The future of digital finance is closer than it appears

What does the future of digital financial services hold?

19 May 2022 . 3 min

This year’s Payments Association Pay 360 conference brought together industry leaders to hear their top predictions for the years ahead and how companies should respond to upcoming challenges in the world of fintech, payments and financial services.

“There is a wealth of opportunities in a changing payments industry, with the evolving payments ecosystem supporting and protecting customers by making payments safer and faster,” was one of the key messages from the panel, which included Jessica Richards, Head of Market Development, Payments at NatWest.

These are the predictions the payments experts shared with the audience.

State of the market:

The payments landscape is changing rapidly due to the following three factors:

Customers are starting to expect real time 24/7 digital payments with enhanced data running alongside.
Regulators are driving innovation and competition while at the same time focusing on protecting customers and ensuring the security and resilience of the systems.
Technology has given the industry a host of new solutions, from APIs to Open Banking, Cloud and digital ledger technology as well as QR codes and other tech solutions.

Going forward, there will be huge investments in payments infrastructure including RTGS, TARGET2, SEPA and NPA to comply with standards such as ISO 20022, while the focus on Open Banking remains. What does all this mean for customers? First, they will benefit from simpler, smarter, and safer payments. Second, they will continue to receive innovative solutions – and faster. Third, and probably most importantly, the data and insights that banks and Fintechs can offer today will help customers to thrive financially.

The next phase in Open Banking:

Variable Recurring Payments (VRP) are in their early infancy but have the potential to be transformative for the industry, enhancing the customer experience by further streamlining payments as other Open Banking solutions have already started to do. For example: APIs help consumers to top up wallets or accounts more easily, rather than having to go through the more time-consuming process of a bank transfer.

Customer protection:

The industry and regulators are focused on protecting customers against fraud through initiatives such as PSD2, Secure Customer Authentication (SCA), and the work being done to stop Authorised Push Payment (APP) scams. However, with fraudsters now attempting to get into the payments cycle earlier by inserting fake identities, merchants must and have already become much more careful with the customer verification process. To tackle the challenge, they will have to move from rather simplistic identity checks to more complex machine learning models with many more inputs to determine whether they are dealing with a real person or a fraudster.

“Creativity will win the war for talent”:

To take advantage of the innovation capacity of the payments industry, new talent is crucial. Equally, growth and scaling up can only be realized with additional staff. So, how can the industry find the right people? The panelists agreed that they need to offer attractive pathways for people on all levels from outside the industry rather than ‘stealing’ talent from competitors.

2022 is the year for being 20022-ready:

ISO 20022, the emerging global standard for payments messaging, will create a common language for payments data across the globe, making interoperability and the exchange of data easier. ISO 20022 will bring the industry together while also allowing payments – internationally and domestically – to include a lot more data. More data will enable more innovation, and provide greater safety and protection from fraudsters.

Co-opetition and collaboration – a new form of partnerships:

Partnerships have become a key success factor for the payments industry and will continue to play a crucial role to tap into the innovation potential of the sector. Collaborating in one market segment while competing in another will become the norm for fintechs and banks, requiring all market participants to be nimble and agile. The panel agreed that the power of partnerships lies in the opportunity to focus on one specialty payments area while collaborating with other specialist providers for other areas.

If you are a fintech and want to find out more about NatWest’s Open Banking solutions, such as VRP and Payit, and how you could partner with us, please visit our ‘Bank of APIs’ website or speak to your usual NatWest representative.

This article has been prepared for information purposes only, does not constitute an analysis of all potentially material issues and is subject to change at any time without prior notice. NatWest Markets does not undertake to update you of such changes. It is indicative only and is not binding. Other than as indicated, this article has been prepared on the basis of publicly available information believed to be reliable but no representation, warranty, undertaking or assurance of any kind, express or implied, is made as to the adequacy, accuracy, completeness or reasonableness of the information contained in this article, nor does NatWest Markets accept any obligation to any recipient to update or correct any information contained herein. Views expressed herein are not intended to be and should not be viewed as advice or as a personal recommendation. The views expressed herein may not be objective or independent of the interests of the authors or other NatWest Markets trading desks, who may be active participants in the markets, investments or strategies referred to in this article. NatWest Markets will not act and has not acted as your legal, tax, regulatory, accounting or investment adviser; nor does NatWest Markets owe any fiduciary duties to you in connection with this, and/or any related transaction and no reliance may be placed on NatWest Markets for investment advice or recommendations of any sort. You should make your own independent evaluation of the relevance and adequacy of the information contained in this article and any issues that are of concern to you.

This article does not constitute an offer to buy or sell, or a solicitation of an offer to buy or sell any investment, nor does it constitute an offer to provide any products or services that are capable of acceptance to form a contract. NatWest Markets and each of its respective affiliates accepts no liability whatsoever for any direct, indirect or consequential losses (in contract, tort or otherwise) arising from the use of this material or reliance on the information contained herein. However this shall not restrict, exclude or limit any duty or liability to any person under any applicable laws or regulations of any jurisdiction which may not be lawfully disclaimed.

NatWest Markets Plc. Incorporated and registered in Scotland No. 90312 with limited liability. Registered Office: 36 St Andrew Square, Edinburgh EH2 2YB. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. NatWest Markets N.V. is incorporated with limited liability in The Netherlands, authorised and supervised by De Nederlandsche Bank, the European Central Bank and the Autoriteit Financiële Markten. It has its seat at Amsterdam, The Netherlands, and is registered in the Commercial Register under number 33002587. Registered Office: Claude Debussylaan 94, Amsterdam, The Netherlands. NatWest Markets Plc is, in certain jurisdictions, an authorised agent of NatWest Markets N.V. and NatWest Markets N.V. is, in certain jurisdictions, an authorised agent of NatWest Markets Plc. NatWest Markets Securities Japan Limited [Kanto Financial Bureau (Kin-sho) No. 202] is authorised and regulated by the Japan Financial Services Agency. Securities business in the United States is conducted through NatWest Markets Securities Inc., a FINRA registered broker-dealer (http://www.finra.org), a SIPC member (www.sipc.org) and a wholly owned indirect subsidiary of NatWest Markets Plc.