An Evolving Payments Landscape

3 An Evolving Payments Landscape: New Payment Methods to Support New Business Models Go global, think local To succeed with a direct-to-consumer model, companies need to be able to provide products in an accessible way (in the relevant language), deliver them within a reasonable timeframe, and offer consumers their payment method of choice. The last element of this has historically been very difficult to achieve cost effectively as compliance rules, tax regimes, FX and settlement periods vary widely around the world. It is important to be aware of the significant differences between various countries’ payment behavior. For example, in China the rapidly emerging middle class largely skipped the credit card stage. Smartphones and other technology were already prevalent and therefore social media companies were able to leverage their presence into two of the world’s largest payment platforms — Tencent’s WeChat Pay and Alibaba and Ant Financial’s Alipay. Equally, in the Netherlands the majority of online purchases are paid for using a bank transfer instrument called iDEAL, which was set up as an eCommerce payment system to allow customers to buy on the internet using direct online transfers from their bank account. The system took off because in the Netherlands — like some other European markets such as Germany and Austria — many consumers are credit-adverse and are therefore more comfortable paying using their bank balances. Likewise, India has Paytm while some markets in Latin America have adopted Mercado Pago. Companies need to take account of these local preferences when making decisions about payment methods. The role of cards While known as credit card companies, Visa and Mastercard are networks and technology platforms. They make multi-party commerce possible by setting rules to govern those interactions. The form factor — plastic cards — is largely irrelevant to these networks and technologies. This can be seen by the ease with which we pay by phone today or use other contactless methods rather than swiping a card or entering a PIN number. Both Visa and MasterCard have recently made acquisitions in the open banking space in order to extend their reach and future proof their businesses. They are also innovating in the instalment and deferred payment space, which is growing rapidly in many markets. In Brazil, for example it is quite prevalent for people to make purchases using a card and then automatically spread payments over a set number of instalments: the merchant is funded the entire amount and the instalments are automatically scheduled. Over the next decade, deferred or recurring payments are likely to become increasingly important for consumers and therefore will received greater attention from payment providers. As eCommerce becomes a global phenomenon, innovation will accelerate with local payment products vying for attention with those of global providers. The growing number of offerings will make products such as Spring by Citi more relevant as it will enable retailers to offer choice to consumers without increasing payments New payment models In response to clients’ evolving needs, Citi has built a global solution that allows corporates to connect to consumers wherever they are in order to help achieve their eCommerce and B2C objectives. Spring by Citi leverages partnerships with Global Payments for card processing solutions and PPRO for access to local payment methods to give Citi’s institutional clients a comprehensive consumer payments solution that enables digital commerce by extending Citi’s presence and capabilities. Using the Mastercard payment gateway, Spring by Citi offers institutional merchants the ability to collect from a wide range of payment methods including cards, e-wallets and new and innovative bank transfers such as Request to Pay, Instant Payments and Open Banking. In turn, their customers will have access to a wide variety of payment methods of their choice. Spring by Citi is now live in the US and the UK. The solution already has its first user and many corporates are currently evaluating it.