand for savings accounts compared to loan applications, forcing banks to pay out more interest than they’re receiving. Executives are aware of the opportunities that come with an M&A and are more eager than ever to take advantage of them. Having an aggregated clean data environment can help a newly formed bank maximise the benefits of the merger, ultimately leading to portfolio diversification, an increase in revenue and higher shareholder return.

Merging two banks brings operational challenges, one of which is needing to integrate data from two different core and ancillary systems to get a consolidated view of banking relationships. The success of the newly formed entity depends on the accuracy and complexity of this data, as the leadership team will use it to make long-term strategic decisions.

The key benefits of a clean data environment include:

• Getting pricing right – By unveiling the difference in pricing practices, the two banks can learn from one another and proceed with the pricing method that is more profitable and impactful to the bottom line. For example, the two banks might have similar or even overlapping customers, but are pricing loans completely differently, leading to a significant difference in customer profitability. A good technology partner will provide the newly formed bank with such insight, uncovering the most profitable path for the future.
• New market penetration – Having organised information about customers, including what products and services they have and don’t have access to, will enable the banks to cross-sell and market their offerings into the other bank’s customer base and expand their client portfolio. Additionally, a holistic view of customer data will allow banks to see if their existing customers are actually using the products and services they offer, and if so, market and sell more of those, leading to an increase in revenue. This will also help banks avoid regulatory penalties on unused banking products.
• Building better relationships with customers – Curated customer data will also allow banks to meet their customers where they are, providing crisp and relevant offerings that will help increase customer retention. For example, a married couple that banks with the same financial institution but has separate accounts expects the bank to be aware of their alliance and offer products and services based on their household needs. However, this is rarely the case. Technology partners can help newly formed banks get a clear overview of their client accounts, empowering them to make the necessary links that will lead to long-term, trusting relationships and increased profitability over time.
• Incentivising optimal banker performance – Data on banker performance will give the newly formed leadership team an overview of each department and individual banker, helping them quickly become familiar with the staff of the organisation they recently merged with. Tracking banker performance will also enable managers to set best practices, coaching staff better and ultimately helping the bank become successful, faster. Lastly, data will also give the board an accurate idea of how the newly formed leadership team is performing.

Banks are profitable when customers use the products and services they offer and when they sell new products, assuming that those products and services are priced appropriately. Having a clean data environment that enables banks to price products better, cross-sell deeper and deliver a personalised experience to their customers is necessary for a bank at any time in its lifecycle but is especially crucial during a merger. Bank executives are right to look at consolidation to offset challenges in today’s banking environment and add to their bottom line. However, without a universal view of their data, the benefits of a merger or acquisition may well be limited.

Since the early days of the digital movement, technology advancements have revolutionized work environments to achieve more efficient and profitable organizations. We now see business leaders moving beyond the bottom line, using technology to create environmentally favourable operations.

by Phillip McGriskin, CEO, Vitesse

This is true for global payments, where some of the earliest digitization efforts focused on automating simple manual tasks. In doing so, businesses were able to eliminate paper-based processes to consume fewer environmental resources.

As the digital movement exploded, process automation grew to encompass entire workflows, streamlining operations while also reducing waste and improving the environmental impact. For instance, businesses could initially scan an invoice into software to reduce the need for data entry, but advancing technology soon made it possible to send invoices electronically, automatically extract and store information, and even pay vendors without the need for paper documents or payments.

As businesses began to lessen their environmental impact through the use of technology, interest in conservation grew. According to an Accenture CEO study on sustainability, 44% of CEO respondents are now working toward a net-zero future for their organization. For many, technology will lead the way toward a greener future, particularly as cloud technologies make it easier to adopt cutting-edge advancements in payments technology. Gartner predicts that spending on cloud technologies will have grown over 23% in 2021 and that 75% of all databases will be deployed in or migrated to the cloud in 2022.

Making greener payments in the cloud

In order to understand all of the hype around cloud technology, it’s necessary to introduce some of the basics. Quite simply, the cloud is an off-premise location where organizations can store data, facilitate transactions or even consume software applications provided by external vendors. The magic of the cloud occurs from a very real-world technology called application programming interfaces (APIs).

APIs act as a connection layer, providing users with a single point of entry to the available functionality on the cloud. So, whether you’re accessing your own stored data, utilizing that data to fuel third-party applications or connecting to other users on the platform, it’s possible to enable all workflows from a single portal.

We can see the impact of the cloud on recent payments innovations. Vitesse, for instance, makes it possible for organizations to send and receive payments via a global domestic partner network. Communication with and movement of payments through the network occurs in the cloud, allowing businesses to more seamlessly transfer money, with payments made in local currencies.

However, while cloud technologies are streamlining processes and offering definite financial benefits to business organizations, such as a 30-40% decrease in the total cost of ownership, the cloud is also good for the environment, potentially reducing CO2 emissions by as much as 59 million tons per year. That’s the equivalent of taking 22 million vehicles off the roads.

The environmentally friendly aspect of cloud technology occurs by capitalizing on the economies of scale. Not only do cloud centres utilize far fewer servers than you would require to run your on-premise applications, but they’re also now doing so in a far more efficient manner:

• Cloud data centres can be positioned closer to the facilities from which they draw power, preventing power losses associated with long-haul transmissions and reducing overall usage.
• On-premise software is designed to handle high-intensity usage spikes. However, much of the time, systems sit idle, utilizing high levels of energy. Cloud servers, on the other hand, have higher utilization rates, meaning very little downtime and more efficient energy usage.
• Because cloud centres are typically engineered to use energy more efficiently than most on-premise applications, they can operate with less of an environmental footprint. One recent study determined that the energy required to run business email, as well as productivity and CRM software, could be reduced by as much as 87% of all business users moved these applications to the cloud.

Business organizations can more easily improve their own environmental accountability by moving processes, such as payments, to the cloud, while boosting internal efficiency and turnaround times for equal bottom-line results.

With hybrid working seemingly set to stay, can complete discovery of data and devices and ongoing monitoring of asset behaviours across highly dispersed financial service estates mitigate remote security concerns in the new hybrid working world?

by Andrew Gehrlein, Chief Financial Officer, Park Place Technologies

Across the conclusions of a recent McKinsey report on the future of the physical workplace it was clear that the majority of employees (52%) would prefer a continued hybrid model of working. McKinsey expanded the definition of hybrid workplaces to include the usage of flexible workspaces that are physically located outside existing company office locations to include home office workspaces alongside hub working and communal space works. How do banking infrastructure leads accommodate this ongoing transfer of working conditions, especially with the increased security parameters that the world of trading demands?

Since the initial rush to accommodate working from home mandates in March 2020, these IT infrastructure leads have now had the benefit of time and experience to consider, mitigate and control the security impacts that continued hybrid working poses in finance. Today, these leads are proactively focused on developing a clear, structured, and continued strategy for those organisations and employees who elect to work outside of company facilities in an environment where speed, security and increased regulatory pressures are paramount considerations in each financial exchange.

Hybrid staff continually need to access devices and exchange data above and beyond the usual elaborate security firewalls that these organisations typically embrace from within fixed corporate networks. Now, on a permanent basis, these IT leads must identify all possible ingress and egress points in their newly expanded dispersed network before holistically deploying enhanced next generation security and cyber services that give increased protection from hostile activities. This also includes systematic and ongoing understanding of endpoint usage, and endpoints themselves need to be capable of being restricted and isolated quickly, to avoid further contamination should a security breach occur.

Within a hybrid working strategy, organisations also need to develop a clear understanding of usage of cloud accounts, yet the nature of cloud service provision means that much of this is dynamic, and complex to track. Additionally, public network usage provides further challenges in settings such as communal spaces. Data transfer to a wireless printer inside a secure corporate facility poses relatively little risk yet place the same wireless printer within a hub space and the possibilities for hostile activities increase exponentially.

Equally in the home environment additional vulnerabilities exist. Routers can have exposed modem control interfaces; or staff using BYoD that may fall outside of patching windows; or the increase in domestic IoT exposure points, all of which need additional consideration. Faced with the level of challenges, it becomes quickly apparent that finance IT leads essentially need a real-time, always-on, centrally managed discovery and monitoring system of devices and data.

How can this be achieved? Pre-Covid, IT Asset and inventory device management was limited largely to a manual discovery and tracking that assisted with security and audit requirements. Faced with the complexity and threats outlined outside of corporate locations, today this discovery must be conducted as an ongoing service, in real-time, expanded across multiple remote locations for immediate discovery, automating and simplifying asset disclosure without manual IT inventory collection. In short, discovery needs to provide complete visibility into financial services’ data centres and cloud environments, and should include servers (physical, virtual and cloud), desktops, peripherals, edge devices, alongside the infrastructure services.

Discovery is the first step. Monitoring networks this complex is the second. Network monitoring tools have become increasingly specialised and siloed towards departmental usage, neglecting the holistic cross-departmental requirement that hybrid working needs. What’s required today is proactive and predictive generic monitoring across hardware and software that gives leads immediate and actionable insights to gain the greatest level of controls allowing identified new devices to be quickly added to the fold and protection. Only then, when IT leads understand what hybrid workers are using at any given point in time, can appropriate security solutions be confidently layered, safe in the knowledge that there are no gaps within defences.

Cloud technology for distribution and processing of market and reference data is disrupting financial data management. According to a comprehensive research report by Market Research Future, the financial cloud market size is expected to reach US$ 52 billion by 2028, growing at a compound annual growth rate of 24% between 2018 and 2028.

by Mark Hermeling, CTO, Alveo

The migration of market and reference data to the cloud has been an ongoing process for several years.  Shifting to the cloud has not only reduced infrastructure and maintenance costs by moving off on-premise infrastructure to increase scalability and elasticity, and therefore ensure an element of future-proofing, it has also helped reduce the cost of market data management through appropriate-sized infrastructure, centralised licensing and more easily sharing data sets.

The use of cloud-native technology can make the approach more easily scalable depending on the intensity or volume of the data. Using cloud-based platforms can also give firms a more flexible way of paying for the resources they use, including driving an organisation-wide standardisation of data charging and consumption. In addition to this, an improved data lineage ensures that source data and any transformation in the data’s lifecycle can be clearly captured. This transparency not only helps firms optimise and share their data assets internally where appropriate but reduces the cost of change.

Shifting the ecosystem to the cloud

All the above show the benefits of moving to the cloud. Today, we are witnessing a seismic shift in the market and reference data management process, with the whole data ecosystem now migrating to the cloud, where financial services firms can move away from slow manual processes and fragmented on-premise systems and start reaping the rewards of improved efficiency and lower costs that the cloud can bring.

Data vendors are starting to push their products directly onto cloud platforms like AWS, Microsoft Azure and Google Cloud Platform. Added to that, we are witnessing providers of applications like portfolio management systems, trading solutions and risk and settlement systems, moving there also. Again, they are being attracted by the enhanced security and scalability, increased efficiencies and reduced cost cloud deployment can bring. So, rather than it being a case of companies placing individual applications in the cloud or using specific software as service providers to host their data management platforms, the entire data ecosystem is now moving to the cloud.

The implications are that data management systems need to be both cloud-agnostic and cloud-native to optimally source, integrate, quality-control and distribute market data. In other words, systems used need to be designed and built to run in the cloud and to work effectively in that environment but at the same time, they should not rely on a single cloud provider’s proprietary services or in any way be locked into a single cloud vendor.

With this shift accelerating, firms need to find new ways of provisioning data onto the cloud and into their applications that also reside there – and it is increasingly urgent that they do if they want to keep up with the competition and retain their edge over their rivals.

Every firm will need to consider everything: from building in more robust information security to keep data safe in the cloud right through to enhanced permissions management, usage monitoring, and of course, data quality, which is always a topic. That’s important. After all, if organisations automate more, put more applications in the cloud, or simply more directly connect them, then data quality becomes even more critical because the process of change removes what is typically a manual step in between cloud and on-premise, which could potentially act as a safety net to prevent mistakes escalating quickly into significant issues.

Achieving all this can be made easier through the partial or full utilisation of vendor-managed solutions with a ‘one-stop-shop’ for the end-to-end provision of market data from vendor feeds all the way to distribution to their customers. It is, after all, essential that cloud environments are optimised to achieve maximum efficiency. To be truly effective, these solutions need to be cloud-neutral: part of which involves being capable of interacting with data on any public cloud platform.

Starting the move today

Given all the above, while the ongoing migration of financial services market reference data to the cloud is nothing new, the migration process is now gathering pace. It is now longer just data management solutions and processes that are moving over to the approach. Upstream, data vendors are putting data on public cloud platforms and, downstream, application providers are doing so also.

There is therefore a growing imperative for financial services firms to shift their market and reference data to the cloud. They can’t afford to wait if they want to remain competitive. However, in migrating their approach, they will need to opt for cloud-native solutions that support ease of use and ease of management. These solutions will also need to be cloud-neutral and cloud-agnostic to deliver the scalability that firms will need moving forwards.

Moreover, in rolling out their approach, financial services businesses will also benefit from opting for a managed services approach to data management which allows them to tap into all the benefits of the cloud while eliminating the day-to-day burden of data processing and platform maintenance. With all that in place, they will be well placed to maximise the benefits of having their financial data in the cloud.

Of all the FinTech and banking trends of the past few years, the story of Buy Now, Pay Later (BNPL) stands out as one of the most prominent and memorable. During a period of tumult and uncertainty, BNPL seemed to go from strength to strength, growing exponentially in scale and popularity and swiftly being incorporated into the offerings of some of the world’s largest and most influential companies.

by Ion Fratiloiu, Head of Commercial, Yobota

Breaking financing down into multiple fixed repayments has allowed consumers to increase their short-term spending power, which can be a tremendous advantage to those with regular income that lack saved capital. The benefits aren’t limited to the user, of course. Retailers are reaping the rewards of this heightened spending power, while BNPL providers have grown in tandem with the product’s popularity.

BNPL is not a license to spend with abandon – it is ultimately a credit product, and its misuse can have adverse effects on the consumer’s credit rating and financial wellbeing if repayments are missed. It is a tool that has the power to help consumers reach their immediate goals, but one that must be treated with care and caution.

With Which? estimating in July 2021 that a third of UK consumers reported having used a BNPL product at least once, this convenient lending system has clearly landed in the business to consumer (B2C) sector with aplomb, changing expectations and best practices for lenders and retailers alike. This sea-change, however, is not limited exclusively to B2C – the next destination of the Buy Now, Pay Later revolution is in fact other businesses.

Back to B2B

The next giant leap for BNPL might stem from its usefulness to startups and small-to-medium enterprises (SMEs). Liquidity and financing are common obstacles for businesses in their early stages, and while specialist services do exist to cater to these issues, BNPL can provide a greater degree of control, flexibility and transparency that could prove invaluable to businesses that are in the process of levelling up.

Support for SMEs and startups comes in many forms, but overreliance on incubators and seed funding can stunt the overall development of the sector. Sometimes, businesses need to be able to manage their own finances at speed, needing short-term injections rather than waiting for their next seed round. Traditional lending options are available, and have existed for years, but can be slow to secure and be laden with complex terms and conditions.

This is what makes BNPL for Business such a tempting proposition. The ability to spread repayment for specific purchases over an agreed period suits businesses with predictable revenues but little capital – like a subscription-based startup or a growing company still awaiting funding. BNPL can make borrowing frictionless and consistent in a way existing options cannot.

This isn’t only good news for small businesses – growth in the BNPL for the Business sector could fuel the same growth that B2C did, with all parties involved able to benefit. We could see SMEs experiencing improved cash flow management and spending power, and specialised B2B BNPL providers expanding with the same speed as their B2C counterparts.

Power to pay your own way

The driving force behind the rate of change within BNPL is the strength of modern core banking. Banking as a Service (BaaS) has simplified the process of setting up seamless and scalable lending and payment solutions to the point that any business can create their own financial products with ease. This means that not only can more businesses offer SMEs lending options, but more SMEs can create their own BNPLs and offer split payments through their own platforms.

In the UK alone, BNPL usage almost quadrupled in 2020, totalling an astounding £2.6b in transactions – this sort of opportunity should not be exclusive to major brands and eCommerce retailers. Whether using the services themselves or offering them to their users, SMEs should consider adopting BNPL as part of their approach if they want to stay ahead of the curve.

The year of BPNL for small business

While the world’s largest companies like Amazon and Apple have already embraced BNPL, enjoying banner years of their own, the success of new businesses is a more encouraging metric of our economy rebuilding. Seeing more SMEs and startups turn to Buy Now, Pay Later could be an indication of better things to come, and of different industries and sectors beginning to get back on their feet.

2022 is a year for optimism, for looking forward and having confidence in better things ahead. BNPL is one area with the potential for success, and the opportunity at hand is there for the taking. All small businesses need to do is embrace it for themselves.

 

From launching his financial career at Deutsche Bank, Ion spent a number of years consulting in the equity capital markets space and leading sales growth for FTSE500 company Fiserv and core banking provider Thought Machine. He joined Yobota in 2021 to launch its commercial operation, leading GTM strategy and building a diverse and multi-faceted team to take the company to the next stage of growth.

Supported by a payments ecosystem that becomes increasingly more sophisticated each day, and driven by accelerated digital transformations following the pandemic, the payment methods consumers have at their disposal today are myriad. Not only are Alternative Payment Methods (APMs) proliferating across the globe, they are already dominating cards in some countries and consumers are developing specific preferences according to region or country.

by Kristian Gjerding, CEO, CellPoint Digital

Armed with and accustomed to this array of APMs, consumers can spend their money in multiple, digital-first ways almost anywhere in the world from card or cash-based wallets to mobile payments, to paying by instalments.

Merchants who are unable to accept these APMs risk creating customer friction points that interfere with their growth ambitions and prevent them from scaling their businesses to serve a global customer base.

The rise and rise of APMs

Consumer adoption of APMs is growing exponentially and was believed to account for over half of all global e-commerce payments in 2019 – the last year for which results are available. At a more regional level, it is reported that in Europe, upon reaching the Point of Sale (POS), 80% of consumers have an expectation to pay for their goods and services with a digital payment method rather than a typical debit or credit card.

Meanwhile, across the Asia-Pacific (APAC) region, nearly all consumers (94%) report that they would consider using an APM in 2022 and within the Middle East and North Africa (MENA) experts are saying digital wallets are set to be the region’s preferred means of making payments. Owed largely to the pandemic and the necessity for online, digital, and contactless payments, Latin America is also catching up with 55% of the population now banked and the use of APMs on a steady increase.

As we can see, consumers are shifting towards APMs in ever-increasing numbers. For merchants with cross-border growth ambitions, it means that developing an APM strategy is now crucial for penetrating global markets and driving revenues.

Tackling cart abandonment

‘Cart abandonment’ is an inevitable bugbear for online merchants with 70% of shoppers deserting their virtual trolley at the point payment is requested.

As an increasing number of merchants with ambitions of international growth are experiencing, an inability to accept a customers’ preferred payment method is one of the more reliable ways to kill a conversion. Indeed, a recent study in the US found that 42% of American consumers will bring a purchase to a halt if their favourite payment method isn’t available.

The problem for merchants is, with all these different payment methods, some more popular in specific regions than others, and with a gauntlet of contrasting international regulations to navigate, implementing and managing all these methods can be incredibly difficult.

It is partly because of their ability to confront this friction that payment orchestration platforms are growing in prevalence.

Enter the payments orchestration provider

According to PYMNTs, the global market for payment orchestration platforms is also expected to grow 20% every year between 2021 and 2026. With each new merchant implementing the technology, consumers across the globe have a new place to spend their money in whichever way suits them best.

The platforms provide merchants with a single interface through which all transactions between themselves, their customers, and their payment providers are initiated, directed, and validated. The agility this confers to merchants who would otherwise need to manually integrate new APM options – resulting in protracted time-to-market and decreased competitiveness – is considerable.

Moreover, the complexity of monitoring the performance of multiple, manually integrated, and siloed payment methods would add to these obstacles and delays. Here, payment orchestration intercepts by automatically aggregating and processing these crucial data streams and providing merchants with valuable, real-time analytics that save time, prevent human error, and aid decision making.

This speed to market coupled with comprehensive real-time reporting allows merchants to begin increasing revenues in the short-term and make better decisions to facilitate growth in the long-term. However, the opportunities to enhance cash flows don’t stop there.

When a merchant relies on a single acquirer/PSP it is they who have ultimate control over transaction flows. For example, if the PSP succumbs to an outage, the merchant is subsequently and directly impacted. Likewise, if the PSP routes transactions to a specific acquirer, the merchant can do little if the costs they incur from this acquirer are unfavourable to them. A payment orchestration provider redresses this imbalance by transferring control of the transaction flow back to the merchant by allowing them to create real-time rules for switching transactions and offering APMs to consumers. This dynamic routing improves the success of processing rates, gives customers more payment options, and means failed transactions can be re-routed to the next acquirer leading to fewer lost sales.

Collectively, these various payment orchestration features and functionalities both unleash the potential of APMs and provide merchants with the speed and flexibility to drive revenues to ambition-exceeding levels.

Partnership with payment orchestration platform provider is key

By plugging directly into existing core or eCommerce systems, payment orchestration platform providers allow merchants to go straight to market with a growing payment ecosystem where the best-suited partners are easily picked and added. With their online checkouts optimised to accept a full suite of APMs, opportunities for growth quickly begin to multiply.

Merchants can display their products or services across multiple digital channels knowing that consumers can pay using whichever APM they prefer. This reduces cart abandonment rates and allows merchants to target specific regions by demonstrating their ability to accept the most popular APMs consumers in that region use.

Payment orchestration enabled APMs to add agility and dynamism to today’s merchants that allow them – for the first time – to give consumers whatever payment method they want, wherever they are. As the adoption of APMs continues its steep upwards trend, this capability will only become more essential for merchants looking to thrive on a global scale.