To fully realise the capabilities of these new payment solutions, it’s important for the organisations offering them to ensure seamless usage and connectivity, by moving their business closer to the digital edge.
It can be said that new routes of connectivity and innovation go hand in hand. The digital payments sector is a great example of this as we have seen improving rates of interconnection help to drive adoption of new services. Globally, electronic payment volumes are increasing at around 11% per year, with double-digit growth likely to continue through 2020.
Our use of digital payment methods across Australia is growing rapidly. Roy Morgan released a report in January 1 noting awareness among Australians of digital payments is now an almost universal 93.9%, with 72.4% using at least one digital payment method over an average 12 month period.
While the digital payment phenomenon is not new, these statistics show it has only recently begun to experience rapid acceleration. The growth is driven by factors such as an abundance of new electronic payment methods and the rise of contactless card transactions in the region, making it possible for new entrants and new routes of interconnection.
With consumers seeking more convenient, reliable and secure transactions, success in the digital payment space will depend on the ready access which businesses have to data, applications, networking controls and their associated technologies as well as the proximity with which they can deliver their services to end-users. The closer the services are located to their end users, the more successful the end-user digital payment experience will be.
Finding the Right Payment Partner
The latest payment research conducted by the Reserve Bank of Australia (RBA) shows continued preference for electronic payment methods over paper-based methods, such as cash (now below 45% of all transactions) and cheques (almost extinct), with consumers making over 450 electronic payments per person from January to June 2017.
Our 2018 white paper titled Key Trends in Digital Payments Markets and Strategic Infrastructure, developed by the Initiatives Group, identifies three key trends that are shaping the payments industry:
- Real-time payments: A shift in focus away from person to person (P2P)payments has steered conversations towards value-added products and services by merchants that an enhanced infrastructure will allow financial institutions (and others) to bring to market. These payments require systems to process and analyse additional data, placing higher demands on the underlying technology and requiring low end-to-end latency to transfer funds within seconds in a secure and reliable way.
- Regulatory intervention: Concurrently, regulatory changes and technology advances have been driving what some think will bring about a revolution in retail banking — open banking and greater choices. Regulators are seeking to capture the economic efficiencies embedded in electronic transactions and drive increased competition and innovation by opening up customer banking data to third parties.
- Open banking: As with real-time payments, open banking will facilitate the creation of new products and services, driven by regulation and enabled by advances in technology. New players are becoming a part of the payments ecosystem as banks create API gateways providing authorised access to customer data to facilitate the creation of new products and services, all leading to an enhanced customer experience.
As the world of digital payments continues to evolve, private and direct connectivity between multiple payment players is becoming more and more critical. It can take weeks, even months, to establish connections with new partners through traditional network. This stands in stark contrast to companies that reside within the same data centre where connections can be achieved within minutes via direct and virtual connections.
The Global Interconnection Index Vol. 3, a market study by Equinix, predicts direct Interconnection Bandwidth for the banking and insurance industry will experience 7x growth by 2022. The future of digital payments remains promising for businesses operating across the Asia-Pacific region, is your business ready?