Fintech Promises Faster, Easier Payments for People and Businesses

The Protiviti View,
Blockchain, globalization, digitization, cybersecurity, fintech, new customer demands, and more. Money 20/20, the largest global financial industry event focused on payments and financial services innovation for connected commerce at the intersection of mobile, retail, marketing services, data and technology, takes place Oct. 23-26. Once again, Protiviti is proud to be an exhibitor sponsor and speaker at the event.
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Jason Goldberg moderating a panel on customer experience at Money 20/20.

By Jason Goldberg, Director, Financial Services Business Performance Improvement

Financial technology, or fintech, firms are promising to revolutionize the person-to-person (P2P) and business-to-business (B2B) payments industry, and are already causing a seismic shift in this sector. On the floor at Money 20/20 this week, some of the hottest discussions are revolving around payments: cross-border transfers, customer authentication and fraud, customer experience, and open APIs and cloud processing specifically are a focus of fintech companies.

Unburdened by regulation and legacy IT systems, new entrants in the payment services space are claiming to provide faster and cheaper transfer of monies, both domestically and across borders, than the established players.

PayPal, the first big shock to the payment industry, was launched in 1998 and for years remained one of the most popular alternatives to using credit cards for online purchases. Today, it is just one of a multitude of person-to-person (P2P) and business-to-business (B2B) payment alternatives being used on any number of devices.

Ironically, the flurry of new technologies and players has lumped one-time industry disrupter PayPal in with traditional payment services, as technology behemoths such as Google, Facebook and Apple have entered the payment space. Seeing the writing on the wall, established players like J.P. Morgan Chase, U.S. Bank, Bank of America, Wells Fargo and other well-known financial institutions partnered five years ago to launch digital payment provider ClearXchange to fend off fintech upstarts. Just this year, ClearXchange began offering a real-time payment option for users who want to avoid the traditional three-day transfer period.

In cross-border payment services, traditional service firms like SWIFT, Visa and MasterCard, are also under threat from new entrants. Upstarts like Align Commerce, Traxpay, Payoneer and others, are relying on distributed ledger technology (DLT), aka blockchain, and virtual currencies to speed up the payment process and make it both secure and transparent. The use of DLT provides a faster, cheaper and trackable mechanism for the transfer of funds. Where a SWIFT transfer may take four or five business days, new entrants can promise transfers within two days and for about half the cost.

These new developments, and our discussion of them, are outlined in a recently published paper, Innovating Payments. All the trends point toward mobile, instant and near-frictionless transactions. But established players are not likely to be disintermediated; they are more likely to embed real-time, P2P functionality within their secure banking apps, and earn fees from other payment interfaces.

The battle for the digital payment market is far from over. Regulators are watching the developments closely, and will surely have the last word on what technologies become widely adopted. As far as consumers and businesses are concerned, the future of payments looks promising.

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