What will the payments industry look like over the next few years? A new report from the Payments Innovation Jury, an anonymous group of 25 industry leaders, aims to answer that question.
A poll of the group shows that 60 percent believe near-field communication (NFC) payment technology won’t live up to its hype, and most think Asia will lead the way for payment innovation. The free report covers a variety of other topics, including where businesses can find the most innovation within their organizations, as well as what the most profitable payment service will be over the next five years (more on that below; you’d be surprised). The report was a joint effort between electronics payment company Ixaris and financial services firm Anthemis.
The mysterious Payments Innovation Jury is made up of leaders in the payments sector from 14 different countries. Their names are kept private so that they’re able to speak freely, John Chaplin, chairmen of the jury told me in an interview last week. Most of the participants have been high-level executives at companies like Visa, MasterCard, and PayPal, Chaplin noted. The group meets up every two years to chat about the state of the payments industry, and this is its third report.
“When I started this 4 to 5 years ago, it was before anybody was running [payment] companies based on innovation,” Chaplin said. “This time we spent a lot more time looking at the different aspects of mobile [in the industry].”
When it comes to NFC, many in the jury said there hasn’t been a demonstrable need for contactless payments from consumers. More than half of the group said digital wallets will replace credit and debit card payments.
“The Jury offered their views on which payments innovation has the greatest hype rating and therefore the biggest risk that the business case will not be achieved,” the report said, referring to the hype surrounding both NFC and digital wallets. “Hype is particularly prevalent in payments, with many organizations trying very hard to talk up their chosen innovation in order to achieve the necessary critical mass.”
The jury found that cross-border remittance services (sending money to other countries) had the potential to be the most profitable payments solutions over the next five years, with virtual and online payments coming a close second. I honestly never thought much about remittance services, but Chaplin pointed out that it’s one of the areas where consumers would pay for better service (in other words: watch out, Western Union).
As for Europe’s poor standing, one jury member noted, “Europe is so weighed down by standardization initiatives such as SEPA and by the banking crisis that there is little energy left for innovation compared to Africa and Asia.”
Asia led the regional innovation pack with a 3.9 score from the jury, while Africa and North America both received a 3.5. Latin America received a slightly lower score of 3.4. Europe lagged far behind with a score of 2.8 and 2.9 for its Central/Eastern and Western regions, respectively.
Mobile payment photo via Shutterstock