Articles & Papers
FinTech Trends Report: Payments
Perspectives from Boyden’s FinTech Experts
Lopez: What regional trends are you seeing in the Payments industry? What fuels these trends? Are there regions that are experiencing greater growth or adoption?
Wargo (U.S.): Digital payments are being used increasingly by both US consumers and businesses, fostering ongoing evolution as the payments industry adapts to meet emerging and diverse needs. The introduction of innovative payment options such as 'buy now, pay later' financing, biometric authentication, and voice payments, reflect the growing demand for convenience and security in transactions. Simultaneously, next-generation payment infrastructure is emerging to facilitate these new payment alternatives and provide a seamless experience for users. However, amidst these trends, regulators worldwide are facing challenges in keeping pace with the rapidly evolving payments landscape. Striking a balance between fostering innovation and ensuring security and consumer protection is an ongoing challenge.
Goudsmit (Netherlands): The EU's payments sector is rapidly evolving due to technological innovations, regulatory shifts, and evolving consumer preferences, opening up business opportunities and reshaping the future of digital payments.
Firstly, the introduction of a central bank digital currency and a European digital identity wallet is poised to establish a unified pan-European payment solution. The digital euro is expected to enhance the use of public money for digital payments across the euro area within 2 to 3 years.
Secondly, regulatory changes and the growth of mobile commerce are propelling the adoption of real-time payments throughout the EU. This trend is projected to continue, with substantial growth expected until at least 2027.
Additionally, Buy Now, Pay Later (BNPL) schemes are revolutionizing online shopping by offering flexible financing and repayment options. This popularity is fostering strategic partnerships among traditional banks, retailers, and fintech companies in the EU.
Organizations are also diversifying their payment methods, including digital wallets, Real-Time Payments (RTP), cards, virtual cards, and Automated Clearing House (ACH) payments. Finally, it would be remiss not to mention that a significant number of organizations are considering increased usage of cryptocurrencies, even though it remains a niche market in the broader digital payments context.
Lopez: Mergers and acquisitions have been a common way for Payments companies to scale and stay competitive. How do you see M&A activity evolving, and what are some of the key factors driving consolidation?
El Naggar (Egypt & MENA): In the Middle East, we observe a distinctive trend where banks and mobile operators are actively investing in this growing sector. This investment often involves vertical integration, which enables these companies to consolidate their operational resources and harness their existing customer bases.
However, it's essential to note that the M&A landscape in the Middle East's payment sector is multifaceted. While some countries in the region have seen significant M&A activity, others are still in the early stages of developing the necessary technological and regulatory infrastructure to support the Payments market. Building a critical mass of users and establishing robust market foundations are pivotal factors in driving consolidation in these regions.
Chang (China): Mobile payments, including digital wallets and real-time transactions, remain a central focus of M&A activities for payment companies, allowing them to expand their footprint in this rapidly growing sector. Cross-border payment M&A deals are poised to rise, catering to the escalating demand in international trade and cross-border e-commerce. The ascent of digital currency and blockchain tech will further spur M&A and partnership initiatives, enhancing security and efficiency within payment infrastructures.
Innovations like AI, biometric authentication, and emerging technologies are pivotal in enhancing payment experiences, mitigating fraud risks, and bolstering security, making acquisitions in these areas crucial.
Consolidation in the payment industry is driven by factors such as market expansion, diversification, and economies of scale. Intense competition, cost efficiency, and the capability to offer a wider array of products and services also propel these consolidation efforts.
Lopez: Is the sector prioritizing ESG? How are companies addressing the issue of diversity and inclusion in their leadership ranks?
Hernandez (U.S.): The payments sector is increasingly prioritizing ESG initiatives in response to consumer demand, regulatory pressure, and the pursuit of long-term sustainability. Diverse and inclusive leadership ranks are becoming a key focus, committed to enhancing gender and racial representation. To succeed, payment companies are integrating ESG into their strategies, setting science-based targets, and actively participating in philanthropic activities. ESG is more than just a financial and operational consideration; it's an opportunity to enhance brand reputation, attract new customers, and meet the expectations of an eco-conscious consumer base. As payments evolve, companies prioritizing ESG principles and DEI practices will be better positioned for sustainable growth and success.
