Tech Innovation Heats Up in the Payment Space

Tech Innovation Heats Up in the Payment Space

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Tech innovation in the payment space knows no bounds. Among the trends, traditional payment companies are pursuing M&A with their fintech counterparts in order to remain relevant in a changing market landscape. Others are launching new products. Even tech giant Apple is jumping in the fray, most recently pouring resources into a new credit card. Payment startups, meanwhile, are making plans for their public market debut in a pipeline of IPOs. Even while uncertainty has gripped the global economy, the payments segment seems to be doing just fine. 

Payments M&A

One of the biggest deals so far in 2019 involved the UK’s largest payment processor, Worldpay. U.S.-based fintech company Fidelity National Information Services (FIS) announced it is scooping up Worldpay in a $43 billion transaction. The merger is the latest in a series of acquisitions that have unfolded in the payment space of late as companies adapt to a consumer shift away from cash and toward cards and the internet.

Worldpay’s payment solutions compete with the likes of Visa and MasterCard and support cutting-edge technology including contactless payments. According to Worldpay’s proprietary research, in 2018, contactless payments became more popular than chip and PIN payments for brick-and-mortar transactions in the U.K.. This includes both contactless cards and mobile contactless payments.

Source: WorldPay

Indeed, contactless payments are all the rage, particularly in the U.K. Consumers have embraced the speed and ease in which they can pay:with just the tap of a card without having to enter a PIN for small transactions. In fact, while the current limit for contactless transactions currently hovers at approximately GBP 30, consumers would be willing to see that amount lifted to as much as GBP 50.

The transportation and retail sectors have largely been fueling consumer adoption, which led to nearly a one-third increase in contactless card usage last year versus 2017 levels. Among retailers, fashion has been out front, as evidenced by a 415% increase in contactless card in 2018 over the prior year.

In the U.K., two-out-of-five card payments involve contactless technology, according to BBC.

Apple Card

It was surprising to learn that Apple’s new titanium credit card is foregoing contactless. A CNET reporter revealed that despite the fact that the Apple Card is a physical credit card, it will not offer a contactless option for payments.

Nonetheless, Apple’s expansion into credit cards, for which it has partnered with both Goldman Sachs and MasterCard, captured the attention of the banking community and fintech plays alike. Payments is already a fiercely competitive space, and now that Apple has entered the picture, some industry observers are predicting that other card issuers will “[rethink] their products and [seek] to copy Apple.”

Security could be one of those features. The Apple Card is expected to integrate biometrics, such as touch ID or Face ID, which for Apple will be facilitated through the iPhone. Consumers might also get used to the simplicity of Apple’s card, which features a laser-imprinted version of the user’s name and bypasses a credit card number and other sensitive data.

While Apple was not a first mover in payments, the sky is the limit for the tech giant. Should they decide to expand into other areas of payments, such as customer deposits or lending products, the company will pose a greater threat to fintech companies such as PayPal, Square, and those startups looking to get into consumer banking, such as SoFi.

Payments IPOs

Another sign that 2019 is the year of payments, several startups are eying the public markets. Dubai-based payment processor Network International plans to make its debut in London’s stock market this year. MasterCard is keen on the company plans to back them with a $300 million “cornerstone investment.” As a result, the companies plan to collaborate on projects to promote digital payments in the Middle East and Africa.

Payments group Nexi, on the other hand, is planning to go public in Milan in a blockbuster deal, looking to raise as much as 2.7 billion euros in what would be Europe’s biggest IPO of the year. Digital payments have yet to take off in Italy, and Nexi is out front to capitalize on the market opportunity.

The payments space is the place to be, with tech innovation gripping the market and major deals leading both the M&A and IPO markets. With tech leaders such as Apple now making a push, things are likely to heat up even further.

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