The next generation of financial services players
Blog by James Cope, Head of Strategy at Travelex
2017 was the year that next-generation financial services players like Revolut and Monzo grew up, raising eye-watering sums to fund expansion. These equity-funded upstarts have outgrown their initially narrow use cases; now they are attempting to monetise their models by partnering with other FinTechs, giving users the ability to access other financial services, such as lending, through their app.
This aspiration to become curators of a range of financial products will have banks worried as it represents a direct challenge to the old school banking business model. It will be interesting to see how these providers fare in 2018 with the pressure of big valuations hanging round their necks.
Despite all the hype around ICOs and the rising value of cryptos, there wasn’t much in 2017 to convince me that digital currencies are going to have a major impact on global payments infrastructure any time soon. Adoption is still very low and many challenges lie ahead, from Legal and Compliance barriers to privacy concerns and monetary policy impacts. Banks will continue to experiment with blockchain technology but cryptocurrencies are unlikely to become truly relevant for many years to come.
Consumer and merchant digital wallet adoption has been slower than expected over the past couple of years, but I expect this to really take off in 2018. Customers are cautious about adopting new behaviours at POS, as demonstrated by the protracted adoption of contactless cards.
However, providers are now identifying the rich features and experiences that will drive more widespread wallet adoption, such as self-service checkout, order-in-advance, and targeted discounts. Digital wallets will result not only in a superior payment experience, but a superior retail experience. The adoption tipping point cannot be far away.
In 2018 there will be more innovation from established players and FinTechs in cross-border payments. International transactions – remittances and network-based – are a crucial source of revenue for financial services players; the average yield is typically 100 times the equivalent domestic transaction. There will be huge revenue opportunities created by the explosive growth in international commerce resulting from the ‘Amazonification’ of the global economy. This business will be increasingly targeted by digital players with focused, high-tech and added-value propositions.