Business Insider Intelligence senior analyst Jaime Toplin moderates a panel on restaurant tech at Money20/20 Payment Happy Hour
This story was delivered to Business Insider Intelligence Payments & Commerce subscribers earlier today.To get this story plus others to your inbox each day, hours before they’re published on Business Insider, click here.At this year’s Money20/20 conference, held in Las Vegas from October 27-30, a bevy of payments, fintech, and banking providers came together to debut new products, announce new services, and premiere new partnerships.
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While attending the conference, Business Insider Intelligence identified four key trends that are set to shape payments in 2020: the emergence of big tech, Banking-as-a-Service, a renewed focus on LATAM, and the pursuit of niche sectors such as cannabis banking.1. The threat of big tech is looming large. Leading tech companies have upped their pursuit of the payments space over the past year, from the debut of Apple Card to Facebook’s foray into cryptocurrency with Libra.At Money20/20, tech’s foray into commerce was on full display:Uber announced the launch of a new financial unit, dubbed Uber Money. Most notably, the ride-hailing giant is introducing a digital wallet, called Uber Wallet, that will house all its financial products, allow customers to see earnings and spending history, and store and manage funds. Uber also restructured its cobranded credit card (issued by Barclaycard) and debit account for drivers.Amazon will start allowing customers to pay utility bills online and via Alexa through a partnership with bill payment provider Paymentus. The new feature — which follows a voice-based bill payment service launch in India — will be available in 95% of zip codes by the end of the year.Big tech’s massive reach and loyal base of consumers pose a huge threat to payment providers. Tech companies are entering the payments fray with giant user bases — like Uber’s 99 million monthly active users or Amazon’s estimated 103 million US Prime subscribers — strong customer trust, and growing engagement, making payments and commerce, which tie to existing interactions on their platforms, a natural next step. However, this means big tech could pull volume from entrenched industry giants like banks, wallet providers, or processors, who are now being forced to strategize about how to best compete. Providers should consider joining forces with big tech companies to stave off the threat of a potential showdown. Though tech firms have reach and engagement, they often don’t have the capability to handle payments fully on their own — a struggle exemplified by the challenges Libra might face getting off the ground after the departure of its payments partners. So, for payments providers, forging partnerships with tech giants can offer a massive opportunity: Paymentus’ deal with Amazon could open the doors to a some of the $4 trillion bill pay market in the US, for example, and might foreshadow a wider set of tie-ups from payments firms and big tech in the year ahead.2. Banking-as-a-Service’s (BaaS’) appeal and use cases are broadening across the globe. In Europe, regulation and open banking have pushed BaaS models to the forefront as banks are forced to open their APIs. But in the US, the BaaS push has been driven more by customer demand and competitive pressure.As BaaS expands, banks are working with retailers and players beyond just fintechs, as evidenced by two key partnerships — both driven by Green Dot — announced at the conference:Walmart will partner with Green Dot on TailFin Labs, a fintech accelerator that will focus on developing “innovative products, services, and technologies” in retail and banking leveraging Green Dot’s BaaS platform.As part of Uber Money, the new mobile bank account for drivers — and the accompanying credit and debit cards — will be powered by Green Dot’s BaaS offering. Incumbents are turning to BaaS and seeking out new partnerships as a way to team up with challengers and delve into innovative new services. In response to threats from challenger banks — like Monzo and N26 in Europe and Chime and Varo Money in the US — the BaaS model has given banks an easy inroad to innovate and push into new areas: Banks can choose to partner with those who are strong in certain areas, rather than outright develop in-house. And as banks, like BBVA, become interested in teaming up with fintechs — and if Money20/20 is any indication — a larger opportunity opens to also partner with retailers, brands, and others to launch unconventional banking products that fill gaps in the market.3. As the APAC payments market matures, Latin America is quickly becoming the next hotbed for innovation. For a long time, payments innovation was laser-focused on the Asia-Pacific region. But as APAC matures and crowds, firms are increasingly looking to LATAM for growth, with Vesta forging into Colombia, and providers including Visa and Rapyd highlighting a focus on the region during the conference’s “Spotlight on LATAM” track.
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Moving into Latin America could provide a big volume opportunity — but the space is moving fast. A combination of low banking penetration and high cash usage throughout the region has made it challenging for payments providers to penetrate. But that’s changing rapidly, particularly in markets like Brazil, where card usage is surging, and Mexico, where the government is aggressively promoting fintech: We expect noncash transactions in LATAM to increase 33% between now and 2024, with e-commerce hitting $1.3 trillion in the same period. With fintech funding surging in the region, activity in LatAm is poised to develop further, and the same dichotomy we’ve seen in other emerging markets will appear here as well: giants aggressively pursuing the region and competing with smaller homegrown challengers for share.4. Innovation in banking and payments for cannabis will surge from a tiny base as players pursue more niche segments. Historically, banks have played it fairly safe with the industries they’ve served, particularly as a result of regulatory scrutiny, which has made it hard for providers of cannabis to find banks. But as these industries become increasingly decriminalized, thanks to bipartisan bills like the SAFE Banking Act (currently in the Senate), they present a ripe opportunity for banks. This was on display during the conference’s cannabis workshop.Looking to niche segments could be a way for smaller banks to build up an audience and grow their profiles.The banking space is so dominated by giant providers that it can be tough for smaller players, with less robust tech budgets and a smaller set of resources, to break through the noise, attract clients, and build up their asset base. Cannabis presents a ripe pocket of growth that could benefit small banks, in particular: At the conference, Maps Credit Union, which has just $795 million in assets and holds 7% of its portfolio in the cannabis space presented on regulatory risks. If firms can work within the scrutiny — Maps doesn’t lend out any deposits tied to cannabis — niche segments like the $13.6 billion cannabis space could provide a tool to easily scale and become a leading provider in a fast-growing segment. In 2020, as cannabis sales mainstream, we expect significant movement in the space that also trickles down to the payments industry as providers need not just banks, but acquirers and processors, as well.Want to read more stories like this one? Here’s how to get access: Sign up for Payments & Commerce Pro, Business Insider Intelligence’s expert product suite keeping you up-to-date on the people, technologies, trends, and companies shaping the future of consumerism, delivered to your inbox 6x a week.>>Get StartedJoin thousands of top companies worldwide who trust Business Insider Intelligence for their competitive research needs.>>Inquire About Our Enterprise MembershipsExplore related topics in more depth.>>Visit Our Report StoreCurrent subscribers can log in to read the briefing here.
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