Future of Payments

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INDEPENDENT PUBLICATION BY 24 / 04 / 2016 #0371 raconteur.net £74.52trn was paid out in UK transactions in 2015, up 1 per cent on 2014 Although this publication is funded through advertising and sponsorship, all editorial is without bias and spon- sored features are clearly labelled. For an upcoming schedule, partnership inquiries or feedback, please call +44 (0)20 8616 7400 or e-mail info@raconteur.net Raconteur is a leading publisher of special-interest content and research. Its publications and articles cover a wide range of topics, including business, finance, sustainability, healthcare, lifestyle and technology. Raconteur special reports are published exclusively in The Times and The Sunday Times as well as online at raconteur.net The information contained in this publication has been obtained from sources the Proprietors believe to be correct. However, no legal liability can be accepted for any errors. No part of this publication may be repro- duced without the prior consent of the Publisher. © Raconteur Media DAN BARNES Award-winning business journalist, he specialises in financial technology, trading and capital markets. LEO KING Writer and editor, he works with the Finan- cial Times, The Sunday Times, Forbes, Bloomb- erg, The Economist and The Daily Telegraph. DAVID BENADY Specialist writer on marketing, adver- tising and media, he contributes to national newspapers and busi- ness publications. DAN MATTHEWS Journalist and author of The New Rules of Business, he writes for newspapers, magazines and websites on a range of issues. HAZEL DAVIS Freelance business writer, she contributes to The Times, Finan- cial Times, The Daily Telegraph and The Guardian. JOE McGRATH Managing editor of The Trade and Global Custodian, he also writes for The Wall Street Journal, Financial Times and The Times. CLARE GASCOIGNE Formerly on the staff of the Financial Times, she is now a freelance journalist specialising in City and financial features. DISTRIBUTED IN BUSINESS CULTURE FINANCE HEALTHCARE LIFEST YLE SUSTAINABILIT Y TECHNOLOGY INFOGRAPHICS raconteur.net/future-of-payments-2016 RACONTEUR PUBLISHING MANAGER Michelle Ingham DIGITAL CONTENT MANAGER Sarah Allidina HEAD OF PRODUCTION Natalia Rosek DESIGN Samuele Motta Grant Chapman Kellie Jerrard PRODUCTION EDITOR Benjamin Chiou MANAGING EDITOR Peter Archer CONTRIBUTORS NUMBER OF ANNUAL CONSUMER PAYMENTS MADE PER UK ADULT UK PAYMENT STATS Source: Payments UK 2015 Retailers may be keen on a cashless society, but there is resistance from consumers Smaller companies are turning to innovative payment solutions to transform their business Improved payments systems are enabling more UK companies to boost exports CASH ISN'T GOING DOWN WITHOUT A REAL FIGHT M AKING PHONES PAY IS A WORK IN PROGRESS TOP SOLUTIONS TO SOLVE PROBLEM OF PAYMENT BETTER WAYS TO PAY OPEN UP WORLD TRADE A clash between cash and digital transactions is being fought worldwide 03 04 06 07 FUTURE OF PAYMENTS Cashing in on payments tech innovations Payments technology continues to evolve as businesses cash in on innovative ways of paying to not only improve customer experience, but also boost the bottom line OVERVIEW JOE McGRATH T he global payments industry is growing fast as go-ahead start- ups in financial technology de- velop emerging technologies and investment from big banks filters through. A 2016 report by Boston Consulting Group estimates the transaction banking market will reach some $2 trillion by 2024, up from $1.1 trillion in 2014. While the spotlight has been on innova - tion and technology, businesses are now be- ginning to realise the benefits of new pay- ment methods to fuel corporate growth and improve the bottom line. Matteo Stefanel, man- aging partner of cata- lyst investor group Apis Partners, says the inter- national networks for making payments have been considerably up- graded in recent years. "Payments infra- structure globally is continuing to move towards more efficient real-time, 24/7 ubiqui - ty, such as the Faster Payments system in the UK and IMPS in India," he says. Global businesses, such as taxi-hailing service Uber, owe much of their growth to the success of real-time payments. The Californian group, which started up in 2009, is now estimated to be worth more than $62 billion. Its growth in profits has largely been down to harnessing disruptive technologies to gain a share in multiple markets. Vaughan Rowsell, founder and chief product officer at Vend, says: "Uber offers a number of ways to pay, including Google Wallet and PayPal as well as credit card. "Popular businesses are showing others that those payment solutions, which were new a few years ago, like contactless cards or mobile wallets, are now real, reliable and widely used. As adoption has been slow, but steady, the technology has been able to evolve and become better over time." Mr Stefanel agrees, stressing that pay - ments should be thought of in the context of their role in enabling commerce. "The level to which payments are friction- less can determine whether online baskets make it to checkout," he says. "Amazon and Uber, with their one-click and invisible checkout processes, can very much attrib - ute a portion of their success to this." Mr Rowsell says there is a lesson here for businesses that the biggest part of growing the bottom line is the number of options on offer to the customer. He says: "The payment aspect of the buying process is hugely important to the customer experi - ence. Shoppers expect choice, they expect payment to be quick and painless, and they expect it to be modern – on mobile, for exam - ple. Our patience for standing in a queue to pay for an item is di- minishing. "By offering these new ways to pay, busi- nesses can create a better customer expe- rience, reduce queues and sell to more cus- tomers in a shorter timeframe, and therefore grow their profits." So, for businesses, quicker, cheaper sys- tems and increased customer payment options mean there is now less reliance on cash. However, it also means that customer expectations are increasing. Nigel Hyslop, president and UK manag - ing director of Global Payments, says: "We have seen a sharp increase in the number of people using their mobile phone to make purchases online or pay with contactless for items up to £30. "More people are realising that using con - tactless with their mobile is easier than dig- ging around for spare change when paying for lower-cost items." More people are realising that using contactless with their mobile is easier than digging around for spare change when paying for lower-cost items In the last 12 months, there has been large- scale adoption of contactless payments at the physical point of sale (POS). Figures from the UK Cards Association show the number of contactless transac - tions in January 2016 was up 212 per cent on the same month last year. This has been spurred by banks continu- ing to issue contactless-enabled cards and retailers continuing to activate compatible POS terminals to take advantage of the lower acceptance costs of contactless payments. However, payment innovation interna - tionally goes much further than mobile and contactless payments. Ian Foottit, head of UK financial ser- vices strategy team at consultancy group Deloitte, says small and medium-sized enterprises are benefitting from improved record keeping and integrated invoice management, while new fintech ideas are leading to flexible supplier financing and competitive foreign exchange rates for businesses. "Large-scale retailers can use payments data to better understand the shopping behaviour of their customers and inte - grate payments with loyalty programmes," he says. "Small-scale merchants may benefit from the scope provided by secure online pay- ments and convenience of mobile accept- ance technology." Mr Foottit says businesses that embrace innovation in payments are likely to find they are able to streamline their operations and offer a greater customer experience. Some of the largest companies in the world are using new payment methods to go one step further than paying for goods. They are using them to enhance buyer in - teraction with their products. Starbucks is one example. The coffee giant launched mobile order and pay, which has been integrated with its rewards card system, enabling UK and US customers to pre-order through their mobile phone and collect on arrival. The importance of the shifting payments landscape is probably best illustrated by looking at the world's banks. A recent report by consultants McKinsey notes that 11 of the world's major banks have already started innovation hubs and a fur - ther six are directly investing in enhancing payment technologies. Of those that aren't, five are partnering with fintech firms, three are looking to ac - quire specialists in the market and three more are building brand new divisions from scratch. At the beginning of April, banking co-op - erative SWIFT announced that 21 banks had signed up to a brand new global payments innovation initiative intended to improve the customer experience by increasing the speed, transparency and predictability of cross-border payments. Participating banks include some of the biggest names in banking, such as Bank of America Merrill Lynch, Bank of China, Barclays, J.P. Morgan Chase, Royal Bank of Canada and Wells Fargo. Share this article online via raconteur.net Source: UK Cards A ssociation Source: Payments UK 212% year-on-year increase in the number of contactless transactions made in January 2016 Cash Debit card Credit card Automated credit Direct debit Other Cheque 2014 2024 FORECAST 345 172 63 41 20 9 7 12 2 282 225 67 53 37

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