Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
Signals by Mastercard: Trends to Watch in the Future of Payments
Mastercard Content Exchange | April 28, 2023
Image: Mastercard Signals
Asset tokenization is expanding the range of assets that can be exchanged, including loyalty points, data, digital goods, rights, and new currencies. Tokens enable the exchange of alternative currencies, physical assets, personal data, and ownership rights, allowing fractionalization of expensive items. The tokenization of financial and private market assets could bring liquidity to the investor class, with the market potentially reaching $24 trillion in financial assets alone by 2027. Tokenization has the potential to revolutionize how value is created and exchanged, leading to a broader set of payment options for consumers and opportunities for new business models.
- Tokenization's expansion into a wider range of real-world assets in the next five years will revolutionize our perception of value and payment methods. This transformation will lead to increased payment options for consumers and create opportunities for banks, digital players, and merchants to develop innovative business models to facilitate new value exchanges.
See: Top 10 Trends Reshaping Banking for 2023
Programmable payments are emerging as a solution to the challenges of managing complex payments. APIs, smart contracts, and artificial intelligence enable business logic to be coded into payments, creating new efficiencies and delivering heightened customer experiences. Commercial use cases include supply chain transactions and royalty payments, as well as expanding existing business models like pay-per-use or leasing. However, cyber attacks are a significant threat to programmable payments, and new security capabilities must evolve to bring trust in an automated way. Governments are also exploring programmability in money itself via central bank digital currencies.
- By 2030, programmable payments are expected to shift from specialized applications to a standard practice in the industry. Integration of messaging and additional services like cybersecurity and Know Your Customer verification will enhance payment options with intelligence and contextual relevance. This will result in substantial cost savings in operational processes such as preprocessing, reconciliation, and exception handling, while also delivering faster and improved service to customers in both commercial and consumer transactions.
Next-gen 'ubiquitous' digital wallets will become essential for managing identities and assets. They will consolidate various services and activities, acting as a single point of control. Analysts predict 4.4 billion unique digital wallet users by 2025, with payments from digital wallets accounting for 54% of global e-commerce transactions by 2026. The competition between tech giants, super apps, and global banks for wallet dominance is increasing. Tomorrow's wallets will serve as command centers for daily life, offering seamless experiences and managing everything in one place.
- In the future, super wallets will go beyond storing card and account information and become the central hub for managing all aspects of our daily lives. With intense competition and regulatory scrutiny, no single wallet provider is expected to dominate the market. Banks and digital players in this industry will succeed by offering enhanced functionality and seamless experiences, fulfilling the vision of a comprehensive all-in-one wallet.
See: Progress Stablecoin Legislation or Risk the Financial Future
Connected finance refers to the integration of financial services across various environments, including digital, physical, and virtual spaces. It enables universal access to payments and other financial services through open banking and consumer control of data. Open banking allows third parties to create innovative banking and payment solutions based on customer financial data. The adoption of connected finance is growing rapidly, with the expectation of a $116 billion market size by 2026. It offers frictionless experiences, such as buy-now-pay-later options, insurance at checkout, and AI chatbots for money management. Messaging apps like WhatsApp are also enabling P2P payments, contributing to the expansion of social and conversational commerce. The market for financial services through other applications is projected to double by 2030. Overall, connected finance presents the opportunity for consumers to access financial services anywhere, and it benefits banks and merchants through partnerships and increased options for customers.
- The potential of connected finance is unfolding as digital commerce expands. Instant access to financial services at scale empowers consumers to bank and pay from anywhere, through any channel. Banks can leverage partnerships for wider reach, while merchants can enhance their commerce experiences with more options.
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