Evaluating FinTech & PayTech

The payments landscape is getting a major makeover thanks to the rise of FinTech and PayTech companies. PayTechs, a subset of FinTechs, make up 25% of the industry and are focused on providing innovative payment solutions for consumers and merchants. This market sector is valued at over $2 trillion and recognises that fast, frictionless, and integrated payments are what customers want. As a result, this is an excellent time for PSPs to rethink their strategies and join the digital revolution.

The Rise of PayTech

PayTech has rapidly emerged as a critical player in the financial industry, sparking significant payment changes. Our article “Evaluating FinTech & PayTech – Seven Forces Shaping the Future of Payments” examines how PayTech revolutionises payments in critical areas such as open banking, real-time payments, cross-border payments, and more.

As payments become more instant, frictionless, and embedded within customer journeys, PayTechs are driving transformation in the industry. Adapting to these changes will require a fundamental shift, and PayTech is at the forefront of this shift. We aim to help payment service providers (PSPs) assess the level of innovation enabled by PayTech in these influential areas.

At the same time, incumbent PSPs also have a significant role. They must help shape the industry’s future outlook to serve their customers better and guide them into the next payments era. Ultimately, PayTech is about opportunity – a chance to leverage these changes to create more value for customers and drive business growth.

Looking at the future of payments, it is clear that PayTech is undergoing significant changes. Here are a few key takeaways:

• Connected commerce is paving the way for a more efficient, cost-effective, and secure digital economy. New payment options are making it easier for merchants and consumers to connect directly. Many payment providers are focused on offering “value beyond payment,” providing additional services that enhance the overall customer experience and make them a one-stop shop for all payment needs. Open banking is driving innovation and empowering more players to offer “pay by bank” options and new payment solutions like variable recurring payments (VRPs).
• Real-time payment rails (RTR) are unlocking innovation and making it easier for PSPs to serve customers through account-to-account (A2A) transfers, which is further accelerated by open banking. Embedded payments are becoming more seamless and invisible as non-financial service providers integrate payments into customer journeys – a trend fueled by the rise of e-commerce, platforms, and marketplaces.
• PayTech ecosystems are being developed that offer robust security with appropriate storage and data management solutions which leverage data generated from customers and merchants through collated transactions, unlocking new opportunities for data monetisation and unique customer offerings.
• The emergence of digital currencies and crypto creates excitement in the world of payments, offering new payment methods and a new infrastructure that enables instant settlement, programmability, smart contracts, and tokenisation. Innovative payment facilitators (PayFacs) are fundamentally changing how companies, acquiring banks, and card networks work together.

The Future of Payments: Seven Compelling Forces

Is your organisation ready for the future of payments? Open banking is the crucial turning point for the financial industry, revolutionising the payment landscape with a brand-new method and framework for innovation.

While not providing a new set of payment rails, open banking creates a fresh approach to payment initiation through the use of application programming interfaces (APIs). With these APIs, single payments can be easily triggered while having the added benefit of flexible solutions, such as creating a mandate for VRPs.

In addition, APIs that coexist alongside open banking have also removed the barriers of fragmented banking rails, unleashing the potential of A2A payments and creating an effective “pay by bank” option, which makes it easier to access payment clearing systems and embeds an A2A payment at the point of purchase. As a result, both customers and merchants have more payment options than ever before.

The open banking movement is gaining momentum globally, significantly changing how banks approach business models, customer engagement, and service delivery. With digital experiences becoming increasingly essential, open banking provides organisations with innovative and intuitive ways to serve their customers.

Real-time payments: The power of RTP with value-added services

Real-time payment infrastructure has revolutionised the payments landscape, but it’s true potential lies in the accompanying value-added services. These services have proven effective in scaling and delivering on the value propositions of RTP networks. Take Australia, for example, where Osko by BPAY is the first value-added service that uses an alias, such as an (email or mobile number), in place of an account number to initiate payments on the New Payment Platform (NPP).

Real-time payment rails also enable tremendous innovation across overlay services, allowing all PSPs to serve their customers through A2A better. This process is further reinforced and accelerated by open banking.

Providing these “overlays” benefits financial institutions, PSPs, PayTechs, and FinTechs by enhancing their bottom lines through new sources of high-margin revenue and increasing transaction volumes on the rail itself. It is a win-win situation for all parties in the ecosystem.

Cross-border payments evolve to deliver warp-speed efficiencies at a lower cost

As the world becomes more interconnected, cross-border payments are becoming increasingly important. Unfortunately, these payments have historically been slow, expensive, and difficult to track. However, now, thanks to new regulations and technological advances, the future of cross-border payments is looking brighter than ever.

PayTechs are leading the charge in transforming the cross-border payments business for wholesale and retail transactions. They are leveraging the power of digital assets, cryptocurrencies, and DLT technology to make payments faster, cheaper, and more efficient. Moreover, they are doing it while maintaining a high level of transparency essential for building customer trust.

One critical development is the G20’s endorsement of a comprehensive roadmap for enhancing cross-border payments. This roadmap covers 19 different “building blocks” across five focus areas, all aimed at making cross-border payments more secure and reliable.

In the short term, we will see a focus on migrating to the ISO 20022 standard, which will improve the quality of outgoing messaging and give us richer data to work with. By staying current on these technological and regulation advances, payment service providers can offer better strategic solutions for their customers’ cross-border payment needs.

Contact us today for more information on Ripae and how we can assist with your PSP requirements and strategic direction.

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