A Bank Reaction to Tech Firms’ Push Among the Top 2018 Payments Trends, Says Aite

As technology firms, both within financial services and those entering it, take larger shares of banking revenue streams and become more like banks, financial institutions will beef up their tech investments as they attempt to counter this pressure, advises Aite Group LLC in a report on 2018 financial-services trends.

In payments, that will mean a multitude of changes ranging from increasing the speed of payments to an emphasis on mobile, especially for fraud prevention, and to an increased use of digital identities to secure transactions.

Real-time payments and same-day automated clearing house transactions programs gained traction in 2017 and are set for wider adoption this year. One of the first real-time payments programs is Real Time Payments, or RTP, from The Clearing House, which went live in November. Meanwhile, NACHA, the ACH governing body, added in September same-day debit transactions, having launched same-day credit transactions in 2016.

Such services, especially for person-to-person payments, business-to-consumer disbursements, and consumer-to-business payments, are “poised to catch fire in 2018,” Aite says.

A vital component to that and existing payment methods is verifying the identities of users. Aite predicts that financial institutions will move to a mobile-first stance. “Leadings FIs are realizing that the mobile device can be used to secure all delivery channels, helping to improve the customer experience while removing friction,” the report says. “FIs will develop new capabilities for the mobile channel first, then determine when or if to develop the capability for the online channel.”

A related prediction is that financial institutions will make greater use of digital identities, relying on the dynamic and tokenized nature of them to better secure transactions. Already, Mastercard Inc., American Express Co., and Discover Financial Services are removing the signature authentication requirements for their point-of-sale transactions beginning this year, partly because digital authentication methods are advanced enough to warrant the decision.

Financial institutions will take advantage of artificial intelligence, machine learning, and other advanced technologies to bolster their anti-money-laundering efforts, too, Aite says. This will be in reaction to rising global money-laundering activity and greater regulatory expectations.

Another prediction is the greater availability of new retail credit products that Aite suggests will gain credibility and spur financial institutions to develop innovative borrower-centric products that can entice consumers back to credit and encourage them to stay.

Aite’s forecast also covers wholesale payments and other financial services, such as insurance and wealth management.