International payments continue to get faster and smaller
Payment providers and banks will continue to offer their customers ever faster cross-border payment services so they can send and receive low-cost, real-time payments. The cost of these payments will also decrease further. This trend will accelerate in 2020 as customer demand for smooth on-demand payments increases. Solutions such as the Interledger Protocol (ILP) and distributed general ledger technologies can gain in importance and scale.
Use of new technologies for competitive advantage
More and more banks will use banking-as-a-service technology platforms to revolutionize their cost of service and cost of change. As technology costs associated with operations and development continue to rise, we can expect banks to turn to cloud banking technology providers to radically reduce those costs.
As cloud-hosted banking technology providers have developed new platforms with modern methods, pioneers of cloud service providers are ideally positioned to easily and inexpensively get involved in emerging blockchain networks, AI engines (artificial intelligence) and other emerging fintech categories to integrate – which means the competitive advantage of innovative banks compared to slower competitors are intensified.
The long-awaited turning point from traditional on-premise banking technology to agile, low-cost, cloud-hosted banking technology is approaching. 2020 is maybe the year?
Building consumer solutions
In addition, in 2020 new consumer buying solutions will emerge for tourists and travelers who do not need cards or card rails. Imagine if a Japanese tourist visiting Thailand could purchase goods using a mobile app or QR code and trigger an instant cross-border payment from their Japanese yen account to the account of a Thai baht merchant. If more consumer buying solutions use blockchain technology in the same way, the profits will literally pay off!
In the global economy, payments to micro-wallets and wallets will continue to increase to support instant, low-cost cash flows. The use case for micropayments has traditionally been limited to messaging apps like Telegram and Line. However, as larger tech companies roll out their own payment services, we can assume that more and more developers are turning to digital assets as a solution to keep up with the in-app, real-time payment processing.
Solution for increased SME needs
Moving from traditional high value batch flows to low value, high volume payments will help SMBs move into new markets much faster. SMEs often grow rapidly, exposing them to a cash flow crisis due to late payments from their larger overseas buyers.
Cross-border payment services today are not designed to help them: they are slow, insecure, error-prone and extremely costly. In some parts of the world, cross-border services are not even available – all of which is putting enormous pressure on small business balance sheets and cash flows.
New blockchain payment technologies enable SMEs to invoice and receive international payments instantly, in small amounts and with security.
This will play a critical role in lowering business costs and enabling SMEs to free up valuable capital for reinvestment. This in turn will improve access to new markets for SMEs. In 2020, international payment services like Ripple for SMBs in emerging markets will grow, helping them expand and process instant payments globally.
Growing market demand in Asia
The overshooting of the OECD economies by the Asian economies in terms of payment innovations will continue until 2020. With 80 percent of the volume traded in digital assets in Asia, the region has an appetite for innovation – and possibly the greatest need for better payments infrastructure.
Blockchain played a key role in this innovation, as microtransactions such as loans, payments and transfers can be made much more efficient and transparent. In a region focused on advances in consumer and corporate remittances, there is a tremendous opportunity for using blockchain technology to address issues of liquidity, speed of implementation, and cost of capital.
This article originally appeared on TechNative as part of their predictions for the future of funding 2020.