Click links below to access 2018 Outlook Documents:
Opportunities abound in a complex environment. 2018 finds the payments industry at a turning point where technology trends such as mobile, open application programming interfaces (APIs), machine learning, and faster payments systems that have been under development for many years are combining to create new opportunities for financial institutions, payment processors, and retailers. At the same time, all the possibilities make it difficult to prioritize investments. Mercator Advisory Group recommends taking advantage of the continued favorable economic environment to invest in new technology but doing so in a collaborative way to achieve maximum leverage.
Modernizing and collaborating remain key Digitization continues to spread across the cash cycle as the commercial payments industry better adapts to the need for faster and improved next-generation technological capabilities while simultaneously improving fraud risk management.
2018 will be a year for credit card issuers to tighten up lending and build on existing customer relationships as account delinquency begins to rise. Credit card account volumes and revolving debt in the United States are back to peak levels. Concurrently, past due accounts are beginning to increase. In 2018, issuers should solidify their portfolios, grow organically, and prepare their portfolios for emerging payment opportunities.
Stop, collaborate, and listen! Banking is back in a brand new edition.The past year has been one of reconciliation and innovation, as financial institutions recognized the shifting landscape created by financial technology (fintech) companies and regulators and took steps to accommodate and in some cases embrace the change. The coming year will be defined by the integration of fintech into the fabric of banking service delivery by all types of financial institutions.
In early 2017, debit card transaction volume took an abrupt and steep decline. In 2018, issuers face a new normal with lower and unpredictable growth, compressed margins, and ever-changing fraud challenges. Meanwhile, push payments will make debit cards important as the gateway to consumers’ and small businesses’ transaction accounts. Person-to-person (P2P) payment strategies will become more important to financial institutions as they seek to fend off competition from successful fintech products. Planning faster and real-time payment solutions will reach fever pitch as financial institutions look for profitable use cases and providers aim to make real-time payments ubiquitous.
Continue investing in technology as outlined in 2017 with minor refinements. In last year’s Outlook for the coming year, Mercator Advisory Group’ Emerging Technologies Advisory Service argued that payment solution providers should immediately invest in tokenization, machine learning, and application programming interfaces (APIs). This year we argue for more of the same. Of the three, machine learning has become entangled in major hype, yet it has demonstrated that it can be applied very broadly, not just applied to Big Data and fraud, and so it demands even greater attention. The networks continue to deliver new tokenized services to market that require new tactics and will further enable e-commerce. Banks, networks, and processors offer APIs through developer websites.
The ghost of merchants past: almost gone,but not forgotten
Over 7,500 brick-and-mortar stores in the United States
have closed in 2017. Some malls have shut down entirely. This surpasses the
previous high of just over 6,000 store closings, which occurred in 2008 during
the Great Recession. Many merchants are down but not out. For 2018, key
questions for merchants and their payment providers, including acquirers, card
networks, and issuers, will be: Where and how will consumers be making their
purchases, and do the patterns and behavior revealed suggest what merchants
should do? Answers to these questions can be discerned from the look ahead to
2018 in the following pages.
Regulation will be one of many concern in the coming year.
The results of the 2016 U.S. elections may have led
many in the prepaid payments industry to think that their regulatory concerns were
at an end, but a more likely consequence is that companies will need to deal
with shifting regulations for at least the next two years. Technological change
and economic factors will also influence the outlook.
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