The  Future  of  Payments      Insights  from  Discussions  Building  on  an  Ini4al  Perspec4ve  by:    MasterCard  on  How  Payments  are  Helping  to  Shape  the  Future  of  Commerce  

Context  The  ini4al  perspec4ve  on  the  Future  of  Payments  kicked  off  the    Future  Agenda  2.0  global  discussions  taking  place  through  2015.    

This  summary  builds  on  the  ini4al  view  and  is  updated  as  we  progress.  

Ini4al  Perspec4ves  Q4  2014  

Global  Discussions  Q1/2  2015  

Insight  Synthesis  Q3  2015  

Sharing    Output  Q4  2015  

Big  Data  Opportuni9es    Most  of  the  opportuni4es  big  data  can  offer  have  yet  to  be  fully    exploited.  The  reality  is  that  there  are  different  chunks  of  data    that  are  collected,  stored  and  managed  in  mul4ple  ways.  

Bricks  and  Clicks    Is  omnichannel  just  a  buzz  word?  How  important  is  the  consistent    

shopping  experience  across  channels?  What  is  the  future  of  physical  stores?    Can  bricks  keep  pace  with  clicks  or  is  it  in  fact  the  other  way  around?  

The  End  of  Cash?    All  the  evidence  suggests  that  the  use  of  cash  is  in  decline  across  the    

globe.  Cash  takes  4me  to  get  at,  is  riskier  to  carry,  and  by    most  es4mates,  cash  costs  society  as  much  as  1.5%  of  GDP.  

Enabling  Financial  Inclusion    With  many  organisa4ons  now  making  financial  inclusion  a  priority,  it  is  

 likely  we  will  see  a  significant  por4on  of  the  2.5bn  unbanked    adults  armed  with  electronic  payments  products  in  the  future.  

Personalised  Shopping    In  ten  years  you  can  expect  to  walk  past  a  shop  and  your  mobile  will    receive  meaningful  and  personal  no4fica4ons  on  discounts  or  deals    

in  store  that  you  are  likely  to  buy  based  on  your  shopping  preferences.    

Omnichannel  Access    You  may  be  able  to  order  online  and  pick  up  at  the  store,    order  at  store  and  arrange  delivery  online,  get  similar  offers    across  channels  and  yet  have  the  same  payment  op4ons.    

Customers  will  be  able  to  purchase  and  receive  their  items  in  a  variety  of  ways,  across  both  digital  and  physical  environments.  

Growth  of  Mobile  Point  of  Sale    In  the  next  ten  years  there  will  be  a  global  acceptance  of  electronic    

payment  products.  We  are  nearly  there  with  Square  and  iZe\le.  Such  is    their  success  it  is  expected  that  by  2019  46%  of  POS  terminals  will  be  mPOS.  

Mul9-­‐factor  Authen9ca9on    Mul4-­‐factor  authen4ca4on  will  become  the  norm...  authen4ca4on  itself  will  become  more  secure  as  biometric  technology  from  hand  geometry,  via  face  recogni4on  and  fingerprints  to  iris  recogni4on  become  more  mainstream.  

There  will  be  a  range  of  appropriate  ways  of  authen4ca4ng  payments,  generally  changing  from  passive  and  complex  (passwords)  to  ac4ve  and  simple  (biometrics)    

Cross-­‐Border  Commerce    Cross-­‐border  commerce  is  growing  faster  than  domes4c  commerce  and  so  will  become  increasingly  important  and  influen4al.  Cross-­‐border  flow  of  goods,  

services  and  finance  could  increase  threefold  to  $85  trillion  by  2025.  

Low  Value  Payments    One  area  that  is  likely  to  see  significant  transforma4on  is  low  value  payments  -­‐  everyday,  high-­‐frequency  purchases  for  which  cash  is  used  (typically  sub  $10  

transac4ons)  and  make-­‐up  the  bulk  of  cash  transac4ons  today.  

Sub  $10  transac4ons  will  become  increasingly  fric4onless,  4ed  into  pay-­‐as-­‐you-­‐go  business  models  i.e.  on-­‐demand  content.  

MiData  In  the  future,  customers  will  retain  full  ownership  of  their  own  consumer  data  in  machine-­‐readable  format,  which  they  then  opt  to  share  with  merchants.  

Some  customers  will  hire  ‘personal  data  managers’  to  make  this  easy  

Unbundling  of  Payments  Value  Chain  Greater  compe44on,  new  innova4ons  and  changing  regula4ons  will    mean  that  the  current  value  chain  will  spread  out,  removing  steps  and    

so  reducing  costs  for  both  consumers  and  suppliers.  

Changing  Customer  Expecta9ons  Customers  will  expect  different  things  from  their  payments  experience:    instead  of  just  ‘security’,  there  will  also  be  a  need  for  greater  individual    control,  flexibility,  choice,  efficiency,  convenience  and  “good  fric4on”.  

Prolifera9on  of  Currencies  People  will  increasingly  use  mul4ple  forms  of  currency  in  different    contexts:  alongside  na4onal  legal  tender,  we  will  see  more  local    and  crypto-­‐currencies  –  many  decoupled  from  exis4ng  systems.  

Regula9on  of  Services  A  new  regula4on  model  will  emerge  in  the  payments  world.  Whereas  

 to  date  regulators  have  focused  on  “defini4ons  of  en44es”  their  role  will    shik  to  being  more  about  “regula4on  of  services”  and  wider  alignment.  

Transac9onal  vs.  Emo9onal    Seamless  payments  will  distance  consumers  from  understanding    

monetary  value.  Brands  will  have  to  reconsider  the  way  they  connect    to  customers  providing  more  holis4c  and  emo4onal  value.  

Seamless  Ubiquitous  Payments    The  ability  to  ‘transact  anywhere’  with  integrated,  sophis4cated    

authen4ca4on  such  as  biometrics  increases:  More  contactless  technology    and  a  convergence  of  standards,  enable  global  informa4on  exchanges.  

Integrated  Global  Governance    Regula4on  to  support  global,  regional  and  local  transac4ons  will  increase.  

 A  set  of  global  integrated  standards  and  governance  for  payments    will  emerge  to  which  key  regulators  and  merchants  all  sign  up  to.  

Evolu9on  of  Security    The  need  for  physical  security  reduces  with  demise  of  the  use  of  cash.  In  its  place,  more  secure  digital  solu4on  plamorms  pervade  with  a  consolida4on  of  iden4ty  and  payments  into  an  ecosystem  that  includes  crypto-­‐currencies.  

Reduced  Human  Control    We  see  a  world  where  most  connected  devices  can  be  used  

 for  payments,  more  people  will  be  financially  included  and  there    are  more  automated  payment  choices  and  channels.    

Device  is  King,  Consumer  is  Queen  Whether  on  devices  or  in  the  cloud,  our  digital  repositories  will  know  who  we  are,  where  we  are  and  what  we  redeem.  Businesses  need  to  understand  these  new  intermediaries  and  how  they  define  our  rela4onships  with  their  brands.  

Tension  with  Regula9on    Some  regional  regulatory  interven4ons  protect  consumers  whilst  others  prevent  innova4on  by  limi4ng  use  of  new  technologies.  A  power  struggle  

between  brands  and  government  emerges  around  wider  data  sharing  and  use.  

The  Composite  Consumer  Flexible  digital  iden44es  allow  consumers  to  connect  with  each  other  even    as  they  connect  with  brands.  Loyal  rela4onships  will  be  made  not  just  with  individual  customers  but  also  with  families,  couples,  and  groups  of  friends.  

A  Systema9c  View  Policy  makers  from  around  the  world  will  have  to  look  at  the  problems    

of  wealth  crea4on  and  wealth  inequality  in  a  more  systemic  way,    with  the  use,  for  example,  of  a  complexity  framework.  

Data  Darwinism    Data  is  a  new  form  of  power:  Corporate  consolida4on  places  data  in  the    hands  of  a  few  who  are  able  to  dictate  terms  above  others.  Governments  correspondingly  have  less  power  as  they  have  less  access  to  key  data.  

Seamless  Data  Representa9on    Improvements  in  the  way  in  which  data  is  visualized  and  presented  leads  to  rising  consump4on  and  wider  use.  In  turn,  we  see  greater  efficiencies  and  benefits  for  individuals,  companies,  governments  and  society  as  a  whole.    

Trust  and  Integrity  of  the  System  As  more  individual  control  and  simplicity  is  sought,  how  will  the  privacy  

con4nuum  evolve,  will  tokenisa4on  diminish  security  concerns    and  do  we  know  what  trust  will  mean  in  the  future?  

Free  Banking  from  Non-­‐tradi9onal  Players      Innova4ve  business  models  -­‐  underpinned  by  changing  technology,  consumer  demand  and  Governments  pushing  for  cheaper  or  free  banking  -­‐  open  the  doors  to  new  entrants  from  outside  the  sector  that  break  old  monopolies.  

Compe9tor  Collabora9on  Wider  collabora4ons  change  the  payments  landscape  with  credit  card  companies  partnering  with  merchants,  MNOs,  and  new  entrants.  These  partnerships  share  infrastructure,  increasing  consumer  u4lity  and  choice.  

Digital  Regulatory  Regions    With  learnings  from  successes  in  East  Africa,  autonomous/sovereign  regulatory  authori4es  come  together  to  create  con4guous  digital  regulatory  regions  that  span  geographic  borders  and  boundaries  and  lead  to  payments  convergence.  

Mobile  Currency  Convergence  Ambi4ons  for  convergence  of  payment  types  is  accelerated  by  the  crea4on    

of  seamless  mobile  consumer  experiences  that  unite  mul4ple  cash-­‐less  stores  of  value  including  a  range  of  tradi4onal  and  alterna4ve  currencies.  

Financial  Inclusion  Driven  by  Payments  Companies  Improvements  in  financial  educa4on  for  the  mass  are  driven  by  the  payments  

industry,  not  governments.  Predica4ve  algorithms  protect  consumers  by  reducing  their  ability  to  over-­‐extend  themselves  with  cheap  credit.  

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