Sunday, 24 January 2010

Innovations & Trends in Payments : Gazing into 2020

The decade gone by has been a fairly exciting & tumultous for the world in the realms of retail finance. Banking penetration has exploded, card payments continue to flourish in the developed and developing economies, the mobile remains the talk of the town, Internet as a significant enabler for access and transaction transmission is becoming a reality.

The impact of electronic payments on economic growth has been proven repeatedly. Coupled with explosion in new frontier financing including microfinance, the onus on retail payments to grab the opportunity and leap frog remains.

However, giant unconventional leaps has not been the hallmark of the banking industry, which has typically believed in incremental and linear innovation and adoption. Regulation, economics, trust and sunk investments have stymied innovation and rebellious outbreaks from the non banking sector. However, as we gaze into the crystal ball, what lies ahead in the next decade might just surprise us

1. Micropayments Go Electronic : Paypal laid the path and led the charge in the last decade. The Internet made switching costs for micro-payments an economically viable reality, ensuring no compromise on the transactional trust in the process. Mobile, transit, prepaid, contactless, biometric and a host of other applications and approaches is going to make this the decade of "Electronic Micropayments"

2. Microfinance Goes Into Course Correction : The excitement over microfinance is palpable and understandable. A few institutions in this space have reached large scale and even gone public. Repayment rates appear to remain stable across Asia, Africa and Americas, with low delinquencies.

The challenge for microfinance is going to be in processes, talent, scaling profitably and increasing regulation. MFIs need to brace for regulators & governments placing caps on interest rates & charges, covering the potential customer delinquency risk caused by droughts, famines and other natural disasters. New portfolio and risk management techniques would need to emerge quickly to enable MFIs to steer clear from a significant market correction.

3. Debit & Prepaid Card Payments Explode : Asia will lead the charge on debit usage. As debit card platforms open out for remote payments, an increasing number of customers will benefit from the convenience of using card payments and differentiate from the credit extension facilities offered by credit based instruments. Coupled with an increasing familiarity with prepaid payment concepts and exploding acceptance channels, both formats would soon overtake credit. ( Am sure this one is open for much debate!)

4. Card Acceptance Gets Cheaper : POS & ATM devices have almost bottomed out on their price curve, and card acceptance services leveraging
the mobile or its connectivity would make card acceptance drastically cheaper. Card issuance across mag stripe and chip would continue to dominate the payments landscape, hence reliance and need for card acceptance infrastructure and devices would remain.

5. Credit Scores Go Global : As the global workforce moving across geographies gains scale, sharing of credit scores across boundaries will become a reality. So dont be surprised if your FICO follows you to your next assignment in Venezuela!

6. Domestic Payment Networks Proliferate : Global economies will establish and adopt domestic payment networks along the lines of NETS & China Union Pay, to create a more cost effective & flexible payments DNA.

7. Payments Get Tax Rebates : Increasing number of nations will incentivise electronic payment usage to counter parallel grey economies and money laundering activities

Lets connect in 2020 and see where we stand.

1 comment:

Anonymous said...

You are absolutely right about the taxes...Tax Refunds – It’s Your Money, Don’t pay to get it.
Last year, the IRS processed 118,479,904 individual income tax refunds, issuing almost 3 percent more refunds last year compared to the same time the year before. Before you choose how to get your refund, know your options.
Even if you do not have a traditional bank account, there are several ways to get your tax refund including a tax refund loan, direct deposit, and a paper check.
A tax refund loan gives you quick access to your refund, but it comes at a high price – up to 2,000%! Tax refund loans, also known as “instant refund loans” or “refund anticipation loans” give consumers a short-term loan, usually 10 days, and costs anywhere between $29-$100 plus filing fees. This type of loan equates to an APR of approximately 222%. According to the Consumer Federation of America and the National Consumer Law Center, 12 million taxpayers paid over $900 million in fees last year on these types of loans. I’m pretty sure that if someone asked you if you’d like a 10 day loan for 222%, you’d either turn and run away or ask if they need a loan under the same terms.
Another way to get your tax refund is the traditional paper check. Last year, millions of paper refund checks were unable to be delivered due to address changes between the time of filing and delivery. Moreover, of the deliverable paper checks, some refunds took up to three months to be issued and received. What about lost or stolen paper checks? We hear every year on the news how mailbox theft is increasing, particularly during the months following the tax filing deadline of April 15th. Refund checks are easily identifiable and targeted by thieves.
If you are one of the millions of Americans without a bank account, how do you cash your refund paper check? If you use a check cashing store or other expensive check cashing alternative, you might want to explore other options, like paycards. It may seem that using a check cashing store is a convenient option, however, these stores charge 5% or more in fees. That’s $100 to cash a $2,000 check!
How can you avoid paying high fees and quickly get your money? Paycards are a great way to receive tax refunds using direct deposit. They allow you to get your refund faster while eliminating the risk of mail fraud, high costs of a refund loan, and check cashing fees.
Paycards are a safe and convenient way to direct deposit your tax refund. Just give the tax preparer your account and routing numbers, and your refund is deposited to your card directly. The same paycard you use to direct deposit your tax refund can be used to direct deposit your paycheck, child support, alimony, government benefits, and more. Just because you don’t have a bank account, doesn’t mean you can’t receive electronic payments. All you need is a paycard.
Direct Deposit
using a Paycard Traditional Paper Check
using a check cashing store Loan
on anticipated tax refund
Cost: FREE or up to $20 Cost: up to 5%of check amount Cost: averages 222.5%
Little to no cost or risk High cost and risk of
delay or undeliverability Extremely high cost, takes time, and loan is short term

About the Author:

Thomas Secor is the President of TFG Card Solutions, Inc. in Portland, Oregon. TFG offers free paycard solutions that empower companies to increase direct deposit participation saving both the company and its employees money every single pay period.
TFG Card Solutions, Inc.
800.457.5809 ext. 707