The Top Payment Trends Shaping Strategic Thinking in 2016, Part 2

In 16 in 2016: Trailblazing Trends in Global Payments, McKinsey&Company sets the stage for what’s likely to be top-of-mind in corporate payments executives thinking for 2016. If you’ve already explored The Top Payment Trends Shaping Strategic Thinking in 2016, Part 1, you’re ready to jump right into the second set of predictions:

9. Domestic infrastructures move to real-time. The U.S. and Canada will continue update their payments infrastructures to catch up with other countries when it comes to innovations like real-time solutions. Improving speed, cost, and security are central to their efforts, in addition to extending access to nonbank technology companies.

10. Cyber attacks will increase. Investments in cybersecurity—namely, enabling issuer and or acquirer tokenization of payment details—will reach an all-time high.

11. New revenue models strengthen fee income. What used to be the leading revenue model in the payments industry—interest income on daily balances—is being usurped by newer models used by digital companies. These pricing models include fee-per-transaction (e.g. iTunes), subscription-based (e.g. Netflix), and ad-generated (e.g. Google).

12. Blockchain promises innovation in corporate banking business models. Expected to be a key driver of disruptive innovation in the financial services industry, Bitcoin’s blockchain technology is set to change the game for the way financial institutions manage transactions. Leading financial institutions across the globe including Citibank and Deutsche Bank are already exploring the technology’s capabilities.

13. Digital banks prove the shift in the trust paradigm, starting with daily banking. Digital-only (aka digital native) banks are proving to be just as trustworthy as their bricks-and-mortar counterparts, while offering the added value of cost-efficiency. To remain competitive, traditional (branch-based) banking institutions will continue to expand their apps and digital functionality to meet B2C and B2B customers’ needs and preferences.

14. Digital challengers extend their claim to “own the customer.” The four “attacker archetypes” of financial technology (a.k.a. fintech) companies are digital attacker banks, process/business model disruptors, non-banking technology attackers, and platform attackers. They will keep earning their fair share of revenue in the changing marketplace by providing enhanced, end-to-end consumer experiences and leveraging data-rich logged-in ecosystems.

15. Strategic partnerships increasingly crucial to serve the full value chain. Optimizing the consumer search-evaluate-buy-bond cycle requires an integrated set of competencies that will be achieved through strategic acquisitions and partnerships across the industry. In addition to payments, the value chain includes tools that supports consumers as they find stores, compare merchants, decide on purchases, and provide reviews.

16. The next M&A wave has started. Competition in the payments space will provoke more banks to merge with and acquire fintech companies to make speedy headway with next-generation payments solutions. These companies will organize for digital payments, define customer-centric value props, leverage upgraded domestic payments infrastructures, and develop strategic partnerships to boost their capabilities.

To review the first set of of McKinsey&Company’s predictions for 2016, see The Top Payment Trends Shaping Strategic Thinking in 2016, Part 1. And stay tuned to our blog throughout 2016 for the latest in what’s new and newsworthy in the world of consumer and corporate payments.