For some time, it felt like the pandemic would never end. But now, with vaccines being rolled out en masse across the UK and pubs back open in full swing, it’s finally starting to feel like a post-pandemic world is in sight.
As the CEO of a scaling payments start-up, it’s my job to ask: What does this world look like for the payments industry? It’s been a tumultuous 15 months for the sector, with sea changes in consumer behaviour setting a whole new stage for emerging solutions.
Interactions with our clients have become digital-first, or in the majority of cases digital-only. Adoption of non-cash payment options is at an all-time high. Open banking is no longer just a data-focused phenomenon. And partnerships have proven vital in a period of reaction to unprecedented socio-economic change.
Let’s make sense of the last year by looking at how these events have shaped the payments industry we see before us today.
The new virtual face of communication
The way we communicated prior to the pandemic was a given. So, when the successive lockdowns hit, habits were broken and alternatives took their place. We’ve had to be flexible. Less face-to-face time with clients this last year has meant we had to change our individualised approach to sales, client relations and onboarding. Of course, video conferencing – now a $9.2 billion market – has gone a long way to help this though.
Like every other industry, the payments sector has become accustomed to video-based communication. With our houses doubling up as offices, many have claimed to enjoy higher levels of productivity by forgoing the long commute into Central London, or travel between meetings.
This is why a number of businesses have made major changes to cater to this remote-first environment. This year, recurring payment processor GoCardless introduced a 90-day “work away” policy, which allows employees to work abroad for up to three months each year. Whilst e-commerce giant Shopify unveiled its “digital-by-default” company status back in May 2020. This saw the majority of its employees transferred to remote working on a permanent basis.
Our approach to work has centred around flexibility this last year. We’ve hired four new UK staff members who are entirely based from home, because we recognise being in our London office isn’t essential. Whilst some teams initially struggled and had to learn to adapt to remote environments, plenty more in our team have benefitted immeasurably from virtual working.
We recognise that nuances can be missed when you exchange information virtually. And the lack of networking has meant we’ve really had to think about relationship and partner management. In-person, you get a sense for a person’s passion and enthusiasm by simply being around them. Which is why we’ve been asking prospective clients lots of questions on our Teams calls, to really dig into that discovery phase. Because you can learn so much from how your clients describe things, over reading information on a word document.
We’ve also been looking at new ways for information sharing within the company. We recognise the importance of sticking to our values despite colleagues being in various different locations. How we get things done is as important as what we achieve at Moorwand, and we want to ensure our clients feel like we’re an extension of their businesses, not just a supplier. So constantly seeking out the most efficient way for us to all work together is always on our minds.
Fintech adoption is levelling up, and fast
Fintechs and the regulations which encircle them, most notably PSD2, have strived (at least in part) to push incumbents into offering more competitive digital services. But ultimately, it was an unprecedented global pandemic that truly kicked digital adoption into gear. And not a calculated, industry-driven shift.
All branches shut for traditional banks in March 2020, following years of gradual closures. Which is no wonder, when you consider branches are costing banks as much as £118,000 a year for every customer who uses them regularly. So, digital became the preferred face of banking. Just like that.
Customers have, in turn, shifted their approach to payments. Instead of relying on traditional banking systems, the pandemic has seen many of them experiment with digital styles of payments and banking. It’s no surprise when trust in banks is at an all-time low. An Accenture report published in December found less than one-third (29%) of consumers globally trust banks “a lot” to look after their long-term financial well-being, compared with 43% just two years ago. This is compounded by Worldpay’s estimate that cash will account for just 7% of in-store purchases in the UK by 2024.
Whilst large businesses worried over their legacy footprints, smaller organisations – particularly tech-focused fintechs – could adapt more easily and advance at a faster pace. Take Starling Bank as an example. The team adopted government-backed loans to support small businesses following the first lockdown in an endeavour to serve those locked out by big banks’ criteria. The start-up has now built up a loan book topping £2 billion. It also rolled out a pandemic-friendly ‘carer card’ to help those wishing to isolate and who needed loved ones to shop on their behalf. An innovation many major banks have now copied.
Moorwand has found that as fintech is fast-becoming “mainstream”, more and more non-financial businesses are adding payments to what they already do. And we’ve seen a growing number of European countries reaching out looking to match the UK’s fintech scene, which the Kalifa Review valued at £11 billion in February.
Mobile wallet usage and integration on the rise
One of the fintech services we’re seeing rapidly adopted by consumers is mobile wallets. A space dominated by just a few key players – Apple, Google and Samsung to name the ‘Big Three’ – the mobile wallet arena has benefited hugely from the tectonic shift towards digital payments.
In 2019, there were 8.3 million mobile payment users in the UK – that’s just 12% of the population. But in 2020, Buy Shares UK data suggests the country’s usage of mobile wallet payments increased by a whopping 50%. At Moorwand, we’ve found around 80% of our clients are actively developing Google or Apple Pay. That is, if they don’t already have it integrated.
And whilst digital adoption is high in the UK (the country accounts for a hefty 25% of the region’s total digital transaction value), we’ve found that international clients are also closing the gaps between cash and digital transactions they housed pre-pandemic. Plenty of our clients now see it as a standard, rather than just a competitive edge on their rivals.
Our very own Luc Gueriane, Moorwand CCO, explains how payments firms can integrate mobile wallets in his column for FinTech Futures. As he rightfully points out, “it is now the norm for users to be offered many different payment options” so we’re taking strides to make it as easy as possible for our clients.
Companies are truly embracing open banking
In the last 12 months, we’ve seen a huge increase in the number of clients and leads embracing open banking. This observation echoes the OBIE’s own data, which revealed in December that half of Britain’s small and medium-sized enterprise (SME) sector is now using services offered by open banking providers. And amongst consumers, open banking demand tripled during the pandemic. In February, Experian recorded more than 188 million data sharing requests on its platform – up from 47 million in February 2020.
For businesses, the spike in adoption is down (in large part) to their awareness of what such technology can offer them. Be that efficiency (which saves time and money), more customers, a better UX, or simply a better overall product. Moorwand has therefore seen a lot more intuitive and customer friendly demos of late, compared to pre-pandemic times.
Deadlines in regulation have also played a part in open banking’s adoption. Despite various dates now being pushed back – most recently, for Secured Customer Authentication (SCA) – the original dates have still served as helpful targets to meet.
But ultimately, the biggest driver for open banking won’t be the pandemic. It will be the education which surrounds it. Because fundamentally, to grow as a concept – the sector, as well as its customers – need to understand the value of the technology’s use cases.
Not too long ago, I was chatting to a partner of ours, Huw Davies, who co-founded Ozone API, on the topic of open banking adoption. He thinks we’ll see huge change following the latest update to the UK’s open banking standard, which now includes variable recurring payments. Huw pointed out that this “goes way beyond PSD2”, delivering the foundation for open banking payments “to really take off”. He added: “I think from here we’ll see banks start to expose value-adding APIs that go beyond the minimum requirements of regulation and create a genuine commercial channel.”
Collaboration never felt so good
It’s a tale as old as time, but one which particularly rings true on the other side of a global health crisis. Partnerships have formed a huge part of so many industries’ survival strategies, and they will only continue to run through the DNA of payments.
A great example of cross-company collaboration in the fintech space is Covid Credit. It saw three start-ups – rental service Fronted, consultancy 11:FS, and credit decisioning platform Credit Kudos – come together over a weekend to help the UK’s self-employed get access to further income relief amid the coronavirus.
Here at Moorwand, we’ve recognised that the relationships we make and keep are really key to making our solutions – and those of our clients – such a success. It comes down to specialists working with fellow specialists, leveraging each others’ carefully curated brains to create products for clients with double and triple the impact.
Because ultimately, your business should be focusing on what it’s good at. For us, it’s BIN sponsorship. That’s what partners are for. To fill in the gaps you don’t consider yourself to be an expert in.
In the past year, we’ve added 12 new, substantial companies to our partner network. This means we’ve now gained a diverse portfolio of new providers across KYC, Open Banking, Insurance, Consultancy, Secure Document Distribution, and many more. Averaging at least one new partner a month, it’s clear collaboration and our agnostic approach have played a huge part in our success throughout the pandemic. And no doubt it will continue to do so.
As we and our industry peers try to understand how the future of the payments industry will look, Moorwand is leaving the past 15 months behind with a newfound approach to how we do business. We’re moving offices, hiring new team members, and have discovered that the traditional 9-5 isn’t the only way to do business. We look forward to seeing our partners and clients in person as soon as we can do, but are also grateful for the way that everyone has embraced not only the changes that have happened across the payments space but also the changes at home too.