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As 2023 winds down, Juniper Research is out with its top 10 trends for payments and fintechs in 2024.
Chief among them is a challenge to cards in e-commerce and funding for wallets through account-to-account payments. Closely related is the prospect for FedNow, the nascent real-time payment service from the Federal Reserve.
Juniper, a United Kingdom-based research firm, says that account-to-account payments will be a major force in 2024 for a couple of reasons. One is the increased availability of open banking, which, according to Mastercard Inc., gives users the ability to share financial account data with third parties. “By enabling permissioned access to bank accounts for third parties, open banking can provide the user interface and front end for linking instant payment schemes with digital wallets. These technical abilities are combined with strong growth being seen in open banking adoption,” Juniper says in its report.
The other factor is the growth in instant payments. These services are fast, low-cost, and easy to reconcile, Juniper says. “Also, in markets where instant payment schemes can be used for merchant transactions, we are witnessing a shift towards merchant payments as the more dominant payment type,” it says.
Also, outside of Western markets, a resistance to card payments is evident. “However, particularly in Europe, the fact that these card schemes are owned and operated by American businesses is problematic to regulators, with this infringing on the perceived sovereignty European authorities have over their payment systems. As such, a coordinated shift to payments that run on locally owned and operated payment rails would be of major benefit,” Juniper says. Juniper expects a major transition for A2A payments in Europe in 2024.
FedNow, which launched in July and now counts 177 participating financial institutions, according to a FedNow Web site, also relies on A2A transactions. While FedNow launched to much attention, its growth will reflect the U.S. penchant for digital payments and will be unlike similar services in other countries, where cash had played a much larger role, Juniper says.
“While FedNow has had strong early support from financial institutions within the US, we do not believe that FedNow will have the same transformative effect we have seen from real-time payments within other markets, such as India or Brazil. In those markets, much of the growth they saw was related to the digitization of existing activities that were already occurring via cash,” Juniper says.
FedNow use is not ordained, as similar schemes were in other countries. “This does not mean that we believe FedNow will be a failure. Indeed, we believe that FedNow will eventually become a vital payments service within the U.S. market, replacing several existing payment rails and improving efficiency within the U.S. payments ecosystem.”
What is forecasted by Juniper for FedNow next year is the exploration of value-added services built on top of the real-time payment service. Prior to the FedNow launch, a Fed executive said the service would be use-case agnostic, but her expectation was that the initial uptake would center on A2A transactions, such as wallet funding or earned-wage access.
Juniper says the FedNow market-led approach “has essentially created a toolbox for financial institutions to then create their own business models on top of this…We do expect that there will be a lot of examination of how A2A payments can be used across different use cases, such as for wallet top-ups, embedded finance, and B2B payments. It will be important for the Federal Reserve to stay engaged in this process and create additional tools to enable further innovation as the system evolves.”
Other 2024 projected trends include the emergence of use cases for central bank digital currencies; artificial intelligence in banking; digital-identity adoption; anti-money laundering tools incorporating AI; sustainable fintech solutions; mobile financial services accelerating the transition to banking tech services; a surge in biometric in-store payments; and the use of buy now, pay later in B2B settings.
