#PayDecoding : Fintecture opinion

The instant transfer will gradually but permanently establish itself among the European and global payment methods.

Thanks to the real-time payment it allows, the absence of an expiry date and its ceiling, which is much higher than that of bank cards, it is perfectly suited to the new modes of consumption.?

As a follow-up to our #payDecoding post on Instant payment for kids... and older, we offered one of specialist partners, Fintecture, a forum to talk about their vision and challenges around instant payment.?

The payment industry is going through a deep transformation.

The payment industry is going through a deep transformation. The payment infrastructure we deploy is to traditional payments what smartphones are to cell phones: fund transfer is the basis, but the added value lies in the technology and the adjacent services.?

Fintecture works on the next-generation payment rails to offer both merchants and buyers a frictionless, secure, and less costly payment processing alternative to incumbent solutions through the Open banking innovation.

Every year merchants face a stark reality; their bottom line is cut into via chargebacks, fraud, and punitive fees. On a global scale, this amounts to a $100 billion “industry” for payment providers.

Add to this that 20% of all online card payments are declined due to card ceilings and technical errors, you’ve got an industry rife to be streamlined and optimized.?

However, under the hood, the payment system is not only failing its users, both merchants and buyers particularly in a B2B context, it is also threatening to fail its providers. Here are three inevitable trends we are observing:

1. Despite all their investments, traditional payment schemes are struggling to keep their old infrastructure properly updated.

Visa, MasterCard and other payment schemes were all created in the 1960s or thereabouts. Their infrastructure is more than half-a-century old. Naturally, payment infrastructure firms are constantly updating and upgrading but in tech you cannot do ‘new’ with 50+ year old system.

If you start a new payment infrastructure you certainly have a technological advantage and Chinese players (such as Alipay and WeChat Pay) are proving this precise point.

2. Transaction fees are an unjustifiable and unlawful tax on commerce that cannot be sustained in the long term.

You may not know it but each time a merchant collects a card payment, a transaction fee (~2%) is directly levied from the collected funds. This fee is split on 3 parts:

1. Interchange fee, the payer’s bank charges to process card transactions,
2. Network fee, charged by card schemes (eg: Visa or MasterCard),
3. Processing fee, going to all other parties involved in the transaction (processors, gateways, etc), as the legacy payment system is built around multiple beneficiaries each increasing friction and cost of the transaction.

3. Banks’ APIfication and the wider application of instant and free bank transfers will drive payment commoditization.

The APIfication of the banking industry (eg: Open Banking) enables Fintecture to connect with banks and directly initiate a payment, on behalf of the buyer. As Fintecture is also connected to merchants, we have built the missing direct link between buyers’ and merchants’ banks. This new payment system bypasses card schemes and their intermediaries, removing fees and friction.

With this new payment system, merchants collect low-cost, instant, and more efficient payments: instant funds availability, enhanced conversion (fewer declines, higher ceilings and smoother UX), less fraud and no chargebacks. Additionally, our new payment infrastructure is flexible enough to quickly embed new features, such as a one-click checkout, to further improve the user experience for both merchants and their buyers.

From our perspective, Account-to-Account payments are only the first step to bring value to merchants by increasing their sales while reducing their payment costs, but we continue to fill other gaps in merchants’ financial services. We are redefining the role of a payment infrastructure, based on merchants’ needs and on our vision of the future of payments.