Payment companies need to brace for more mergers, AI and retail installment pay
The mergers, AI deployments and taste for installment payments that took hold in the past year show no sign of abating, requiring the entire industry to be ready to respond.
For example, the personal loan business will become the retail installment space…everywhere. This will work well and expand as long as the economy stays strong.
The value proposition here is simple—point-of-sale loans for expensive purchases (elective medical procedures, home repairs and upgrades, etc.) can provide different terms to a certain type of consumer than a credit card (needs liquidity, but doesn’t want the temptation of a revolving line) and the lender can bring a better understanding of the borrower (based on the context of the point-of-sale interaction) to bear.
As for market structure, I predict more big consolidations. If 2019 was the year of M&A within the processor space, with TSYS and Global Payments, World Pay and FIS, and Fiserv and First Data all pairing up, look for this trend to pick up steam with banks and credit unions in 2020.
One big example this year was BB&T and SunTrust, but more bank will come after years of relative quiet. The reason is that the technology required to grow portfolios and enable a great customer experience isn’t getting any cheaper, and scale matters.
On the credit union side, sophisticated national credit unions (with robust digital capabilities) will become formidable threats and will snap up smaller credit unions as overall loan growth slows. And, proving that dogs and cats can occasionally work together, some credit unions will even snap up banks (as Suncoast Credit Union in Florida did with Apollo Bank this year).
Watch for regulators to become fierce advocates for machine learning (ML) to solve anti-money laundering (AML). Rob Wainwright, former head of the EU’s law enforcement agency Europol, has said that professional money launderers have a 99% success rate when running their illicit profits through the global banking infrastructure.
That means that banks responsible for AML compliance have a 99% failure rate. Following the massive AML scandals in Europe and Australia in 2019, I predict that in 2020 global regulators will strongly encourage banks to experiment with cutting-edge analytic technologies and techniques to better identify and prevent money laundering.
We can expect plenty of unexpected developments in 2020. If you think there’s something obvious I missed, please chime in with a comment!