Looking into the future of payments
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As 2017 draws to a close, it’s a good time to reflect on the events of the passing year and what they portend. 2017 was an eventful year in payments with significant happenings including the Equifax data breach, the launch of Zelle, Amazon’s acquisition of Whole Foods and many more.

Here we take a data-driven journey into 2018 and some of the key trends that we’re likely to witness.
The rise of mobile P-to-P
2017 was an impressive year for mobile P-to-P activities, with the long-awaited launch of Zelle in June. Aiming to be the Venmo for grown-ups, Zelle has gained momentum in terms of usage and awareness, although supporting banks have been reluctant to call out Zelle by name in their own marketing campaigns and are instead focusing on their own brands.

Alongside Zelle are third-party mobile P-to-P solutions including Circle, Square and PayPal (the owner of Venmo), all of which are fighting for market share. Further, social messaging and email platforms such as Facebook Messenger, Snapchat and Gmail are taking a leaf out of the playbook of Southeast Asian platforms such as WeChat and Alipay by embedding the ability to perform P-to-P (and increasingly bill-pay transactions) directly in the message.

While the majority of P-to-P transactions are performed by traditional methods such as wire transfers and paper checks, the U.S. can be expected to witness a continued land grab by mobile P-to-P, nearly doubling from 2017 levels to reach 13% of all P-to-P transactions in 2018 and reaching nearly half of all P-to-P volume within three years.
The first time cash isn't king
While the United States has been unenthusiastically transitioning to EMV card and terminals over the past two years, other parts of the world have been actively promoting the speed and convenience of chip cards with considerable success. In Australia, the poster child of contactless card adoption, 82% of the population made a contactless transaction every week in 2017, according to Mastercard.

The U.K. has seen similar rapid contactless card adoption, with 2018 being the first year that debit transactions are set to surpass cash, accelerated by the widespread use of contactless cards. This is occurring three years earlier than expected, according to PaymentsUK.

In the U.K., debit cards were used 11.6 billion times in 2016, 14% more than the previous year, with just over one in five of these transactions made using contactless payments. Cash was still the most frequently used payment method in 2016, used for 15.4 billion payments (3.8 billion more occasions than debit cards), meaning that four out of ten payments in 2016 were made using cash. In 2018, 13.4 billion debit card payments are predicted, of which 4.6 billion (or one in three) are expected to be contactless. Cash is expected to be used for 13.3 billion payments.

With some EMV card portfolios reaching their three-year expiration date this coming year, and with some highly compelling precedent for contactless card usage in other regions, a relatively solid base of contactless POS terminals seeding the market and a drop in the price of card stock overall, it can be expected that some U.S. issuers will bite the bullet and launch contactless cards in the U.S in 2018. PaymentsSource interviews with card manufacturers indicate growing interest and even small-scale issuer pilots of contactless EMV.
CNP fraud growing in the U.S.
In a society where data breaches have become almost a part of daily life, the Equifax data breach of September this year was shocking in terms of the scale of those affected (half of U.S. adult consumers) and the sheer ineptitude of Equifax management in its damage control. The Achilles heel to this and other breaches has been the reliance on static data, exacerbated by the unmonitored and largely unregulated industry of data brokering.

Following weeks of finger pointing and congressional scrutiny, the SSN was deemed to be in dire need of retirement as a means of personal identification.

“The answer is to build a digital identity that is dynamically linked to the customer’s digital life,” said Ron van Wezel, senior analyst at Aite Group. “A variety of technologies are making this reality, by leveraging the vast amount of data connected to customers’ transactional history, the use of their devices, and the way they behave online to build a digital identity that is unique to a person.”

However, ripping out and replacing what has become the de facto identifier of all U.S. citizens will be extremely laborious and costly. Even were this to occur, the hundreds of millions of personal identifiers that are now effectively public domain cannot simply be erased.

Predictably, card-not-present fraud is set to grow unfettered in 2018 and through to 2020, according to Aite Group, rising from $4 billion in losses in 2017 to approximately $4.5 billion in 2018 and nearly $6 billion in 2020.
U.S. voice assistant penetration
It would be near impossible to ignore the increasingly pervasive use of voice assistants in everyday life.

Siri and Alexa are now household names, gaining their own personas outside of the hardware that contains them. But the opportunity for conversational commerce has remained tepid. There are a number of reasons for this — consumers need to walk before they can run and need to learn both the intricacies of this new form of interaction with technology and, simultaneously, to develop trust that their commands are accurately interpreted and executed.

This educational trough, however, is passing and the mainstream voice platforms are rapidly adding a plethora of third-party functions — Amazon’s Alexa, for example, grew its collection of skills to over 15,000 in July from 10,000 in February of this year.

The evolution of conversational commerce, whether via voice interaction or textual chatbot conversations, is likely to become more important, with a particularly solid use case building for in-car payments. BI Intelligence forecasts that global connected car shipments will grow to 48 million in 2018 from 33 million in 2017. This, alongside developments in self-driving vehicles, positions the car to become more than just a means of getting from A to B.

Voice assistants are correspondingly set to grow over the next few years. According to research by eMarketer, there are about 61 million voice-assistant users in the U.S., or approximately 18% of the U.S. population. This includes speaker systems like the range of Amazon Echo devices as well as native voice assistants across mobile platforms such as Apple’s Siri, Microsoft’s Cortana, Samsung’s Bixby and Google Assistant.

This is expected to grow to over 70 million U.S. users by the end of 2019. In tandem with the growth in voice assistant usage is the growth in voice commerce — purchasing goods and services over a voice platform. Research from BI Intelligence estimates that 24 million U.S. consumers will have participated in voice commerce in 2017, a number that is set to nearly double within the next two years.

This impending sea change in the way we interact with objects will have a significant impact on many aspects of the payment experience.

“In the next couple of years, the industry will see a hybrid approach to user interface design — conversational platforms will continue to use traditional website visual graphics such as charts, graphs, video or other content to complement the experience,” said Tiffany Montez, analyst at Aite Group. “Over time, as these solutions get smarter and as consumers continue to grow more accustomed to using voice and text to communicate with brands, the dependency on traditional user interface components to fill the communication gap will lessen."
FIs investing in blockchain
We exit 2017 in the midst of cryptocurrency and ICO fervor and increasingly concerned regulators, and these trends will carry into 2018 and beyond.

The sudden rise in bitcoin value is unprecedented, and the feverish purchasing of recent weeks is permeating all areas of distributed ledger technology (DLT) projects, which are seeing an influx of funds and skyrocketing valuations.

Whether bitcoin makes all investors millionaires or crashes and burns is incidental. The blockchain technology that spawned bitcoin has been shown to have countless use cases outside of cryptocurrency as a means of securely recording any form of transaction without the need for a third-party witness.

For this reason, and as a buffer from potential disintermediation of legacy business lines by newcomers, FIs are continuing to invest heavily in DLT. McKinsey forecasts that FI capital market spending on blockchain will reach $315 million in 2018, growing to $400 million by 2019.