If one thing in this world is true, it’s that payment innovation will never stop. And while 2020 has been a huge year for payment companies, 2021 has even more prospects. Below are a few trends I think we will see play out in domestic, cross-border, and credit card payments in 2021.
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1. SWIFT GPI Will Be a Game Changer for Large B2B Transaction Payments
Historically speaking, the SWIFT network (Society for Worldwide Interbank Financial Telecommunication) has been the main way banks—and consumers—send international wire transfers. It has been frowned upon for its lack of transparency, high costs, and long delays for beneficiaries to receive a payment.
In fact, you could probably give credit to SWIFT for the rise of such innovative consumer payment companies like Transferwise, because without SWIFT’s historically terrible payment network, companies like this wouldn’t exist.
So then, how is the SWIFT network going to be one of the top trends in payments, you ask? Well, SWIFT is tired of being the last dog in the race when it comes to international payments. Originally started as a consortium by all the major banks to standardize sending money internationally, SWIFT quickly became the butt of all jokes about international payments, and now after many years working with global banks like BBVA, CITI, Barclays, etc., it has developed a new technology called SWIFT GPI, aka “Global Payment Initiative,” to create faster, more transparent, and lower-cost international payments.
Now with over 200 banks supporting GPI payments that will settle on the same day (subject to operating hours for different countries), all payments will have a cost breakdown of all the fees including the exchange rate, and if there are any delays in the payment being received, both the sender and receiver will be able to track exactly where the payment is.
SWIFT may have been the clown in the room for the past few years, but with GPI, it will be on the payment innovation front for at least the next couple years.
2. Real-Time Domestic Payments in the US Will Be a Reality
When it comes to domestic bank-to-bank payments, the US has been lagging behind the rest of the world for quite some time.
For example, in Mexico you have a real-time settlement network called SPEI. It works so well that people actually use the SPEI network to pay for things at the store rather than using their credit or debit card. In Europe, you have SEPA, which settles a domestic Euro payment in 11 seconds, with a maximum delay of 20 seconds!
Then you have the US ACH network, which takes a full 24 hours to settle for a “normal” ACH payment, and if a payment is sent in before 11am EST, you may receive the payment within the same day. That’s not terrible, and it certainly is a great improvement, but it is still light years behind where the rest of the world is.
Since the ACH network is so behind the times, it has caused a surge in RTP (Real Time Payment) networks. RTP, as you might have guessed, sends funds in, yep, real time. With RTP you will be able to attach data about the beneficiary, an invoice, a payment description, and reason for the payment. The idea is that by attaching all of this to the payment, banks will have more than enough information to release the payments instantly.
So far RTP has been very “closed door,” and only a select number of banks offer the services. There have been some amazing startups that are making huge strides to make RTP a more widely-used system for B2B transactions, the most notable of which is a company called ModernTreasury.
Though the technology just started getting its legs in 2019 and 2020, now that more banks and startups are innovating on it, I expect we will see a much larger adoption of RTP in the US in 2021 and beyond.
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3. Credit Card Payments in Emerging Markets Will Create Competition
In the developed world, online credit card payments are a passive thought. Ever since Stripe made it easy to accept credit card payments online, the e-commerce industry has taken over. The primary trend was, because anyone could accept credit card payments, your average Joe could start an online company selling plumber parts, and before long with the power of the internet and very targeted ads, could build a sizable online business.
This trend has been playing out in the US for years, and it will continue to get bigger and bigger. The one place where online credit card payments are just now beginning to take form is in underdeveloped markets in Africa and southeast Asia. For reasons I am not going to get into in this article, payment networks are far and few between and have a lot of disparity in these emerging markets.
Consumers and business owners in these markets are also just now beginning to have a much more widespread adoption of mobile data networks, thanks to easier access to the internet. This means a consumer in Nigeria is now able to buy a product from a supplier in India for the first time ever, or a supplier in Nigeria can now start an online store and sell to a buyer in India for the first time.
What does all this mean? It means there is a huge opportunity for companies to start taking a piece of the online credit card payment pie. So far in 2020, we have already seen Stripe announce the acquisition of a Nigerian payments company, Paystack, and we have also seen the continued expansion of local payments company D-Local in Africa. This sets us up perfectly for some amazing new innovation on the African continent around payments. I expect we will see more and more acquisitions and payments companies starting in 2021 as the land grab for market share in Africa has begun.
There are many new payments trends that are going to play out in 2021. I imagine we will see continued adoption of USD Coin and other stable coin payments, and I also think we will begin to see companies like Transferwise lose market share as neobanks begin offering a competitive international payments product by using companies like Routefusion.
All of the trends and information included in this piece are the editorial opinion of the author. Think he missed something? Leave a comment below.
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