Convergence, cooperation are bywords for financial institutions, fintechs in 2018
The convergence of mobile platforms, APIs, machine learning and faster payments systems will require an unprecedented level of cooperation between payments industry participants, according to 2018 Outlook: Payments, a free report from Mercator Advisory Group.
"Fintechs should still be considered disrupters, but it has become clear that fintechs still need traditional financial institutions in order to reach scale," Aaron McPherson, vice president of research operations at Mercator, said in a press release. "… [T]raditional financial institutions will need to improve the way they partner with each other and with fintechs in order to be successful."
The report summarizes major findings from all seven previously published Outlook 2018 reports, and addresses:
- Challenging business fundamentals in credit card issuing, despite a favorable economic environment.
- Pressure on debit card issuers due to market saturation and merchants routing transactions over lower-cost networks.
- The inflection point for faster payments in the U.S., the key issue being the willingness and ability of FIs to market these services and enroll customers.
- Regulatory uncertainty for prepaid cards due to turnover at the Consumer Financial Protection Bureau and the ongoing delay of prepaid rules.
- Increasing collaboration between financial institutions and fintechs, facilitated by open APIs.
- The growing use of tokenization, particularly to payment-enable the internet of things.
- The increased use of biometrics and robust back-end fraud detection processes based on machine learning.
- The growing importance of mobile platforms for retailers.
- Consolidation in the merchant services market