“In all markets globally, consumers are moving from cash to electronic forms of transactions, while mobile and online technologies are bringing up new ways to shop and pay both online, and in-store,” he states. This extends well beyond just tapping a phone at the POS, into deeper methods of targeted customer engagement.
“These trends provide huge opportunities for fast moving innovators to launch new products, or even unique approaches to older technologies,” he states.
Ubaghs notes payments is still dominated by very large companies, and payment schemes and networks.
“While innovation is coming from these avenues, these are huge global conglomerates that can often lack the nimble agile development of smaller startups,” he points out.Read more: The rise of ‘app only’ organisations and other tech-fuelled disruptions
“The thinking behind a lot of startups, and more critically their investors, is that payments is still for the most part reliant on decades old technology, that in many instances is fairly slow, cumbersome, expensive and not that user friendly.”
“The expectation is that the market is ripe for disruption,” he states.
“There is no magic bullet and disruption will occur, that's just the nature of modern technology but there is nothing that states it has to come from startups,” he states.Read more: 'How to take the mind-set of a startup’
Disruption will occur, that's just the nature of modern technology, but there is nothing that states it has to come from startups.
He says for traditional providers, focusing on flexibility and adaptability to new shifts and trends, including updating core IT infrastructure to enable this, will go a long way.
“The bottom line in today’s market has to be on simplifying the experience for your customers at whatever level, and incumbent organisations are still very well placed to do this.Read more: From Google to Alphabet: What is behind the rebranding
“That can be hard to do, however, particularly as so many organisations remain closed off to collaboration or working in a more open manner.”
A lesson from the core players is that they have recently been focusing on maintaining their own position in the value chain, he states.
This is done largely through new technologies like tokenisation, and through greater use and openness to using APIs (application programming interface) and SDKs (software developer kit)
These have really opened up the market for collaboration across and in many ways undercuts what could be potential rivals by giving them the tools they need to innovate, thus keeping the incumbents in the game, he says.Read more: 'A global bank can enter NZ without investing in bricks and mortar'
“They're giving developers the tool to innovate on the front end, which is where the vast majority of innovation is occurring, while cementing their role in the background,” says Ubaghs. “This means these incumbents will benefit from the growth in the market, by relinquishing some of the control they are used to having.”
He says the sharing economy gets a lot of hype these days but believes the payments industry is really heading towards the API economy.
“The ramifications of this are still being worked out, but will ultimately benefit the market as a whole, except for those who are too slow to adapt,” he states.Read more: NZ games industry brings more jobs and revenue, but lacks new players
The new breed of payment gateways
Ubaghs points out the most successful startups in the payments space are those that enable payments seamlessly.
He cites the new breed of payment gateways like Stripe and Braintree which enable in-app and online payments with a very smooth user experience for consumers.
What isn't working are payment startups that require a complex array of steps to do something.
There are also companies like Square and Xoom that had taken traditionally complex processes for merchants or consumers to do in terms of accept payments, or send money overseas, and simplified it.
“What isn't working are payment startups that require a complex array of steps to do something,” he states.
The challenge in payments, at least in Western markets, is that people already have highly functional alternatives, he points out. The cards work “pretty damn well”.
“But if you are suddenly given a mobile payments app that needs you to download something just to pay, change your sim, register an account, put in some pins, select preferences, then when you are in store, open your phone, open your app, put in a pin, scan a barcode, make the payment and then maybe receive a few loyalty points or something, it's too fiddly,” he states. “It is just getting in the way of the payment itself.”
For many years the big panic in payments was a fear of disintermediation and in particular just becoming a dumb pipe in the background, so everyone has been focused on their own complicated heavily branded front end.
But with the success of stripe, Braintree and others, the market now seems to be finally, slowly shifting to enabling the payments flatout, he says.
“It doesn't matter if you are in the background, if you are driving tons of transactions,” says Ubaghs.
“I think this is why the market is now really moving heavily towards APIs and easy integration of payment services and functions cross platform.”
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