PayTech is Disrupting Payment Systems – Here’s What You Need to Know

Apr 5, 2023

Traditional payment ecosystems are changing fast. In fact, FinTechs are already capitalizing on this opportunity and using their tech capabilities to extend their reach into payments. So, what does this mean? For one thing, new digital players have appeared: PayTechs. 

Why are they important? 

Because they account for 25% of FinTechs and focus on things like payment facilitators (PayFacs), payment technology suppliers, and payment service providers (PSPs). 

With a market size of $240 trillion, payments mark an important junction between the digital economy and commerce. And, since PayTechs are recognizing the distinct advantages that fast, embedded payments offer, it’s not hard to see why they’re gaining ground. 

With rising demand for hassle-free transfers, PayTechs are delivering real solutions for businesses and consumers alike. 

So, the disruption caused by PayTech is providing an ideal opportunity for PSPs to re-examine their processes. Things like open banking, real-time payments, digital currencies, and embedded payments are among the most important areas influencing payments. 

And though the scale and effect of these technologies will likely vary across markets, one thing is for sure: They each bring transformation and new possibilities. In other words? PSPs need to consider how PayTech is impacting payments and optimize accordingly. 

Ultimately, payment processes are changing with the times – they’re getting faster, smoother, and more convenient. And, though it’s clear that PayTechs are leading these changes, PSPs also play a key role in shaping what the payments sector will look like in the years to come.

How payments will evolve in the future 

Already, there have been discernible changes in the payments sector as PayTech continues to evolve. Here are some key takeaways:  

  • Connected commerce is the driving force behind the digital economy. Ultimately, payment methods that are quicker, safer, and cheaper than before are becoming the connecting link between sellers and buyers. 
  • Real-time payment rails offer remarkable innovation and allow PSPs to better meet customers’ needs thanks to account-to-account (A2A) transfers – transfers that open banking helps accelerate.  
  • Many payment providers are looking for ways to offer their customers more value – beyond simple transactions. And, in so doing, they’re becoming stand-alone providers.   
  • Open banking will change the payments landscape since it will lead to more players adopting “pay by bank” and payment methods such as variable recurring payments (VRPs). 
  • PayTech ecosystems that can safely store, manage, and leverage transaction data are in the works. In other words, this represents huge opportunities for monetization. 
  • As non-financial service providers incorporate payments into customer experiences, embedded payments will likely become more important – and less visible. Ultimately, the driving force behind this change is the increasing number of e-commerce platforms and the corresponding demand for hassle-free transactions. 
  • Innovative payment facilitators (PayFacs) are completely altering how companies, card networks, and banks collaborate. 
  • With crypto and digital currencies, new payment methods aren’t the only change that’s coming to this sector. In fact, a new infrastructure is being put in place that allows for instant settlement through distributed ledger technology (DLT), smart contacts, tokenization, and programmability. 

    The elements propelling how payments will work in the years to come 

    Want to know more about the payment systems of tomorrow? Let’s take a look.

      Open banking is causing a shift in the payments ecosystem

      What does open banking do? Basically, it offers a new framework to make payments more innovative. With open banking, consumers can use application programming interfaces (APIs) to initiate payments with greater flexibility and ease than before.     

      APIs that work hand-in-hand with open banking are also making it easier to make A2A payments, effectively offering a new opportunity to “pay by bank”. So, embedding A2A payments at the point of purchase gives businesses and customers alike more choices. 

      As the need for digitization grows, open banking is gaining ground worldwide. Ultimately, it’s fundamentally altering how financial institutions handle things like service delivery and meeting their customer’s needs in the digital age. 

        How value-added services are unlocking the power of real-time payments 

        Using modern payment rails, real-time payments (RTPs) can transfer payments almost instantaneously. But even though the RTP system is a game-changer, its worth really comes from being paired with value-added services.   

        As an example, a new value-added service from Australia now gives customers the option to initiate payments by entering a phone number or email instead of an account number. Clearly, services like this have helped RTP grow while offering consumers real value and convenience.

          Cross-border payments are becoming quicker and less expensive 

          So far, cross-border payments have been frustratingly slow and pricey. The good news? That’s about to change. 

          In fact, PayTechs are currently in the process of disrupting the international payments model. With the rise of digital assets, DLT technology, and cryptocurrencies, payment providers are becoming conscious of how these advancements could improve transactions in the future.  

          In fact, the G20 approved a plan to make cross-border payments better, with an emphasis on ISO 20022 migration, which creates a common language for international payments. 

          Ultimately, staying informed about technological developments that will impact cross-border payments is how PSPs can provide offerings that serve consumers better moving forward. 

            The incredible capacities of digital wallets and super apps 

            With digital wallets, consumers can handle their finances in one convenient location – and pay fewer transaction fees at the same time. Super apps are also redesigning the payments landscape by aiming to deliver virtually any consumer need – whether financial or lifestyle-based.  

            So far, the Asia-Pacific region has experienced the largest adoption of this technology. Surprisingly enough, places like the US, Canada, and Europe still commonly use physical cards to facilitate payments. 

            But this is changing fast. 

            With consumers driving up the demand for digital wallets, providers outside of the Asia-Pacific region are also aiming to offer more services geared toward a digitally-connected world, including contactless payments and crypto wallets. 

            With built-in security, convenience, and loyalty programs to reward users, it’s not hard to see why digital wallets are becoming more popular.  

            Ultimately, banks can extend their reach by adding PayTech to current offers. This will allow them to retain current customers, attract new ones, and stay current in a changing financial landscape. 

              Embedded payments are making transactions invisible 

              More and more, consumers expect financial transactions to be convenient and hassle-free. And embedded payments are an ideal way to offer that.  

              So far, non-financial, service-based companies are the ones who facilitate payments for their business customers. But as time passes, embedded payment technology will likely expand and seamlessly integrate into day-to-day consumer transactions. 

              So, now is the time for third-party payment processors to capitalize on technological advancements and look for new business models. Since the world of commerce is constantly in motion, banks need to pinpoint distinct sectors that will provide the highest return – while offering customized solutions to meet the needs of those sectors. 

              Ultimately, embedded payment systems give companies the chance to make transformative changes – beyond just “solutions”. 

                How digital currencies will change the financial landscape 

                As digital currencies develop and become more important, the entire payments sphere is changing too. With DLT, the ability to use things like smart contacts and tokens – paired with the technology necessary for banks to participate on an open-loop platform – is a major advantage. 

                Ultimately, digital currencies will bring things like instantaneous, efficient payments and greater automation. And, as banks and sellers begin to accept and utilize this technology, its use will become more and more widespread.    

                Again, now is the time to determine to what extent PayTechs are providing opportunities for real change – and act accordingly. One thing is for sure: Technology is making it a lot easier to transform how payments work to benefit sellers and consumers alike. 

                With the demands of a more and more digitally-powered financial landscape, payment providers will need to stay ahead of these changes to meet consumer expectations and grow.  

                At Genius Avenue, we created Genius Payment Systems to offer a diverse range of digital payment capabilities – and ultimately streamline all benefit, insurance, and healthcare transactions. Payments shouldn’t be complicated. That’s why we’re harnessing PayTech to transform how these industries work. Find out more here.