BNY Mellon Report: Global Payments 2020: Transformation and Convergence

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BNY Mellon | Dominic Broom | Apr 2020

The Transformation and Convergence of Global Payments 2020

The global payments landscape is in a state of fundamental transformation, comparable in significance to the advent of downloadable entertainment for the video rental business. Banks in particular will need to move swiftly if they are to take advantage of the opportunities on offer in the global payments business, or risk losing out to nimbler competitors.

We believe that the world of payments is going to be fundamentally transformed between now and then. It will be reshaped by technology and redefined by regulation, the emergence of new economic powers, and changes in the global currency landscape. Most importantly, payments will be refocused from a commoditised proposition to a strategic, value-adding solution; one that is offered with greater focus on the broader commercial and transactional context within which a payment (or a transfer of value) takes place.

See: How payments can adjust to the coronavirus pandemic—and help the world adapt

Indeed, in 2020 a payment will be understood to be much more than just the settlement of a transaction or the mere movement of funds. The broader commercial, retail, investment or public sector environment of payments will be taken into account, and “payment-proximate” activities (such as investment decisions, trade-related financing and risk mitigation, the cross-border movement of salaries and pensions and a host of other core activities) will become part of the basis upon which providers develop greater value propositions.

The world of payments in 2020 will look very unlike it does today, and market transformation has already begun. The competitive landscape will be redefined by the entry of non-traditional providers, the evolution of new solutions provided by financial institutions, and the development of strategic alliances that cross traditional sectoral boundaries. Besides transformation, there will also be major convergence: convergence around products and solutions linked to payments; around technology platforms and clearing capabilities that will be increasingly global in nature and reach; around the operation of global securities and currency markets; and with regard to regulatory regimes that today are often fragmented and unaligned.

Looking further forward, it is clear that any “end-state” post-2020 will be largely unrecognisable.

That said, we envision it might have integrated global settlement and clearing systems, and platform-agnostic channels that allow for maximum client access, flexibility and convenience. Indeed, as a young, ‘tech-savvy’ generation of business leaders emerges, the expectations of retail/consumer and commercial/corporate end-clients with regard to payments are likely to be far more closely aligned than they are today.

See: Bank of Canada Speech: Money and Payments in the Digital Age

What this entails will differ according to regions, markets and client segments, but one thing is clear: going forward, it will no longer be sufficient to regard payments as utility products; commoditised, undifferentiated and volume-driven. Instead, successful payments providers, whether traditional or emerging, will be those:

Taking a strategic view of payments and “payment-proximate” activities, to devise and offer value-added solutions and products;
Identifying markets and lines of business where payments are a prominent aspect
Updating their technology to deliver services and solutions in line with customer expectations, as opposed to internal operational silos;
Actively targeting payment flows related to demographics, such as the compensation and pension flows linked to the baby boomer generation, or the emerging middle classes in China and Indonesia;
Targeting high-growth and traditionally poorly served customer segments such as small and medium sized enterprises (SMEs);
Exploring non-traditional alliances and partnership models, including strategic cross-sectoral partnerships with those they might not have considered previously (such as mobile or social network operators), to enable access to new client bases.

The successful payments providers of 2020 and beyond will be those taking action today. Those that do not, risk being left behind.

Download the BNY Mellon Global Payments 2020: Transformation and Convergence Report -> Now

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