Today in Nairobi, Interswitch Group formally unveiled the 2022 Payments
Innovation Jury Report,
which was also supported by The World Bank and Global Processing Services (GPS). The report titled: “Payment
Innovation: Myths and Realities”, comes as part of the series of the which reveals some
surprising insights from senior decision makers across the industry, and the 2022 report, which coincides with
Interswitch’s 20th anniversary commemoration, explores several key areas where payment innovation
is currently focused, including A2A payments and BNPL, what actually drives innovation, and which areas of innovation
are most overhyped, amongst other incisive global payment themes.
The
2022 Payments Innovation Jury whose expert insights and perspectives
essentially drove the report, was
made up of 79 senior payments leaders across 30 different markets. To give a
full, 360- degree picture, a
significant number of senior regulators and investors were recruited to the
Jury for the first time since its inception, alongside national payments
companies, banks, fintechs,
and payments policy bodies.
Importantly, all Jury members participate on an anonymous basis to allow them to speak freely, unencumbered by the
innovation priorities of their current organisation. The 2022 report is the tenth in a
series spanning 14 years.
According to Mitchell
Elegbe, Founder and Group Chief Executive Officer at Interswitch, “As one
of the leading and influential
players in payments who regard Africa as both our origin and primary catchment market, we are extremely
enthused at Interswitch to yet again facilitate this timely and important research effort, which curates
practical insights and expert perspectives of senior leaders globally, and across the entire spectrum
of African retail payments. It is worth mentioning that this edition coincides with the 20th
anniversary of Interswitch’s inception, and I am thoroughly delighted that at such a significant milestone in our journey as a front-row contributor to payment
innovation in Africa,
we once again have the privilege of supporting this worthy initiative that is facilitating balanced appraisal and better understanding of the payments industry
as it continues to evolve”.
John Chaplin, Founder/Chairman of the Payments Innovation Jury and Board Director at Interswitch opines that “In the payments industry
there have long been competing ideas on what will be the ‘Next
Big Thing’, particularly as many good ideas fail to achieve the scale to
operate economically. As such, what is surprising about the 2022 Payments
Innovation Jury is the level of consensus achieved in almost
all areas, from the future of BNPL to the
end user benefits of CBDCs.
“It has been incredibly rewarding to gather the insights
of 79 of the most senior players shaping the
global payments industry. My grateful thanks to them for taking the time
to share their views, which have been
curated in this report. The support of Interswitch, the World Bank, and Global
Processing Services is much appreciated, as their patronage
allows us to operate on a not-for-profit basis and
distribute the report free of charge
to anyone with an interest
in the future of innovation in the payments industry.”
Some of the report’s key findings include:
·
Market share of
account-to-account (A2A) transactions is expected to increase steadily over the next five years, but the lack of a sustainable income
stream for participants calls elements of the A2A business case into question.
·
Although the dominance of the
card model in developed countries will be hard to shake, volume growth in card payments will be harder to achieve as
alternative payment methods such as A2A
grow their market share.
·
In terms of which initiatives regulators should prioritise to promote innovation, the establishment of
payment institution licenses with lower regulatory capital than full-service banks was
seen as most effective, with sandboxes not being viewed
as impactful.
·
There was an almost even split
between whether Banking as a Service (BaaS) is a technology model or a business model. Hopes that traditional banks would benefit
seem largely misplaced, as it is a new generation of
specialist platform providers that are leading the charge.
·
BNPL usage is set to increase
in the short/medium term because of strong benefits for consumers and merchants. However, its rapid expansion is likely to be a short-term phenomenon in the face of future
regulation and rising
credit losses.
·
The introduction of CBDCs is seen as highly
likely in most markets. The Jury was not convinced
that there is market demand for CBDCs, however, and highlighted the
significant operational costs of
deployment. Essentially, the Jury believes that CBDCs will happen, but not that
there are tangible benefits for much
of the industry nor end users.
·
Payment data is still not being utilised
to its full advantage, with the exception
of fraud control.
Regulatory restrictions on the use of personal
data are leaving
the field largely
clear for a small number of global bigtechs who have better
technology and a different business model than
conventional payment providers.
·
Whilst the mobile is becoming the preferred form factor for payments globally,
and gathering particular momentum in developing markets,
mobile money has significant regulatory hurdles to overcome.
·
Asia continues to lead the global charge
on payments innovation and Africa comes out
ahead of the USA and Europe, despite traditionally having
much lower levels of investment.
·
The two areas of payments
innovation where the Jury feel reality will diverge most from the promises
were cryptocurrency and BNPL.
The 2022 Payments Innovation Jury report: Payment Innovation: Myths and Realities
can be read in full here: www.interswitchgroup.com/2022paymentinnovationjuryreport
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