Legislative and market pressures are forcing greater collaboration in the payment industry – at the same time as incumbents and fintechs find themselves in dramatically different positions, leading to new opportunities for collaboration, or consumption.
In the European Union, payment harmonisation efforts such as EMPSA are pushing for a consistent digital standard across the region. However, the majority of EU banks are not yet ready for account-to-account (A2A) payment solutions, with only the larger ones having the ability to offer this functionality.
Meanwhile, tightening economic conditions and a rush away from risk have left fintechs in a more precarious position, making them more open to acquisition by larger institutions. This could lead to greater collaboration or even acquisitions in 2023 as banks seek to boost their technology back-ends.
Global fintech M&A activity rose sharply in the first half of 2022, with 591 recorded deals as bargain hunters shopped around for discounted prices, as well as in the crypto and blockchain segment.
In a tighter economic market, there will be a need to refocus on system efficiency, service provision, retention, and efficient growth – all delivered through payment systems that can enable margin and improve the customer experience. Integrating new acquisitions will also present new challenges for incumbents on a technical, cultural, and compliance level. For some, acquisitions may actually slow down technical progress, and banks could be better served by partnerships rather than acquisitions.
Either way, we will likely see an increased focus on innovation as the pressure mounts – hopefully one built on collaboration and openness, rather than closed systems.