Drivers for change
Let’s start by delving into the drivers for the changes, after all, they’ll help us to understand.
1. E-commerce reaches far beyond retail, with other industries beginning to accept payments online and swapping traditional invoice solutions out with more flexible solutions
2. Regulations alter how payments are completed and regulated, for example the Second Payment Services Directive (PSD2) has made card payments a little more complicated – but also safer – as it requires strong customer authentication.
3. Transaction cost also plays a role – most businesses favour the cheaper payment methods such as account to account payments, rather than those where lots of costs are incurred. Wouldn’t you agree?
4. Convenience is key – many consumers are adopting the use of mobile wallets and mobile payment methods because they’re quick and easy to use. And naturally, you want to provide the payment options that customers prefer.
Right, now that we’ve covered the drivers, we’re ready to talk about what’s in store for payments.
Throwback to account-to-account payments
Account to account payments (where you transfer money directly from your own bank account intro another person or company’s bank account) aren’t exactly a new phenomenon – we’ve been doing it for years.
But using them as an online payment method may increase in the Nordic (and indeed, European) markets after the onset of new regulations, such as PSD2, which levels the playing field for all licensed payments providers and offers a single regulated access point across Europe, instead of dozens of local variations.
Also, did you know that account-to-account payments lie in the background for some of the mobile payments that consumers use because they’re convenient?
Doesn’t seem like account-to-account will be going anywhere. And who knows – maybe we’ll even see more payment providers taking advantage of the technology.
Will cards die out?
Cards? The physical plastic card is quickly being replaced with mobile wallets here in the Nordics. But we don’t think that cards will be fully replaced.
Why not? Well, the card payment infrastructure and the technology that lies behind it is unlike any other – its global and therefore invaluable. That same technology is also in the background when we use many mobile payment solutions.
So, while the plastic cards we carry in our wallets may be replaced by the virtual cards we carry in our mobile wallets, the technology behind cards isn’t going anywhere.
A growth in buy now, pay later
Invoice, like account-to-account, may also sound a little analog, but in recent years there has been a boom in online invoice and buy now, pay later providers. And they are growing fast – a trend which we don’t expect to stop.
Online invoice can be split into two categories: invoices and invoice-in-instalments which essentially is paying using credit. They’re favoured by customers because it’s easy and flexible – and with this growing preference, online invoice looks like it’ll be around for a while.
All in all…
At Nordea Connect, we think we’re looking into a more convenience-focused future, where quick mobile payments and flexible online invoicing solutions will be increasingly favoured over their more traditional counterparts. Further regulations may alter the playing field again, but we anticipate that the consumer preference for convenient solutions will prevail.