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Six Payment Trends to Watch for in 2021

Six Payment Trends to Watch for in 2021 (Summarized to Save You Time)

A new year and a new wave of prognosticating about the future.

We’re not immune. Last week we offered up our own Five Fintech Predictions for 2021. Now, in the interest of equal time, we wanted to share a few other predictions that caught our eye.  

Many of the trends identified below were already disrupting the payments space in 2020 (faster, contactless, embedded, as well as the decline of in-person and cash payments). But that doesn’t make them any less thought-provoking.  

1.Payments Will Be Central to Any Digital Transformation Strategy

The Financial Brand’s Bill Streeter covers a lot of ground in his piece, 7 Major Payment Trends that Will Shake Up Banking in the Year Ahead. But this comment caught our eye:

“More than four out of five (88%) banking executives in the U.S. and Canada surveyed by Accenture agree that transforming the payments business is a key element of their broader digital transformation efforts.”

Streeter acknowledges the problem is that most of the investments in modernizing payments have not been driven by customer needs, but rather by compliance requirements. This has left less to invest in improving the customer experience around payments.

Financial institutions (FIs) that can’t build or upgrade a full payments tech stack can still offer best-of-breed products by outsourcing. As Streeter writes:

“While there can be some loss of control over product and service quality with outsourcing, according to McKinsey, banks and credit unions do retain control over customer touchpoints, and, in many cases, transaction data.”

2. A Bigger Push for Real-Time Payments

The real-time payment system continues to gain popularity among consumers. And why wouldn’t it? Real-time payments offer consumers speed, accuracy, and security.

In Payments Journal’s What Are the 5 Popular Payment Trends of 2021?, Catherine Burke writes:

“The mobile payment or e-wallet has dominated the market during the corona period. Service-focused companies like restaurants and online-based companies have hugely benefited and are going to earn benefits from the mobile payment and e-wallet system in the next few years.”

The bottom line: If you ignore the technology of modern payments, it’s going to put pressure on your business and increase the the risk that consumers will simply ignore you.

3.Finance is Social

Mark Goldberg takes a longer view in his piece, Five Fintech Predictions for the Next Decade. Payments will get more social in the year ahead (which will be a larger trend for the remainder of the decade). As Goldberg writes:

“Finance is inherently social (trips, meals, events) but money has remained stuck in a single-player paradigm. As the pandemic recedes and social activity explodes, new platforms will put groups, not individuals, at the center.”

This trend from single-user apps (think Word, Excel and PowerPoint) to multi-user, collaborative platforms (for example, Notion, Airtable and Pitch) is already underway in other tech sectors, Goldberg says. The new year will be the year it takes hold in payments.

4. Disrupting the Value-Chain

2021 will be the year of value-chain disruption – at least according to Ron Shevlin in his piece in Forbes called Top 5 Banking And Fintech Trends For 2021.

As Shevlin points out, in previous years, this trend might have presented as a prediction of more Fintech-banking partnerships. But two things got in the way: core processing limitations of aging banking infrastructure and challenges having Fintech and banking systems talk to each other. Both of these barriers will diminish in 2021, predicts Shevlin.

Watch for demand to increase for a variety of startups that are solving the challenges of Fintech-banking partnerships. As Shevlin writes: “Banks will find it easier and—more importantly—faster to partner with Fintechs.” In this way, financial institutions will accelerate the disruption of their own value-chains in the year ahead.

5. Cashless Payments and the Underbanked

Virtually every payments trend list for 2021 includes inexorable rise of cashless payments and Mobile Payments Today’s 3 payments trends to watch in 2021 is no exception. As Bradley Cooper writes:

“[We] can say with some certainty that in 2021, cashless will become highly standard in many businesses and regions, however, it will still have to deal with the elephant in the room: the underbanked.”

But few identify one of the biggest barriers facing cashless payments: traditional bank accounts - with their high fees and limited access - can be difficult for many people to afford. But - the article assures us - Fintechs will continue to chip away at that problem in 2021.

“Fintechs have already begun the process of taking underbanking head on with multiple apps that directly help the less financially fortunate and that trend will likely intensify in 2021.”

6. 2021 Will Be “Less Terrible”

What would a survey of trend articles be without Professor Scott Galloway’s 2021 predictions?

Thankfully, Galloway predicts 2021 will be “less terrible” than last year. Specifically, he writes:

“2021 will be about the macro trend that is driving the most change in our lives and the market: The Great Dispersion. Dispersion is the distribution of products and services over a wider area where and when they’re needed most, bypassing gatekeepers and removing unnecessary friction and cost.”

What does that have to do with payments? Consumers reject friction and big tech firms are defining expectations around customer experience. In other words, brand loyalty in financial services is no match for a better, faster, and cheaper solution and experience.

Galloway earns mention in this roundup for another reason: predicting Mackenzie Scott, co-founder of Amazon, will continue to be applauded for her refreshing take on philanthropy:

“In 2020, Ms. Scott gave away over $4 billion, quietly and efficiently, getting the money to people on the ground who could use it to make an impact right away. Contrast her data-driven, results-oriented approach with the transactional/RFP/naming rights testosterone that accompanies most billionaire giving, and we are brought back to the essence of … ‘Giving.’”

While there may yet be some surprises in the year ahead, most of these trends are well-established and less a matter of “if” than “when”. And let’s hope that genuine giving really does emerge as a dominant trend.

Want to know BillGO’s predictions for 2021? Read our Five FinTech Predictions for 2021.