It’s no secret that the payment industry is experiencing a sea change. As the year 2024 unfolds, various payment trends and technological advancements are set to redefine the landscape of transactions globally. This article aims to dig deep into the most significant developments that are expected to shape the payment industry this year.
The Controversy over Card Interchange Fees
The year 2024 shines a spotlight on the ongoing dispute over card interchange fees, often referred to as swipe fees. Retailers, merchants, and consumer advocates are striving to curb these fees, while bank card issuers and partner networks are set to resist these efforts. The Credit Card Competition Act, a proposed congressional bill, is at the heart of this conflict. This legislation aims to inject more competition into credit card payment processing by compelling bank card issuers to provide merchants with access to an alternative network to Visa and Mastercard.
FedNow Gaining Traction
The launch of the Federal Reserve’s instant payment system, FedNow, last year has sparked a new chapter in the banking and payment industry. This year, the key questions are: How swiftly will banks adopt FedNow? How quickly will financial institutions develop use cases to expedite U.S. payments for consumers and commerce?
The Rise of Real-Time Payments
As the digital revolution propels forward, real-time payments are set to play an increasingly crucial role. Industry experts predict a significant shift towards real-time payments in 2024. This shift is driven by consumers’ growing demand for immediate transactions. The Clearing House, an association owned by several of the world’s largest commercial banks, has added over 200 institutions to its real-time payments network in 2023, with plans to expand further in 2024.
The surge in B2B Digital Payments
In contrast to consumer payments, the evolution of business-to-business (B2B) payments has traditionally been slower. However, the launch of FedNow seems to be a catalyst for faster adoption of digital payments in the B2B arena. The potential for digital payments in this segment has spurred numerous large and small companies to venture into B2B payments.
A Surge in Industry Consolidation
The payment industry is likely to witness a wave of consolidation in 2024 due to increased acquisition activity and company closures resulting from financial constraints. This is especially true for saturated sectors, such as embedded finance or Buy Now, Pay Later (BNPL).
Digital Wallets: The Next Big Thing
Digital wallet transaction volume is projected to hit the $16 trillion mark by 2028, according to a report by research firm Juniper Research. As digital wallets become more mainstream, both fintechs and traditional financial institutions are innovating to enhance the digital wallet experience.
The Era of Instant Payments
The demand for instant payments is steadily growing. According to Zur Yahalom, senior vice president and head of financial services at digital transformation fintech Amdocs, we are witnessing a significant shift towards real-time payments, a trend set to continue into 2024 and beyond.
The Scourge of Fraud
The payment industry is grappling with an unprecedented surge in fraud, driven by the increase in digital transactions. Banks, processors, card networks, and various intermediaries and fintechs are all affected by this escalating issue.
The Role of Fintechs in Payments
Fintechs are playing a pivotal role in promoting the adoption of advanced payment systems like FedNow. The Federal Reserve is encouraging its certified service providers, including ACI Worldwide, CSI, Finastra, and FIS, to boost FedNow adoption.
The impact of Regulatory Developments
Regulatory developments are also shaping the payment industry. The Consumer Financial Protection Bureau (CFPB) is scrutinizing tech giants’ control over contactless payments on their smart devices.
The Role of Data and Research Firms
Data and research firms like Insider Intelligence are playing a crucial role in the payment industry by providing industry benchmarks for the most critical KPIs in digital marketing, advertising, retail, and e-commerce.
Conclusion
The year 2024 promises to be a landmark year in the payment industry, with several groundbreaking trends poised to transform the landscape of transactions globally. Despite the challenges, such as rising fraud and regulatory scrutiny, the payment industry is set for a thrilling ride, driven by technological advancements and evolving consumer demands.