The Digital Payments Revolution: What are the Key Questions for Payment Professionals?

Michael Aragona
Michael Aragona Head of Global Solutions Sales, Mizuho Americas
February 27, 2017

More than 420 billion non-cash payments are expected to have been made in 2015 representing a 10 per cent increase on the 387.3 billion in 2014, according to the 2016 World Payments Report by Cap Gemini and BNP Paribas. Much of the growth is expected to have come from “emerging Asia”, Central Europe, the Middle East and Africa as well as the “mature Asia Pacific” markets.

These numbers are staggering and demonstrate that the world is witnessing a revolution in the way we make payments. We are now financially connected within seconds. The positive impact of this growth in non-cash payments on emerging markets is particularly phenomenal. For instance, a staggering 43% of Kenya’s GDP representing 237 million person-to-person transactions flowed through M-Pesa, Kenya’s mobile payment system. M-Pesa has allowed individuals who might not have access to a traditional bank account to take part in the world economy as a result of technical innovation.

Advances in technology have without doubt provided consumers around the world with a vast array of non-cash options when making a payment. However, individuals making payments are not the only beneficiaries of innovation. Corporate treasurers and finance managers are equally spoiled for choice as innovative systems connect them financially within seconds to other parts of the world. Immediate and direct responses are now possible through mobile technology. While we take this for granted today, it was not always the case.

The payment industry has certainly developed since beginning my career in the early 1990s as a trainee in an international banking department. Desktop computers were just being introduced, memos were still typed on IBM electric typewriters and telex machines were still very much in use. 

Since then, the introduction of innovative solutions and systems have allowed more and more transactions to be processed electronically and on the go. Paper-based instruments, such as checks, are diminishing rapidly in volume with card payments, particularly debit cards, contributing significantly to volume growth. At the same time, new technology – often considered disruptive to the status quo – is changing the way we view, process, settle and use information associated with payments to make sound financial decisions about our money. 

Back then, few would have envisioned the transformation we see today – a world where new entrants to the payment industry can now offer similar services to banks through mobile app-only offerings built with open APIs available to all.

Equally who would have thought that regulators in a certain jurisdiction would seek to facilitate the entrance of third parties such as ‘Payment Initiation Service Providers’ and ‘Account Information Service Providers’ to the payment process.

While the aim of this is to level the playing field between established payment service providers and new entrants while creating areas of growth for small businesses through increased efficiency, it raises other issues. For example, it highlights the ever-present need to ensure appropriate measures are taken to protect data. Consumers must be confident that their data will be protected by service providers and that any technology used is secure.

Proposed regulatory changes to ensure that relevant parties are responsible for protecting data continues to be debated by central bankers, regulators, trade bodies, standard setters and businesses. While the potential benefits to consumers and businesses in the form of increased competition cannot be denied, potential compromises to privacy and information security also cannot be ignored and must be addressed.

At the same time, technology continues to blur the lines between what were previously clearly distinct types and processes. Payment professionals would do well to stay informed and understand the principles behind the way transactions are processed as the payment revolution gains momentum. Does one size fit all? What is the impact of change? Can we help shape the future?


This article was originally published by The London Institute of Banking & Finance’s as part of their Payments Content Series. The London Institute of Banking & Finance has recently launched the Certificate in Principles of Payments, a new internationally recognized benchmark qualification for those working in, or aspiring to work in the payments industry. The qualification provides a comprehensive understanding of payments, from terminology to the mechanics of moving money across the globe, as well as compliance, risk, regulation, and strategy. Find out more information on their website.

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