At the end of 2018, no one could have predicted all of the jaw-dropping things that happened in payments this year. If 2019 is any indicator of the explosive potential and opportunity in the payments industry, then 2020 is already on track for unprecedented growth. While there’s no sure-fire way of knowing what the future holds, our team’s diverse experience on both the technical and traditional sides of the payments industry means a few things:
- We can spot a payments trend emerging a mile away.
- We have unique perspectives and context regarding why.
Startups Reprioritize Profit Over Growth
In an uncertain economy, investors will be less risk tolerant and looking for stable bets - especially before companies go public. Companies that own vs. rent more aspects of their operational infrastructure, from HR to payments, are less vulnerable and will be attractive for their ability to monetize more of their offerings, more quickly.
We saw this happen in 2019 with Lyft and Postmates, both adding additional payments processors as they were contemplating going public - something they may not have done without the expectation of public scrutiny. Expect that trend to continue for companies in 2020, as the focus shifts from “growth at all costs” to unit economics, or, more plainly, focusing first and foremost on profitability.
Shifting Regulatory Climate
As US-based financial service companies begin to adapt to PSD2 (and new privacy laws like CCPA), a new wave of innovation will change B2B and B2C banking as we know it. These new regulations create incentives that will spur more data sharing from and between larger financial organizations, giving developers access to much richer data sets.
Rise in Payments M&A
Many of the biggest payments companies on the market, including PayPal, Global Payments, and FIS, have made significant acquisitions over the past year-plus. Expect that trend not only to continue but accelerate in the year ahead as the payments arms race continues. Keep an eye on Bank of America, who will shut down their payments processing joint venture with First Data in June 2020.
Emerging Fintech Hubs
As fintech companies move beyond Silicon Valley, new fintech hubs are developing in cities like Salt Lake City, Lagos, Mexico City, and Atlanta. Lagos-based payments companies raised almost $400m in a single week in 2019. Stripe opened an office in Mexico City. And Salt Lake City, long home to Galileo and Divvy, now has Plaid and WebBank while Atlanta has a healthy mix of established fintech companies and emerging startups that are changing the face of financial services. From Elavon to Fiserv to GreenSky and Kabbage - it’s becoming a hotbed for new fintech ideas and talent. Expect to see these fintech hubs continue to grow and a few more new hubs popping up in 2020 and beyond.
Peak Debit Card
Everyone will get a branded credit/debit card in 2020. In 2020, cash management companies, neobanks, and on-demand services will continue to retain customers by plugging into the existing payments ecosystem. In 2019, we saw Uber, Lyft, and Square Cash all launch debit cards to incentivize drivers and merchants to keep their money in their respective apps. In 2020, tech companies will continue to threaten traditional credit card issuers and banks like Capital One or Wells Fargo with bank-like capabilities.
Contactless is Coming
2020 will witness the end of the card processing dongle as contactless payments become king. As payments continue to eat software, the hardware of payments will begin to change in response. Already, it's not uncommon to pay by tapping an app on a phone rather than swipe a physical card on dedicated hardware. Soon, consumers will be able to tap their contactless-enabled card to a tablet or cell phone to pay as well. Visa, Fiserv, and Samsung are rolling something like this out. EMV chips will keep these payment information secure as consumer demand drives the convenience of contactless.
At Finix, we’re passionately committed to helping software companies become payments companies. It makes sense for fast-growing enterprises who want to innovate quickly, delight their customers, and grow revenue. Customers, and increasingly merchants, expect and demand frictionless financial capabilities from the software they use most. The growing transition away from third-party payments providers toward embedded payments shows that bringing payments in-house is far more than a trend and here to stay.
If you'd like to learn more about how Finix can help turn your software company into a payments company, please get in touch. Payments-curious but not ready to commit? Subscribe to our newsletter below for more content like this.