2021 Trends: How banking may change over the next year
Of all the technology sectors to have prospered amid the Covid-19 pandemic, the online payment space has emerged as one of the most influential, following the call for social distancing and demand for contactless payment solutions.
“In fact, the Global Payments Report for 2020 published by McKinsey & Co. found that the digital payments sector experienced half a decade’s worth of growth and development in just a few months[i],” explains Andrew Hardie, Chief Executive Officer at [email protected] - a leading payment aggregator and provider of secure payment solutions. “Both in South Africa and abroad, this coincided with a significant increase in the use of online payment gateways and platforms for businesses and consumers alike who were looking to stay safe while socially distancing.”
Yet, looking ahead to 2021, Hardie indicates that traditional payment processes will remain the norm; however, markets should anticipate continued innovation in the payments landscape as digital solutions gain traction.
Cash will continue to be king
As much as the world becomes increasingly digital, it is important to first recognise that cash will remain the foremost alternative bill payment method to debit orders and formal banking channels in South Africa.
“We’ve seen increased scrutiny for cash globally, as the physical exchange of goods has come to be closely associated with the spreading of Covid-19. However, with a large part of the South African population being mostly underbanked, we can expect the use of cash to remain the most popular form of exchange for bill payments,” advises Hardie. “For this demographic, cash is the most convenient and reliable form of trade. Looking to the future, however, it is important to note that at some point cash will start to be cannibalised as more and more people become banked, as mobile money becomes better entrenched, and as e-wallets become more commonly used.”
More digitisation, more convenience
While consumers will continue to rely on cash, Hardie also anticipates greater innovation in the digital payments space. Banks, mobile network operators and payment service providers are already making advanced strides towards digitising bill presentment and payments. Retailers are also looking to extend their footprint into the digital realm, with many of these businesses now introducing their own mobile or web applications for consumers to process payments on specialised platforms.
“In entering the digital arena, retailers and other goods and service providers are tapping into the growing number of consumers who are moving online, with utility and functionality becoming key determining factors,” explains Hardie. “As such, we can also expect to see these businesses more readily adopting a service bundling approach, where various services are combined into one platform. This can include online payments and payouts, real time notifications, debit order collections, loyalty solutions and a range of other functions, which will together create a far more integrated customer journey.”
He continues, saying that the integration of various services will mean greater convenience for consumers; however, he notes that until this is more widespread, bill payers will still be confronted with the issue of a mostly decentralised payment landscape.
“People have become accustomed to the ease of making payments online; however, they still contend with the fact that many of these payments need to be made on separate platforms. As a result, more businesses will now be looking to bill and payment aggregators as they negate the need for separate integrations, separate payment reference numbers, and separate operations across an array of payment networks. Payment aggregators like [email protected] make the process far smoother and more comfortable, meaning you spend less time worrying about these integrations and more time driving your business agenda.”
But while payment preferences will continue to fluctuate between business owners and consumers, Hardie believes that those operating in the payments space can anticipate lower prices as markets enter the new year.
“We expect to see greater downward pressure on pricing across the board in the field of payments. This comes as bill issuers become more and more price sensitive, which is likely due to the state of the economy and impact of Covid-19 on consumers. As a result, we may see certain card schemes investigating the idea of reducing the interchange rates around bill payments. If that happens in the card and digital world, it will make a huge impact and influence where people will go to pay,” shares Hardie.
He concludes: “Nevertheless, the payments landscape will continue to innovate and evolve as the year unfolds.”