The search for Uber of Payments is on

Uber is known for effective global disruption to taxi industry. It became an adjective and a verb in innovations’ circles. Therefore Uber of Payments in the title. Whether you do it as “Banking with bookkeeping & money management” (Europe) or “Bookkeeping linked to your bank accounts” (North America), finance is a part of daily living. It is woven into community by helping individuals manage personal finances and financial risks over a lifetime, facilitating B2B and B2C payments and connecting lenders with borrowers to channel the money where it can make the most.

Technology and finance are inseparable

… so boom in technology created countless #fintech startups, a lot of them with significant funding, which are actively seeking disruption in every imaginable way. Banks at large did not catch up yet how disruptive this process can be to their fundamentals.

Being an innovator inside the bank is a lonely job, says JP Nichols, Co-founder of @BankInnovators Council. Banking system stability is crucial to governments and organized nations, so chipping away at its business happens way slower than anywhere else. Since 2008 financial crisis people mostly using just basic banking services are well aware that within wider financial services, tied to the banks at its roots, there are shady ‘financial product innovations’ abound.

The driver of the changes to standard banking

… is not even a technology progress, but the nagging feeling on the part of the everyday customer that somewhere, somehow, he is getting screwed.

So innovating trends of both good and bad nature are accelerating now beyond banking, and 2016 will be a scene of significant changes in the payments industry. Canada may see them last of developed countries, just because we adopt new financial processes with a healthy dose of caution, and our market is relatively smaller than US and Europe.

Fintech funding

With the momentum in #fintech increasing, money is pouring to this sector in search of the next Uber of payments. Small businesses are all of a sudden bombarded with offers of loans or bridging receivables. Mobile apps for in-store payments are popping at multiple retailers. Each smartphone manufacturer developed their own payments platform. It’s getting crowded in this space, and the fight is now for national reach and integration with most institutions. The Big Banks in North America were slow to negotiate fees with Apple, and that created a whole slew of new opportunities for other players.

What started with young, well-off consumers waving their smartphones at Starbucks to move past cash register, is now maturing as a race to national-wide platforms for non-bank payments.  Ernst&Young survey of >10k people in 6 well developed countries hints at non-bank payments options growing possibly to 30% of digitally active users in 2016. As huge as it sounds, reality check shows that it is only at 5% now (of digital users that is, not the population), and obstacles are resembling the bottom of an iceberg. Some of them include lack of national platform, security and authentication concerns, inadequate protection and regulations, merchants lagging in technology updates, RFID deployment in merchandise. So, simply speaking, everyone is unprepared. But that can change in a snap. Once a few bigger puzzle pieces fall in place, the new picture will be clearly visible to mass consumer.

Why now?

What is the basis of acceleration forecast? Non-users of #fintech products cited as top reason for not using them the lack of awareness.

And while #fintech startups are advertising as better customer experience and lower/no fees, have no doubt: they are after every line listed on bank’s business income statement. From payment processing, transaction recording systems, through cross-border money transfers, stock trading, mortgage lending, lines of credit, there is a #fintech startup focused on every under-served financial niche.

It will be interesting to see which ones will go main stream first – we will witness it through traditional advertising, when the most successful startups shake off the initial variable cost marketing.

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