This refers to a banking practice that gives third-party financial service providers open access to consumer banking, transactions and other financial information via application programming interfaces (APIs). The sharing of financial information has enabled customers to access user-friendly interfaces and make faster, easier and more secure payments.

It’s a modern, straightforward and highly effective approach, so it’s no surprise that open banking is so popular, particularly in light of COVID-19 which forced the industry to digitise even faster than originally expected. In the UK, for example, there are currently three million open banking users — three times more than in 2020.

One area of the finance sector that looks set to reap significant benefits from open banking is cross-border payments. Due to the various time zones, intermediaries and legal requirements involved in a transaction, sending money internationally has always been somewhat challenging. However, open banking can go some way in solving the problems financial institutions, businesses and consumers have all traditionally faced, ensuring that cross-border payment services are cheaper, faster and better for all parties involved. Stan Cole, Head of Financial Institutions at Inpay, delves into the topic.

APIs and cross-border payments

Open banking enables third-party financial services providers to access data from banks and other financial institutions, with APIs offering access to account information services (AIS) and payment initiation services (PIS), allowing apps to directly interact with bank accounts. Although APIs take a great deal of effort to design and implement, they are time-saving and cost-effective in the long term. This is because with these solutions, financial institutions don’t need to create custom solutions for every FinTech they intend to integrate with. APIs also allow new financial services to be developed more quickly around these interfaces.

So, what does this have to do with cross-border payments? Well, in our globalised world, sending money abroad is commonplace, whether that’s due to trade and e-commerce, international investments, global supply chains, or the sending of money via international remittances. And according to the Bank of England, cross-border flows are expected to grow significantly in the coming years, from $150 trillion in 2017 to an estimated $250 billion by 2027. As a result, banks, financial institutions and other global businesses must be able to facilitate these transactions with ease and efficiency if they want to attract and retain their customers. Partnering with FinTechs using APIs can play a significant role in achieving this.

The benefits of open banking for cross-border payments

Cost & speed

Open banking enables senders and recipients to bypass the intermediaries that would otherwise be involved in facilitating cross-border transactions. For instance, direct access to customers’ bank accounts means that a business or financial institution could verify their identity and creditworthiness without the help of a third party. This results in reduced fees and quicker services. Time and money can also be saved because FinTechs using open banking will provide an efficient alternative to the slow, expensive legacy systems currently in use.

Ease

Open banking can make it considerably easier to make cross-border payments. APIs can be designed to provide a streamlined, responsive user interface and thereby provide an excellent customer experience. In addition, open banking makes know-your-customer (eKYC) processes much simpler as they can be entirely digitised, gaining the required information in seconds rather than days.

Safety

As well as improving KYC processes, open banking allows banks, financial institutions and businesses to reduce the risks associated with cross-border payments. They can immediately check that customers are able to afford the transaction, for example, and set precise limits. FinTechs using APIs are also likely to have stronger cybersecurity measures in place compared to dated legacy systems.

Competition

Open banking means financial institutions and businesses can stay flexible and meet evolving customer demands, with APIs allowing them to offer exceptional customer experiences. As a result, there is increased competition, encouraging innovation and giving customers more choice over the companies and services they use.

Open banking and cross-border payments today

Open banking is already making waves in the cross-border payments sphere, with many companies already responding to the clear benefits APIs can bring. Some exciting services to have emerged include API-driven live FX pricing and API-based currency hedging automation, while many big names in the financial services sector (including Visa, Mastercard and Western Union) have teamed up with forward-thinking FinTechs in order to use open banking to improve their cross-border payment services.

The most exciting part of this is that open banking is still in its relative infancy and is continuing to evolve. With new tools regularly launching to accommodate various markets and purposes, financial institutions and businesses can take advantage of this phenomenon to provide the best possible customer experiences to anybody that needs to make a cross-border transaction. However, to do so, they must find the right FinTechs to support them as they strive to bring their financial services into the present day.

Organisations have had to rethink their entire business models, new players have sprung up seemingly from nowhere, and consumer behaviour has completely changed. Of course, more transactions are now taking place online and the use of cash is dwindling.  

But while digital payments are dominating the ecosystem in regions such as the Nordics and the UK, there are some key markets in Europe where there is still a way to go. Both Spain and Germany, for instance, still have fairly low rates of card usage and digital payment adoption with cash still used in around 40% of in-person transactions in Spain, rising to 44% in Germany, according to figures from PCM. 

However, while these statistics suggest that digital payments still have a long way to go in these markets, it could also indicate that a boom is set to happen. Indeed, the growth seen in the Spanish e-commerce sector, for example, and Germany’s creation of a common standard for open Application Programming Interfaces (APIs) through the Berlin Group suggest that further revolutionary changes could be just around the corner. Kriya Patel, CEO of Transact Payments, explores the massive untapped potential of the Spanish and German markets, highlighting the opportunities for innovative incumbents and agile new players. 

Spain: Modernisation will drive a boom in digital payments

Spain has a developed payments market, with 86.3 million credit, debit and charge cards used by a population of 47 million for 5.58 billion payments with a value of €210.56 billion via 1.7 million point of sale (POS) terminals and more than 115,000 online merchants. But as mentioned above, cash use remains relatively high suggesting there are still opportunities for cards to replace cash.

The foundations for huge growth in digital payments already exist. Spain’s three major payment systems merged into a single provider, SistemaPay in 2018. As well as rationalising the previously complex infrastructure, Spain’s banks and regulators have upgraded and modernised the technologies that power their payments system. This has led to the enablement of instant payments and other services, while regulatory sandboxes have provided a catalyst for trials of new payment methods between FinTechs and banks.

While all European markets saw a rise in e-commerce during COVID-19, Spain enjoyed the fastest growth in this sector among all Southern European nations at 15%, with e-commerce accounting for double the proportion of national GDP compared to the UK, at 4.5% compared to 2.25% of total GDP.

As well as e-commerce, contactless transactions for in-person payments grew during the pandemic. Spain’s smaller merchants are continuing to open up to electronic payment both in-store and online.

Having previously been something of a desert in terms of opportunities for payments players — largely because of its bureaucratic systems and standard debit-led card portfolios — the outlook is now much brighter. The modernisation of its payment systems and speed of digitisation means issuers could be set for a boom in business over the next three to five years.

Germany: Embracing PSD2 to drive massive growth

Meanwhile in Germany, the growth potential is even more obvious. While the country is unarguably Europe’s economic powerhouse and a global leader in banking, there is still relatively high use of cash, while card use is not as high as some other regions, with 153 million cards held by a population of 84 million people — just under two cards per person. These cards were used for 6.29 billion payments with a total value of €350 billion via 1.15 million POS terminals and online in 2019.

Like Spain, there are solid foundations for digital payments players to build on. Digital transactions are expected to grow at a compound annual growth rate of around 11% in the next few years. While debit cards are most commonly used to pay online, low digital wallet use at just 7% suggests an openness to new solutions other than wallets.

Germany has not sat on its hands when it comes to embracing the EU’s PSD2 regulations. The Berlin Group has created a common standard for open APIs, opening the way for innovative players to muscle into the payments market. With a high number of permissioned intermediaries now able to deliver payments services thanks to the new regulations, smaller companies in Germany now have better options for accepting payments, reducing their reliance on more expensive third-party players.

There are also plans to bring together Germany’s various instant peer-to-peer (P2P) and person-to-business payments schemes. Instant payments are experiencing very rapid growth in Germany, though with only 20% of banks offering this function the room for growth is obvious. Look out for “PayX” — a merger between schemes like Geldkart, Paydirekt and Kwitt — in the coming months and years.

Overall, there look to be plenty of opportunities for players in the payments space to take advantage of in these two key European markets. While restrictive infrastructure has previously made these two nations something of a challenge for payments innovators, recent regulatory and systemic changes coupled with public appetite for new services make Spain and Germany an exciting place to be right now. 

Even chasing these late payments can also be a drain on your already stretched resources, taking time and money away from other areas of your business. Putting ground rules in place can help you protect your business and your bottom line, as well as preserving those precious relationships with your clients. So, with this in mind let’s explore some helpful tips to ensure your invoices are paid on time, every time.

Make Your Invoices Clear And Professional

Writing up invoices can be time-consuming and incredibly dull, and this is often reflected in the end result. Dull, boring invoices can easily be overlooked or forgotten about, causing you a bigger headache later on. Updating your invoice software and utilising invoice templates will help you create eye-catching, memorable and high-quality invoices within seconds. Customisable templates will also help you build a strong business identity, with bold logos on professional-looking documents that will encourage loyalty to your brand, as well as better recognition.

Automate Your Invoices

Automating your invoices every month helps in two ways. Firstly, you’ll know that the job has been done and it’s one less responsibility you need to oversee. Secondly, when your invoices are automated, clients can’t claim that they didn’t receive your invoice or that it’s been misplaced. Automation leaves a digital paper trail that can’t be ignored or disputed.

Be Willing To Check In

Of course, some payments are often late, due to a lack of organisation and forgetfulness on your client’s part. If payment is late, it’s always worth checking in with your client, to enquire. While reaching out and chasing payments can sound daunting, there are gentle ways you can prompt or remind clients about outstanding amounts without being aggressive, such as calling to enquire about their satisfaction with your services and if they haven’t paid because something wasn’t quite right. Most of the time, clients will feel embarrassed at their oversight and pay you straight away.

Set Clear Expectations

You want to get paid on time, but if you fail to stipulate this in your payment terms, then your clients won’t know this. Stating your payment terms as early as possible, and reminding them of your guidelines when you send out your invoice, will ensure payments are on time and overdue payment collections will be avoided.

Highlight Your Willingness To Pursue Legal Action

This doesn’t have to get personal! In your payment terms, it’s important that you also highlight that you’ll be willing to take legal action if payment terms aren’t met within a certain time frame and after a certain number of reminders and warnings have passed. Stating these terms as early as possible keeps everything professional and clear.

Final thoughts…

Follow these tips to ensure your invoices are paid on time, every time.

Businesses today must keep up with the times to entice all customers and give them little or no reason to go elsewhere. With the world getting smaller by the day due to the internet and how it is used by businesses and customers alike, companies who aren’t riding the wave could find themselves struggling to keep up with their competitors.

The best way in which you can boost your business is to be on top of the latest technology trend and use it to its maximum advantage, and embracing cryptocurrencies like Bitcoin and Ethereum would certainly do that.  However, before you decide that taking Bitcoin will make your business explode overnight, there are a few other things you need to consider first.

The rise of Bitcoin

Bitcoin is very much a hot property, as is Ethereum and, as of this moment, Dogecoin. They are in the news every day, and ‘Bitcoin prices’ is one of the most searched terms on Google. It would be easy to assume that cryptocurrencies would naturally be used to purchase goods in the same way we once used cash.

However, this is not currently the case. It is not because Bitcoin and other cryptocurrencies are not safe and secure (because everybody already knows this is not the case), but instead, it seems to be a problem of perception, which is always a critical factor in the mass adoption of anything new.

Cryptocurrency trading

While those with a decent working knowledge of Cryptocurrencies do not share this bias, there is a strong current perception (especially in the face of daily stories about the rising price of Bitcoin) that Bitcoin is something you invest in, not something you use to buy everyday items.

It could be argued that, given the current perception of Bitcoin almost as a commodity, that the person in the street is as likely to pay for a newspaper or a can of Red Bull with Bitcoin as they would using a bar of gold.

Accepting Bitcoin for everyday payments

This looks to be the main barrier in the way of accepting, for example, Bitcoin as a method of payment online. The technology should never be a problem; but instead, it is the willingness of the customer to use it.

Social media can play a significant role in this by normalizing the use of Crypto for everyday purchases. Seeing influencers using Crypto as a currency and not something that just sits in exchanges like Coinbase will increase the ability of regular users to see digital currencies the same way they see the ones they use every day.

Final thoughts

Suppose you are not sure about using cryptocurrency or feel that perhaps this is not the way forward. Just think about how customers used to pay on sites like eBay 20 years ago, which was mainly cheque or cash through the post. Paypal was not really trusted as a payment method, whereas now it is most definitely preferred and indeed requested by most if not all sellers.

Hong Kong is a highly banked, wealthy region which enjoys excellent digital and physical infrastructure. To hear about the financial hub’s payment evolution, we hear from leading ePayment technology and eCommerce management company Payment Asia which provides customised all-around payment strategies to more than 10,000 Asian and multinational companies.

We speak with Lance Lau, Head of Sales at the Hong Kong Team of Payment Asia. Established in 1999 in Hong Kong, Payment Asia has over 20 years’ experience in providing eCommerce payment solution services to local and international markets. Taking the lead in the ePayment technology and eCommerce management market in Asia, the company helps merchants to continue to grow in the wave of technological development.

Over the last two decades, Payment Asia has expanded its business from Southeast Asia to the international market, including the Philippines, Malaysia, Singapore, Australia, New Zealand, Mauritius, the United Kingdom and Canada.

Tell us a little bit about the current payments environment in Hong Kong?

The current payments environment has been very interesting as we’re witnessing a stage of transformation - from cash transactions to the digital era with traditional cashless payment such as credit and debit cards being replaced by eWallets, mobile payments, virtual banking and the future usage of cryptocurrencies.

What payments trends do you expect to see in Hong Kong in 2021? How is Payment Asia going to respond to these?

With the pandemic still affecting everyone across the globe, most merchants are finding ways to improve the purchase experience for their clients while also implementing the online/eCommerce elements to their business.

At Payment Asia, we have designed and self-developed a mobile payment application called PA Pay - specifically for merchants - which integrates multiple payment channels, including credit cards, debit cards, UnionPay and a variety of eWallets, and can be applied to POS or smartphone operating systems.

We offer various online payment solutions including Visa, Mastercard, UnionPay, Alipay and WeChat Pay, which integrate with online stores, H5 web pages and applets through API. We can also guide merchants and personal clients in the process of setting up international bank accounts (IBAN) for payment settlements and operate as an offshore virtual bank.

On top of payment processing solutions, Payment Asia’s services also cover online and offline eCommerce payment strategies, payment gateways integration, eCommerce management, artificial intelligence, big data and more.

Payment Asia’s mobile payment application - PA Pay which can be applied to POS or smartphone operating systems

What is Hong Kong’s current position in China’s payment evolution?

Over the last decade, China has been a pioneer in implementing ePayments, propelled by China UnionPay, Alibaba’s Alipay and Tencent’s WeChat Pay.

The FinTech industry is taking off amid a backdrop of growing consumption and the large, tech-savvy millennial generation. China’s FinTech Explosion explores the transformative potential of the country’s financial technology industry, covering subsectors such as digital payment systems, peer-to-peer lending and crowdfunding, credit card issuance and internet banks, blockchain finance and virtual currencies, and online insurance.

In 2014, the People’s Bank of China established the Digital Currency Institute of the People’s Bank of China where a specialist research team discusses technical and regulatory issues in relation to the development of Digital Currencies in China.

Since August 2020, the People’s Bank has been carrying out pilot trials of Digital Currency Electronic Payment (DCEP) in various cities across China. The estimate is that 30%-50% of cash will be replaced by the DCEP within two to three years.

Features and capabilities of DCEP:

• DCEP uses digital tokens and blockchain technology to represent a country’s official currency. DCEP differs from cryptocurrencies in that it has the status of legal tender and is centralised and regulated by a country’s monetary authority.
• DCEP is a digital version of the Renminbi (RMB).
• DCEP is a sovereign currency issued and backed by the People’s Bank of China and controlled by the Chinese Government which will be able to track the currency moving through its economy and monitor its usage.
• DCEP is said to be secure, have controllable anonymity and prevent counterfeiting. It also addresses the high costs of cash issuance and handling, and difficulties in tracking and fraud.
• Like cash, the DCEP cannot be refused as payment. The People’s Bank will exchange DCEP with commercial banks and payment operators, which can then distribute DCEP to their customers via eWallets.
• The use of DCEP will be convenient for the public and provide more efficiency in the financial system, helping China bring its unbanked population into the mainstream economy and accelerate the move to a cashless society.
• DCEP also helps to internationalise the RMB’s use in trade settlements and presents an attractive alternative to the established international funds-transfer system, SWIFT, with lower transaction fees.

On 4^th December 2020, Eddie Yue, Chief Executive of Hong Kong Monetary Authority (HKMA), announced that HKMA and the Institute are discussing the technical pilot testing of using DCEP for making cross-border payments and are making the corresponding technical preparations.

How is Payment Asia contributing to this?

Payment Asia has always delivered the advantage of being in Hong Kong to our merchants. We are now implementing blockchain technology to our payment platform and are actively developing an emerging cryptocurrency gateway. This can be seen as a baby step but is still an efficient and effective way to get merchants to warm-up and be ready for the new payment era.

At present, 36% of the SMEs in the United States accept Bitcoin (BTC), whereas Wikipedia, Microsoft, Expedia, AT&T, Burger King, KFC and Subway have also started accepting BTC. Our value proposition is to provide merchants with a familiar payment gateway experience while bridging the gap between digital and fiat currencies. Customers will be able to have this new option as their payment method while merchants will be protected on the cryptocurrency’s fluctuation.

Features of Payment Asia’s Crypto Gateway:

• Acceptance of major digital currencies (e.g., Bitcoin, Ethereum, Cardano, BCH, Stellar, USDT etc.) for online and offline payments.
• Instant locking of rate to minimise merchants’ risk.
• Withdrawal of funds in less than a business day.
• Payment to merchant’s suppliers in 200+ countries with digital currencies.

Payment Asia’s Crypto Gateway bridges the gap between digital and fiat currencies

What does the future hold for Hong Kong’s payments industry?

With its status as a key Asian financial hub, Hong Kong will always be an important part of the global payments industry.

Supporting this, Hong Kong's Stock Exchange raised $51 billion from 154 new listings in 2020.

Numbers like this make Hong Kong irresistible for many investors, according to Tara Joseph from the American Chamber of Commerce Hong Kong.

"The flow of money that comes in and out of Hong Kong on a daily basis, that goes into mainland China and comes out, is very hard to replicate," she said during an interview with BBC's Asia Business Report.

A city with attractive tax rates and a business-friendly environment is the natural successor to Hong Kong. Being the gate into the Chinese market, a lot of international businesses will still prefer Hong Kong as the processing hub for their B2B and B2C activities.

How can Payment Asia help merchants with digital transformation?

One of Payment Asia’s strengths is based on creating a landscape for merchants and businesses in order to generate traffic and convert this into sales through our payment technology.

As transactions are made, we are implementing big data for our merchants, through our secure system and a robust business intelligence system.

We use this data to create inbound and outbound digital marketing strategies for merchants, in order to increase their conversion rates.

In addition, we have also developed a chatbot platform that uses artificial intelligence to realise real-time conversations to strengthen the interaction between brands and consumers.

What’s on Payment Asia’s agenda for 2021?

With our extensive experience in the market, moving forward into the post-COVID world, we aim to redefine the benchmark of online/offline and mobile payments - not just in Hong Kong but on a global scale.

For more information on the work we do, you can follow our  blog on our official website: www.paymentasia.com.

Finance Monthly hears from Stan Cole, Head of Financial Institutions at Inpay, on the progress that has been made towards creating seamless cross-border payment solutions.

Modern technology continues to advance at astonishing speeds, and recent years have given us plenty of remarkable developments in the fintech sector in particular. Yet, despite phenomenal progress in other areas, the trillion-dollar cross-border payment industry was stuck in the dark ages for an inexplicably long time. Banks and other financial institutions had to make do with outdated models, which slowed down international transactions, rendering them expensive and unreliable. And to make these frictions even more frustrating, many cross-border payment systems offered very limited transparency.

Improvements were long overdue, and thanks to rapid modernisation within the industry, customers are now enjoying a far better experience. However, we’re only at the beginning of the cross-border payment revolution. In fact, changes are expected to come even faster in the wake of the coronavirus. For example, Stephen Grainger, executive vice president of Mastercard’s New Payment Platforms, believes that global eCommerce will transcend the need for face-to-face transactions, while more remote and migrant workers move overseas, and more people enter the gig economy. “As the change becomes reality, it's the financial institutions that will be expected to step up and provide efficient cross-border payment systems that their clients demand — especially in regions where the need for trusted, reliable cross-border payments is increasing rapidly,” he explained to Business Insider.

With goods and services moving more quickly and across greater distances than ever before, customers are increasingly demanding cross-border payments that are as seamless and convenient as domestic ones. Huge progress has already been made and the future is just as exciting, and we’ll explore how all of that has transpired below.

How have cross-border payments modernised so far?

Cross-border payments have traditionally been the domain of correspondent banks. While these institutions are still major players in the industry, the rapid advances in technology and consumer demands mean that times have changed. With the click of a button, people are able to send emails, photos and videos globally, and these are received in real-time. Why shouldn’t consumers expect the same convenience when wiring money abroad?

With goods and services moving more quickly and across greater distances than ever before, customers are increasingly demanding cross-border payments that are as seamless and convenient as domestic ones.

There have been a host of new arrivals in the cross-border payments sector, so people are no longer forced to undertake a costly, slow, non-transparent international bank transfer. In lots of countries around the world, innovative services have made it possible to make an instant payment to a mobile number, email address or another unique ID form. This ID is mapped to the correspondent bank details, so in many nations, sending money is already as easy as sending an email. This marks a huge evolution from the traditional way of transferring money internationally.

In the face of stiff industry competition, banks need to embrace today’s consumer demands more than ever, and speed up their product propositions, reduce costs, and offer new, modern digital solutions if they are to retain their customers.

What does the future look like for cross-border payments?

Stablecoins

The future of payments is digital and tokenised, which explains why stablecoins have been gaining such popularity. These are cryptocurrencies that attempt to peg their value to an external reference, like a hard currency or commodity, in order to resist the high volatility usually experienced by the likes of bitcoin.

We have already seen this digitisation in action in South Korea, which has started to move from card to stablecoin payments. Likewise, Chinese central banks have partnered with e-money providers to test and provide central bank digital currencies (CBDC), vowing to launch a system like this before the 2022 Winter Olympics in Beijing. “As cross-border payments involve numerous players, time zones, jurisdictions, and regulations, they are often slow, opaque, and expensive, making us believe that an interoperable CBDC could play a role in improving cross-border payments,” explained Senior Editor Mirela Ciobanu in a feature for The Paypers.

However, it remains to be seen how large financial players in the current marketplace will respond to this shift. They could try to remain in the centre of such infrastructure and charge fees to their users for making transactions, or merely provide platform access to allow users to make peer-to-peer [stablecoin] transactions. We already know that Visa plans to help partners launch cryptocurrency services through its partnerships with wallets and exchanges, while Mastercard is also introducing cryptocurrency to its network, “allowing [customers] to transact in an entirely new form of payment”.

The future of payments is digital and tokenised, which explains why stablecoins have been gaining such popularity.

Blockchain & cryptocurrency

Incorporating blockchain into the cross-border payments space will help resolve key drawbacks of using correspondent bank transfers for overseas transactions. Banks that proactively adopt blockchain solutions will be able to attract and retain customers by offering cheap, real-time international money transfers that are more reliable and secure.

As Payments Journal notes in its feature on blockchain in cross-border payments, many issues with international transfers “stem from the high number of intermediaries in the form of correspondent banks that are involved in processing a transaction. Each additional intermediary drives up the processing fee, increases the number of failure points, and adds to the risk of fraud somewhere along the payment pathway”. Blockchain means these intermediary stages are not required, and the risk of fraud is significantly reduced, as all transaction information is stored on the network and is very difficult to modify.

A big obstacle to blockchain adoption has been its regulatory uncertainty. However, the situation is changing now that governments across the world are increasingly looking into blockchain, and developing CBDCs to distribute and receive payments outside of traditional banking systems.

Collaboration between banks and fintech PSPs

As an ex-banker and an ex-oil/gas professional, I like the analogy of banks being oil tankers — they’re big and strong, but take a long time to change direction when out at sea. The key issue here is that banks tend to rely on systems for international payment products which were developed last century, requiring customers to provide standardised legacy data. And as banking systems vary between different countries, one size certainly doesn’t fit all.

Fintech PSPs, on the other hand, are speedboats — fast and agile, jumping over the waves. Collaborating with these organisations means that banks can take advantage of the right data and access new instant payment infrastructures that are being created around the world.

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Having worked on both sides, my view is that banks and fintech PSPs both need each other. Banks have already acquired a long-standing, loyal customer base, and although fintech PSPs don’t yet have that in their favour, their freedom from client acquisition and legacy infrastructure costs lets them concentrate exclusively on product and service delivery. Therefore, teaming up with them enables banks to enhance their product offering, improve time-to-market, reduce costs, and retain their customers. Collaboration beats competition, and results in a win-win outcome for both sides.

The price of Bitcoin continued to climb on Wednesday, setting further records as it gains greater acceptance among mainstream investors and companies.

Bitcoin’s value reached as high as $51,140 before sinking back down to $50,828.83 in early Wednesday trading in London, extending a bull run for the currency that began in October last year.

Only a day earlier, Bitcoin raced past the $50,000 milestone on several stock exchanges, earning renewed attention from investors who witnessed the coin’s jump to $48,000 less than a week prior.

Bitcoin has been on a steady rise since 2020 as stock market turbulence drove investors to seek out new havens. Late in the year it received a crucial boost towards the payments mainstream after PayPal announced that it would accept the currency as a payment method on its platform. February 2021 also saw Elon Musk’s Tesla invest an unprecedented $1.5 billion in Bitcoin, a show of confidence that triggered the coin’s most recent price surge.

This rise has also lifted other cryptocurrencies, with rival token Ethereum reaching all-time highs of its own.

However, investment gurus have cautioned that Bitcoin’s rally may be short-lived. JPMorgan strategists led by Nikolaos Panigirtzoglou wrote in a memo on Tuesday that the price surge “looks unsustainable” given current volatility.

“Movements since January this year appear to have been more influenced by speculative flows," the analysts said.

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Whether or not Bitcoin’s price drops down again, it is unlikely that cryptocurrencies’ march towards the mainstream will be reversed. Earlier this month, BNY Mellon also stated that it will begin to hold, transfer and issue Bitcoin and other virtual currencies for its clients, furthering the tokens’ adoption in the financial services sector.

Cryptocurrency, the digital currency created with cryptography technology, continues to increase in popularity. More users continue to adopt the use of cryptocurrencies into their payment practices as a secure method to send money without geographical limitation. This might sound familiar. After all, the American platform Paypal operates with a similar mission. For those unfamiliar, PayPal has continued to operate forward-thinking digital payment options for nearly 20 years. Now, over 300 million consumers and merchants transact using the platform. With many similarities in place, it only makes sense that Paypal Holdings Inc. (NASDAQ: PYPL) would eventually leverage the increased interest in cryptocurrency since new cryptocurrency users require a trusted platform.

Luckily, PayPal has since made the announcement that all U.S. users can buy, sell and hold specific cryptocurrencies. This announcement is promising for future adoption since many users struggle to find a Bitcoin Exchange that they trust. Therefore, purchasing on Paypal might be a small step to ease new cryptocurrency users into the crypto space.

How to buy and sell cryptocurrency with Paypal

To start purchasing, Paypal requires users to have a Cash or Cash Plus account. Further details can be consulted using the terms and conditions. While PayPal is designed as a secure method to send, receive and access funds, the app itself cannot protect users against the volatility of the cryptocurrency they choose to purchase. Therefore, the same level of attention and research should be considered before making any purchases. The Paypal app has released many articles designed for beginners to help users learn at their own pace. Resources provided include information about the cryptocurrency ecosystem's inner workings, the risks of investing and information on future technology initiatives.

After determining the type of cryptocurrency that a user wants to purchase and in what amount, the tactical steps are easy. Users can select "crypto" from the Paypal dashboard. From there, users can choose from available cryptocurrency options, including Bitcoin (BTC), Ethereum (ETH), Litecoin (LTH) and Bitcoin Cash (BCH). To make a purchase, the user simply needs to click the "buy" button, which will prompt them to verify their identity. Paypal will display the spread to show users the conversion rate and associated fees they will pay. If numbers look favorable, users can proceed with the transaction, adding coins directly to their PayPal digital wallet.

Within the application, users can continue to track the prices of their currency through different charts. Alternatively, users have the opportunity to make purchases from any sellers that accept PayPal. To do so, the cryptocurrency used to make a purchase will be instantly converted into fiat currency, which will be paid forward to the merchant.

The future of cryptocurrency on Paypal

This announcement is only the beginning of Paypal's plans for cryptocurrencies. The company also announced that adding this offering to Venmo is also on the roadmap for 2021. However, many continue to question the market for this service as the potential still exists for consumers to lose money if they don't know what they're doing. Paypal rebuttal was that this initiative would increase the education around cryptocurrency offerings.

To put users at ease, the New York State Department of Financial Services (NYDFS) issued Paypal a "Bitlicense," one of the first of its kind. This framework was created in the efforts to encourage, promote, and assist interested institutions to have a regulated way in which they could join the cryptocurrency marketplace within New York. Paypal also works in Tandem with the Paxos Trust Company, another American company, to increase security. Users can also rest assured that Paypal has dabbled in this area before, once offering services with Facebook's digital currency, Libra. Although this was later suspended, many financial regulators took note of their efforts.

This initiative continues to excite many cryptocurrency enthusiasts as the path to widespread adoption becomes more clear than ever before. On the business front, PayPal has also taken an advantageous position to help lead the charge toward digital currency development by central banks and large corporations. Dan Schulman from PayPal shares that working with regulators on CBDC's is still among the company's goals.

New payment methods have enabled people and businesses all around the world to access the digital economy. But we’re only at the start of reimagining the payment experience.

Here are four trends that will shape the way we pay in 2021.

1. Retailers went digital, but next, they must diversify their payment offering.

Retailers have responded well to the pandemic by pivoting to online commerce this year, but their work is only just getting started. Payment diversification will be a crucial next step in 2021. As consumers continue to embrace shopping online, often engaging with retailers they haven’t purchased from before, we will see growing demand to introduce new digital payments methods that address customers’ safety & security concerns.

Being able to pay on delivery, tokenisation, biometric fingerprint cards, vein scanning or phone-to-phone payments, alongside a variety of more traditional card payment options, help to create a universe where the consumer can make a choice based on convenience, personal preference and knowing they are protected from financial fraud.

2. QR code payments will thrive.

In the quest for truly contact-free payments in the pandemic, QR codes will continue to prove their resilience, especially in emerging markets. We can expect QR codes to dominate in these fast-growing markets such as Asia, over other payment methods such as NFC-enabled cards. Unlike card transactions which require merchants to invest in costly and complex point-of-sale terminals, QR codes are cheap to deploy and easy to use.

In the next year, we can expect to see QR code-based payments become even easier for consumers to use. Thanks to integrations with digital wallets, we’ll start to see wider adoption in both developing and developed markets.

Currently, the QR code payment solutions available today require an app, for example, developed by a retailer, that can only be used in its stores. However, in China, where QR codes are wildly popular, consumers can make QR code-based payments using a digital wallet such as AliPay or WeChat Pay. In developed markets, leveraging popular digital wallets already on consumer smartphones, such as Apple Pay, Samsung Pay and Google Pay, will make QR codes more accessible to them. Customers will no longer need to download separate apps but instead can use their favourite wallet to make a purchase with ease.

Offering a safe, convenient and cashless payment method, QR codes will continue to emerge as an important payment method in 2021.

3. COVID-19 will be the catalyst for digitising transport payments infrastructure around the world.

COVID-19 has been the catalyst for national and local governments around the world to embrace digital services. This is becoming particularly visible in transport, where we started seeing individual public transport ticketing systems and piecemeal approach to digitising infrastructure elements replaced with end-to-end services.

We will see the rise of smaller cities in developed countries as well as large cash-based cities in emerging markets easing into joined-up cashless fare collection across different modes of transport. The benefits of a simple tap-to-pay will go way beyond a matter of social distancing, as we expect to see a greater willingness among citizens to use cashless payment methods in other scenarios.

This will be a huge opportunity for the payments industry.

4. Voice-enabled payments will get a boost.

While conversational AI has already made great strides in other aspects of lives, we are only starting to see its application in the world of payments. Chatbots with speech-to-text and text-to-speech features have now become more accessible, bringing the ability to transform how we make in-app payments. Digital banking apps that offer this feature are enabling their customers to instruct on transactions and initiate bill payments using voice alone.

And the potential for this isn’t restricted to banking apps. Voice-enabled payments could be used to confirm payments on other apps such as those of food delivery providers.

We are already seeing some retailers integrate voice-enabled grocery shopping, allowing customers to commence checkout by voice. And as we continually seek out touchless payment options as part of the return to brick-and-mortar stores, voice payments could reimagine that experience in the future too.

While still in its infancy, we can expect to see banks, retailers and others explore voice as an emerging payment method.

This trend isn’t one that is unique to the UK either, far from it. The People's Bank of China is tipped by many to be the world’s first cashless society and is currently conducting extensive tests of a digital currency payment system ahead of a planned launch later this year. Elsewhere, Australia’s Central Bank has announced that it too is looking at the viability of a central digital currency.

Closer to home, however, the decreased need for cash has seen an acceleration of an already steady downward trend in ATM transactions, cash withdrawals and the use of cash more generally. So significant was the trend that it led to the National Audit Office concluding, earlier in 2020, that there was increasing pressure on the sustainability of the infrastructure for producing and distributing cash and that, overall, the current approach to overseeing the cash system is fragmented. It has also led to significant infrastructure changes across the sector that have seen a number of banks announce further branch closure programmes.

When many banks are making significant losses, it is difficult to argue with them trying to reduce their costs, especially amid an accelerating trend towards digital banking - TSB’s own website says that 67% of its customers now use mobile, telephone or online banking.

With forecasters predicting that cash may only be involved with 10% of transactions by 2028, the COVID crisis looks set to rapidly propel us towards a cashless future. But, while convenient for some, this transition will cause significant challenges for the banking sector as well as for governments and wider society as institutions look to adjust to yet another ‘new normal’.

On a more macroeconomic scale, coins and notes have acted as the primary means of payment across the globe and, in times of emergency, central banks have often printed banknotes to hand out to their governments.

The stats are certainly compelling, but they don’t change the fact that many banking customers either don’t have access to digital banking or still rely on cash. What’s more, the targeted impact of a move away from cash was clearly laid out when, in 2018, an Independent Access to Cash Review was undertaken (funded by LINK). The subsequent report stated that “technology is often designed for the mass market rather than for the poor, rural or vulnerable”.

On a more macroeconomic scale, coins and notes have acted as the primary means of payment across the globe and, in times of emergency, central banks have often printed banknotes to hand out to their governments. As such, money has become another tool used to manage the economy, and how these same levers would be pulled in a cashless society is not clear.

As is so often the case though, out of adversity comes opportunity and, in addition to the Post Office and retailers stepping in to support those who still rely on access to cash, there is already evidence that some new players are taking a more innovative look at the banking sector.

OneBank, for example, is a new payment institute that will not charge consumers but will instead charge participant banks to allow their customers to use OneBank’s “bank agnostic” kiosks. Retail bank branches cost between £500 and 700k per year to run so OneBank can justifiably claim to be providing a solution to banks and consumers simultaneously. Interestingly, the platform has its own anti-money laundering (AML) and know your customer (KYC) systems, independent to the banks.

Innovators such as OneBank will undoubtedly be important in the short term, but attention still needs to be given to longer-term and more far-reaching solutions.

Whichever way you look at it, the use of cash is declining, and to try and push against this particular tide now seems futile. The focus must be on harnessing technology to deliver innovative new approaches to overcome the challenges that will face a cashless society – tackling the key questions that need to be asked head-on. This doesn’t mean we are starting from a standing start though, as it is possible to adapt or accelerate the adoption of proven technology to help solve some of these challenges. For example, distributed ledger technology has applications for both central-bank-controlled digital currencies and identity verification to enable the unbanked to more easily access bank accounts.

Each of the major players, both new and old, in the banking sector will have their own role to play but one thing is for sure - the next 12 months will be crucial as the sector looks for new ways to deal with these emerging problems.

The drive to access the digital economy during the pandemic has been behind much of the disruption in payments this year. COVID-19 has pushed the industry to think fast and contactless payments have emerged as a lifeline for businesses and consumers. Interestingly, a lot of the innovation that is taking centre stage leverages existing technologies, but in new ways to tackle new problems. Most notably, the QR code saw a revival and has become an increasingly popular way of paying for goods and services.

Crucial to the success of the QR code payment is the fact that simply, it’s a technology that is accessible to anyone with a smartphone in their pocket. And this signals a much bigger trend we’ll continue to see during the pandemic and beyond - we don’t need to reinvent the wheel to create disruptive payment solutions. Instead, the most exciting innovations will leverage technologies that are within reach of consumers and businesses. This will be the key to seeing widespread penetration of new payment experiences.

Opening up the digital economy with the smartphone

While much of the contactless payment drive has focused on the ease of access for consumers, it’s not been such an easy ride for businesses. Large swathes of micro and small businesses that were predominantly cash-based have had little choice but to accept contactless payments during the pandemic. But one of the challenges that come with this payment revolution is that contactless point-of-sale (POS) hardware can be costly and complex to maintain for businesses. This can present a financial burden for micro and small businesses that want to access the digital economy and accept contactless payments.

The launch of Visa’s Tap to Phone solution and the comeback of the QR code show what can happen when you keep innovation simple.

The launch of Visa’s Tap to Phone technology in October is a pivotal step towards breaking down this barrier for businesses. And its genius once more comes down to harnessing existing technologies – again, the smartphone - in innovative ways to open up access. Visa Tap to Phone transforms Android smartphones and tablets into contactless POS terminals so sellers can accept contactless payments from their customers.

By removing the need for costly POS hardware and complex maintenance, it is enabling smaller businesses to download an app and accept contactless card or mobile wallet payments within a matter of minutes. The proliferation of mobile means Tap to Phone is well within reach of businesses of all sizes – and the customers they serve. And this is key if we are to see widespread adoption of new payment experiences among businesses.

Visa’s Tap to Phone innovation signals the end of POS and the start of easy access to cashless payments for businesses.

Easing emerging markets into the cashless economy

What works for one market, might not necessarily work elsewhere. In emerging markets, the technology that is accessible to both consumers and businesses can vary and that can dictate what is possible. With many markets around the world still predominantly cash-based, there is also a greater challenge to ease consumers and businesses into cashless payments, in some cases, for the first time. Again, using technologies communities are familiar with and already comfortable using is an important first step to encourage adoption.

If new payment solutions are to see widespread uptick and success in these markets, understanding of local market behaviours will be crucial. It comes down to learning the unique challenges faced by the local community, as well as their attitudes towards cashless payments. Only then can you explore the tools accessible to them to create payment solutions that stick.

Let’s keep it simple to make real change

The launch of Visa’s Tap to Phone solution and the comeback of the QR code show what can happen when you keep innovation simple. These technologies are transforming payment experiences for consumers and business alike around the world. And it’s all powered by the humble smartphone – a device mostly all of us carry in our pocket.

By using the existing technologies around us, we can expect to see increased penetration of new payment solutions. It might have taken the pandemic for some consumers and small businesses to make the leap to contactless payments, but we can expect to see this shift in behaviour take hold, even as we revert back to normal. We’re only seeing the start of the contactless revolution. The payment solutions that are accessible to all will have the power to scale with ease and will see the biggest success. That’s where the real innovation lies.

German payments fintech Wirecard, which collapsed following a fraud scandal earlier this year, will see a significant portion of its remaining assets purchased by Madrid-based Banco Santander.

Wirecard’s insolvency administrator Michael Jaffe said on Monday that Santander “will acquire the technology platform of the payment service provider in Europe as well as all highly specialised technological assets”. The deal marks the conclusion for the dissolution of Wirecard “despite unfavourable conditions”, Jaffe added.

In a separate statement, Santander said that it would acquire technological assets from Wirecard’s merchant payments business as part of plans to accelerate the bank’s growth in Europe. A source familiar with the deal told Germany’s Süddeutsche Zeitung that Santander had agreed to pay around €100 million for these assets.

Around 500 Wirecard employees who manage the technology acquired by Santander will join the bank’s global merchant services team, but remain in their current locations, according to the Santander statement. No Wirecard companies were involved in the acquisition and Santander will not assume any legal liability relating to the company or its past actions.

Wirecard was a rising star in Europe’s fintech scene until June this year, when it emerged that €1.9 billion of customer deposits could not be found in the company’s accounts. The resulting fraud scandal led to the arrest of former Wirecard CEO Markus Braun and a warrant being issued for the arrest of COO Jan Marsalek. The company filed for insolvency in August.

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The scandal was an embarrassment for German financial regulator BaFn, and Jan Marsalek remains at large despite an ongoing Interpol search.

Investor processes are still underway for the sale of Wirecard’s other subsidiaries in Asia, Turkey and South Africa, Jaffe said. The sale of assets from subsidiaries in North America, Brazil and Romania has already been included, with results expected in the coming weeks.