Tectonic shifts

Digital payments in the U.S. are expected to hit a total value of $3 trillion in 2024, more than double that of 2020, according to Statista. This rapid growth is partly being driven by retailers offering more integrated omnichannel experiences: Payments solutions that work across all touchpoints, from point-of-sales terminals to smartphones, online stores and marketplaces. New technologies which reduce friction at checkout and improve security are helping spur the omnichannel trend. Biometric authentication, such as palm scanners or facial recognition, is gaining traction; Amazon-owned Whole Foods recently announced its adoption of palm recognition tech nationwide1. Similarly, restaurant chain CaliExpress is implementing pay-by-face technology powered by PopID2. The FedNow real-time-payments (RTP) infrastructure, launched in 2023, will accelerate this shift. The scheme allows consumers and businesses to make instant payments from their bank accounts, at any time, and will greatly reduce usage of cash and checks.

The European Union’s second Payment Services Directive (PSD2) was introduced to help grow innovations such as open banking, which required banks to develop standard ways to share transaction data with fintechs and other third parties. Under open banking, payment initiation service providers (PISP) are permitted to transfer money straight from a consumer’s account to a merchant’s—the basis for account-to-account (A2A) payments. A2A is promising because it cuts out intermediaries, making payments faster and cost effective. The UK in particular is looking at ways to promote A2A. Despite leaving the EU, the UK is a pioneer in open banking; today, more than one in seven British consumers use such services³. As the EU continues to make progress with open banking and real time payments, the European region could become a hub for A2A payments technology, bolstered by the expansion of the EU’s SEPA Instant scheme, which allows payments to be settled within ten seconds. 

Major companies in the Middle East and North Africa (MENA) are looking to create in-house banks to simplify their accounts payable processes and reduce costs. The complexity of their current set-ups is partly a product of strong growth and international expansion. For firms operating across the many countries of MENA, it can be common to have hundreds of accounts spread across different banks. This results in complex payments processes, with varying reporting formats for different banks, while holding numerous accounts can result in high fees. In-house banking has the treasury operating a single account and centralizes key functions like account management, multi-currency payments, and cash consolidation. The number of physical bank accounts is then reduced by replacing them with virtual equivalents, which reduces expenditure. Plus, the centralized structure of an in-house bank can provide real-time visibility over cash balances. 

Companies in Asia-Pacific (APAC) will triple spending on generative artificial intelligence (GenAI) to $3.4 billion in 2024, according to Infosys. GenAI is a category of machine learning that can analyze huge volumes of data based on plain language prompts and output text or visuals. Research suggests that East and  Southeast Asia leaders in digital finance4, and treasury teams, will be fast adopters of this technology. With GenAI tools, treasurers will be able to upgrade the  speed and quality of their data management. A simple prompt such as, “Do we have enough liquidity for the week?” could not only produce a rapid answer, but also relevant graphs and context. This would allow non- programmers to interact with complex data sets. Beyond ad hoc analytics, GenAI could also be used to routinely parse huge volumes of data to identify errors and anomalies, helping with account validation and fraud management, which are both long-standing treasury challenges.