Shaking Up the Payments World in 2019

Mobile technology, open banking and artificial intelligence will still drive big changes in the payments world this year, but a slowing global economy could have big consequences, according to a new 2019 outlook by Mercator Advisory Group.

The Marlborough, Mass.-based research firm predicted that business cycle factors, trade policies, Brexit, slowing growth in Europe and China, and expected higher interest rates all pointed to an economic slowdown in 2019.

“We expect even more disruption in 2019, as The Clearing House’s Real Time Payments (RTP) system emerges out of pilot, new competitors emerge and the Federal Reserve makes key decisions on how it will participate,” Mercator VP of Research Operations Aaron McPherson said.

Interchange revenue could also fall in 2019, Mercator said. Interchange caps have already come to the European Union, Canada and Australia but so far have only affected debit cards in the United States. Litigation between merchants and banks could also put pressure on interchange, as could Congressional actions after the 2020 elections. New prepaid rules will also reduce profits and slow the convergence of prepaid cards and debit cards, it predicted.

“The bottom line is that the U.S. is seriously out of step with other developed economies, and as a matter of national competitiveness, this discrepancy cannot be maintained forever,” it said.

Data protection, fraud and privacy will remain under scrutiny in 2019 as well.

“As with faster payments, products that were in pilot in 2018, including new tokenization services, will launch in 2019, and we shall see whether network-based card-on-file tokenization, 3-D Secure 2.0, and Secure Remote Commerce gain acceptance from merchants,” Mercator said.

There will probably be more mergers and acquisitions in the payments sector in 2019, Mercator also predicted.

“Already we have seen a tectonic shift with the proposed acquisition of First Data by Fiserv. Even if that deal does not complete, First Data is now in play, and another suitor will be found,” it said. “FIS will be looking for an answer and may find it in TSYS. Other major acquirers, such as Chase Paymentech, will also be looking to bulk up, although there are precious few acquisition targets left. We will see continued acquisitions of the Mastercard-Vocalink variety, as networks and processors seek to augment their capabilities to expand their revenue streams and increase competitiveness.”

Credit unions and other payments players should look for ways to participate in pilot studies as a way to stay current on developments, Mercator noted. Customer engagement, a focus on mobile and increased competition will be crucial considerations in 2019, too.

Perhaps most important is that payments providers should make contingency plans for an economic slowdown, however.

“It is most likely that the economy will experience a soft landing, but it is not inconceivable that an unforeseeable event such as a major cyberattack or war could disrupt the economy,” it warned. “Since the downside possibilities are more numerous than the upside ones, a conservative posture regarding risk and growth would be prudent.”