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Open Finance and GenAI set to dominate FinTech and payments landscape in 2024

A Juniper Research whitepaper has revealed the 10 trends it believes are set to radically impact the fintech and payments landscape in 2024.

The whitepaper found that the fintech market is undergoing a rapid shift, with the rise of new technologies, such as Open Finance, generative AI and A2A (account-to-account) payments having a major impact on business models. This is combined with unprecedented competition to be ‘top of wallet’ for customers, making the market more competitive and uncertain than ever.

Top 10 Fintech & Payments Trends 2024

The trends are as follows:

1. A2A Payments to Challenge Cards in eCommerce and for Funding Wallets
2. CBDC Use Cases to Emerge in Practice
3. Generative AI in Banking to Transform Spending Insights
4. Digital Identity Adoption to Be Catalysed by Digital Wallet Integration
5. AML Tools to Increasingly Leverage AI as Alternative Payments Complicate Compliance
6. Sustainable Fintech Solutions to Emerge, as ESG Compliance Moves to Top of Agenda
7. FedNow to Fail to Match Instant Payments Success, but Value-added Services Will Flourish
8. Mobile Financial Services to Accelerate Transition to Banking Tech Services
9. Biometric In-store Payments to Surge, as Checkout Innovation Rises
10. B2B BNPL to Provide Critical Financing for SMEs

Juniper Research’s VP of Fintech Market Research, Nick Maynard, said: “The fintech and payments market is undergoing fundamental changes, with new payment methods and different business models threatening to completely uproot existing operations. Stakeholders must fundamentally reassess the viability of their offerings, and build ambitious roadmaps for future developments, or they will be left behind by more agile competitors.”

These trends were compiled by Juniper Research’s expert team of financial markets analysts; cross-referencing their detailed industry knowledge against the online data platform harvest, comprising over 2.1 million fintech market statistics.

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Alternative payments fuelling Australian e-commerce

E-commerce sales in Australia registered sustained growth over the last few years supported by availability of secure online payment tools, increasing number of online shoppers, and proliferation of online merchants and payment tools.

Against this backdrop, alternative payment methods such as mobile and digital wallets are set to account for 34.1% of the payments made on the online shopping platforms in 2023, according to GlobalData.

An analysis of GlobalData’s E-Commerce Analytics reveals that Australian e-commerce market is expected to register a 10.3% growth in 2023 to reach AUD74.9 billion ($51.0 billion), as consumers are increasingly shifting from offline to online purchases. The market is set to increase at a compound annual growth rate (CAGR) of 7.5% between 2023 and 2027 to reach AUD99.8 billion ($68.0 billion) in 2027.

Shivani Gupta, Senior Analyst Banking and Payments at GlobalData, said: “The popularity of online shopping events such as Black Friday, Cyber Monday, and Afterpay Day has also driven e-commerce growth in the country. E-commerce payments in Australia are dominated by payment cards, accounting for a 50.6% share in e-commerce payment value in 2023. Of this, credit and charge cards account for 29.2% share while debit cards account for 20.9%, according to the GlobalData’s 2023 Financial Services Consumer Survey.”

Consumers prefer credit and charge cards due to the value-added benefits they offer including interest free instalment payment options, reward programs, cashback, and discounts.

Gupta added: “Payment cards are followed by alternative payment tools, which collectively account for a 34.1% share in 2023. Alternative payments are increasingly preferred by Australians with some of the popular brands being PayPal and Apple Pay.”

The growth of alternative payments has also been driven by the rising popularity of buy now, pay later (BNPL) solutions. Some of the prominent BNPL brands in Australia are Afterpay, Zip, and Klarna.

In a bid to boost usage, Afterpay conducts a four-day bi-annual shopping event dubbed Afterpay Day in Australia. The latest event was held during March 2023, offering up to 70% discounts at brands including THE ICONIC, ASOS, Myer, Wild Secrets, and Sephora.

Gupta concluded “The growing popularity of alternative payment solutions, especially among younger generation, is expected to further accelerate the shift away from cards and these alternative payments are therefore all set to challenge the dominance of payment cards over the next five years.”

GlobalData’s 2023 Financial Services Consumer Survey was carried out in Q2 2023. Approximately 50,000 respondents aged 18+ were surveyed across 40 countries.

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BPFI data shows increase in payment fraud in ireland

Fraudsters stole nearly €85 million (€84.6m) through frauds and scams in Ireland during 2022, an increase of 8.8% on 2021, according to a detailed report published by FraudSMART, the fraud awareness initiative led by Banking & Payments Federation Ireland (BPFI).

The FraudSMART Payment Fraud Report H2 2022 outlines how card fraud accounted for over 95% of fraudulent payment transactions by volume but only 40% of fraud losses at €33.4m.

Most of the increase was driven by online card fraud or ‘card not present’ fraud where a criminal uses the victim’s compromised card information to make an online purchase (up by 24% in value year-on-year to €27.1m in 2022).

The report also highlights the continued rise in value of unauthorised electronic transfers (primarily payments through mobile and online banking) which accounted for almost 39% of fraud losses at €32.8m, but less than 4% of transaction volumes. Meanwhile, there was a 19% decrease in authorised push payment (APP fraud) transactions in 2022 compared to 2021, and APP fraud losses dropped by 41% to €9.9m, the lowest value since the data became available in 2019.

The report comes as FraudSMART warns consumers to be on high alert as text message fraud, known as smishing, continues to become more prevalent. A recent survey by FraudSMART revealed that this type of fraud is now the dominant channel for fraud attempts, with 1 in 2 adults having received fraudulent text message in the previous 12 months. These text messages often include a link and sense of urgency requiring immediate action.

Niamh Davenport, Head of Financial Crime, BPFI said: “[The] figures show that card fraud continues to account for the vast majority of fraudulent payment transactions at 95% of the total volume although these transactions tend to represent lower levels of losses on average. On the other hand, other fraud types have relatively low volumes but would have higher average losses, particularly any fraud that leads to account takeover where the fraudster takes control of your main bank account by tricking you into handing over your bank log in details, which we have seen recently through text message scams.

“Conversely, we also see from today’s report that there was a 19% decrease in authorised push payment (APP fraud) transactions in 2022 compared to 2021. APP fraud can happen when a scammer tricks a consumer into sending money directly from their account to an account which the criminal controls. Examples of this include investment scams such as fake cryptocurrency schemes or romance, holiday or accommodation scams. The decrease in this type of fraud might be attributed to increased consumer awareness or a post-Covid shift, as we have gradually returned to meeting in-person with decreased dependency on online communication. However, figures across all types of financial fraud can fluctuate as fraudsters continually adapt their behaviours and methods.

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Top global payment companies generated $228bn in 2022

The global payments industry witnessed an exceptional 2022, despite the challenges posed by expansionary monetary policy, geopolitical uncertainties, pandemic-related supply chain disruptions, and a macroeconomic environment with heightened inflation and increased energy costs.

That’s according to GlobalData, which says the top 20 public payment companies experienced a 15.5% increase in their top-line performance, reaching a total of $228 billion.

The US payment companies dominated the list with the top four – American ExpressVisa, PayPal, and Mastercard – accounting for 58.5% of the aggregate revenue of the top 20. Driven by an increase in global payment volume, the big four grew by more than 10%.

Other companies in the top 20 list that recorded impressive top-line growth include Adyen, WAG Payment Solutions (Eurowag), WEX, and Fleetcor Technologies. Each grew by more than 20%. Eurowag and Nuvei are the new entrants replacing Lakala Payment and Evertec.

Murthy Grandhi, Company Profiles Analyst at GlobalData, said: “Adyen’s growth can be attributed to its remarkable progress of processed volumes that surpassed half a trillion, reaching EUR767.5 billion in 2022, reporting a year-on-year (YoY) growth rate of 49% and a CAGR of 48.2% over the past five years. Of these volumes, point-of-sale (POS) accounted for 15% translating to EUR115.1 billion. The company’s revenue expanded due to a greater increase in settlement and processing fees.”

Integrated payments and mobility platform player Eurowag’s 27.9% revenue growth was a result of higher energy prices and growing scale of payment solutions.

WEX reported robust revenue growth of 27% owing to 34.6% rise in payment processing revenue from Fleet solutions segment on the back of higher domestic fuel prices and volume growth in North American fleet and over-the-road businesses.

Fleetcor Technologies’ 20.9% growth in revenue was due to 14% rise in fleet revenue, driven by increase in transaction volumes and new sales growth and positive impact of the macroeconomic environment.

New entrant, Nuvei registered 16.4% rise in revenue primarily due to organic growth driven by higher e-commerce volume.

Samsung Card reported a dip in revenue triggered by a depreciation in currency value. Cielo’s 4.4% drop in revenue was due to the impact of the sale of MerchantE and M4U. Block (formerly Square) also reported a marginal drop in revenue owing to decline in the market price of bitcoin.

Grandhi concluded: “The recent disruptions in the economic, social, and technological landscape have created promising opportunities for businesses to explore and expand. These disruptions forced companies to explore new channels, enlarge customer reach, and seek new business prospects. In the near future, there can be spurt in niche areas such as social and live commerce, blockchain technology, real-time payments, open banking, adoption of digital currencies, biometric authentication for payment transactions, and the metaverse can emerge as a new commerce platform.”

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