Paytech: Reinventing Transactions Navigating the disrupted payments ecosystems Introduction Contents Executive Summary Section 1: Introduction: Disrupting Payments Introduction 3 with Tech-Enabled Solutions Executive Summary 4 Section 2: Digital Infrastructure Enables Section 1 Introduction: Disrupting Payments with Tech-Enabled Solutions 6 Payment Diversification Section 2 Digital Infrastructure Enables Payment Diversification 13 Section 3: Collaboration for Paytech Section 3 Collaboration for Paytech Innovation 19 Innovation Section 4 Balancing Fast Pace of Change and Value Addition 26 Section 4: Balancing Fast Pace of Change Section 5 Adopting Diverse Business Models to Stimulate Growth 32 and Value Addition Section 6 Conclusion 37 Section 5: Adopting Diverse Business Models Ireland's Payments Advantage 39 to Stimulate Growth Glossary 40 Section 6: Conclusion Ireland's Payments Advantage Glossary 2 Introduction Introduction Executive Summary Section 1: Introduction: Disrupting Payments This eBook has been commissioned with Tech-Enabled Solutions by Enterprise Ireland to identify and Section 2: Digital Infrastructure Enables analyse key trends in the paytech market. Payment Diversification Section 3: Collaboration for Paytech The information and analysis presented in Innovation this report is based on a variety of sources Section 4: Balancing Fast Pace of Change including publications, journals and analysis and Value Addition of data that is part of proprietary research Section 5: Adopting Diverse Business Models from Frost & Sullivan. The publicly available to Stimulate Growth sources of information include government Section 6: Conclusion websites, academic and trade journals, and Ireland's Payments Advantage online media. Glossary 3 Introduction Paytech: Reinventing Transactions Executive Summary Section 1: Technology adoption drives transformation in the payments industry Delivering digital products and services comes with its own set Introduction: Disrupting Payments of challenges with Tech-Enabled Solutions Consumer behaviour and expectations have evolved in the shared economy, prompting industry participants to harness technology to It is important to try and isolate the intended outcomes upfront for Section 2: launch innovative products, services and business models. The delivery any innovation implementation. Customers are demanding seamless Digital Infrastructure Enables and consumption of payment services has undergone significant and secure services, with an ability to make payments across multiple Payment Diversification change, making paytech one of the most disruptive segments within channels and access financial services on the go. Acceptance of fintech. Technology has lowered entry barriers, and the new paytech different payment channels such as e-wallets and social media platforms Section 3: ecosystem comprises a multitude of industry participants. is on the rise. Collaboration for Paytech Innovation Payment providers can transform capabilities with digital Success of the paytech market rests on diverse business models infrastructure Section 4: A wide range of paytech products and services are available, as Balancing Fast Pace of Change The transformation of back-end technology can contribute to an providers have adopted dynamic, scalable, and tech-agnostic business and Value Addition enhanced customer experience, which goes beyond changing the models. To retain competitiveness, companies are actively responding user experience (UX) or interface. Some of the advanced technologies to the needs of customers, which require them to be flexible and agile. Section 5: expected to impact the industry are cloud computing, the Internet of Subscription, pay-as-you-go and usage-based models are gaining Adopting Diverse Business Models Things (IoT), Big Data and Analytics (BDA), Artificial Intelligence (AI), popularity and incumbents are exploring different ways to incorporate to Stimulate Growth Machine Learning (ML) and blockchain, all of which are at different new models. levels of implementation and maturity in the payments industry. Section 6: Objective and Summary Conclusion Collaboration among industry participants blurs the lines of competition The payments industry has seen significant disruption over the last few Ireland's Payments Advantage years. This highly regulated segment is benefiting from the emergence Glossary Paytech has moved beyond IT providers to encompass a range of new of tech-enabled products and services. Industry initiatives aimed at market participants. Given the specific competencies possessed by transforming the customer experience and promotion by regulators in different industry participants, careful consideration of selection criteria some jurisdictions are driving multiple opportunities. However, the fast is important before deciding on different partners. pace of change makes it difficult for stakeholders — traditional banks, neobanks and alternate payment providers — to make the most of these business prospects. 4 Introduction To benefit from emerging opportunities, payment providers Executive Summary need to adapt rapidly and reduce time to market. Fragmentation across the industry is a challenge, and stakeholders will likely Section 1: benefit from collaboration within the ecosystem. Technology Introduction: Disrupting Payments disruption is rife, with a strong focus on integrating advanced with Tech-Enabled Solutions technologies into solutions. Platforms, Machine Learning (ML), Artificial Intelligence (AI), analytics and blockchain will define Section 2: the future of the industry and several new solutions based on Digital Infrastructure Enables these technologies are being explored. Furthermore, start-ups Payment Diversification are introducing new business models and channels, developing innovative services that are redefining the competitive landscape. Section 3: Collaboration for Paytech Technology has the potential to disrupt significant elements of the Innovation payments sector and the paytech industry is poised for substantial growth. This eBook observes the evolution of the segment and takes Section 4: a thematic approach to underline noteworthy developments. These Balancing Fast Pace of Change themes span technology-based transformation, disruption, innovation, and Value Addition collaboration, and diversity. Section 5: This eBook considers: Adopting Diverse Business Models to Stimulate Growth — Disruption in the payments industry brought about by digital and mobile-first products and services Section 6: — The impact of technology-enabled solutions Conclusion — Evolution of the paytech ecosystem and collaboration among Ireland's Payments Advantage stakeholders to enhance value for customers Glossary — The game-changing potential of new business models and channels in the payments industry 5 Introduction Section 1 Executive Summary Section 1: Introduction: Disrupting Payments Introduction: Disrupting Payments with Tech-Enabled Solutions with Tech-Enabled Solutions Section 2: Digital Infrastructure Enables Payment Diversification Payments industry processes and Section 3: Collaboration for Paytech functions are being transformed through Innovation the application of digital solutions. Section 4: Balancing Fast Pace of Change and Value Addition Section 5: Adopting Diverse Business Models to Stimulate Growth Section 6: Conclusion Ireland's Payments Advantage Glossary 6 Figure 1: Rising consumer awareness Introduction The payments industry is undergoing significant transformation, Executive Summary driven by the growing adoption of technology. The evolution of Consumer expectations regarding payment services consumer behaviour and changing expectations in relation to Section 1: payments in a shared economy has prompted a reaction from Introduction: Disrupting Payments industry participants that have harnessed technology to launch with Tech-Enabled Solutions innovative products, services and business models. Consumers supporting the use of Section 2: While traditional enterprises have been disrupted, tech-enabled 80% futuristic payments technologies Digital Infrastructure Enables businesses have created a completely different payments and currencies Payment Diversification ecosystem. The collective influence is visible in the range of new opportunities that have emerged in recent years. Simultaneously, Section 3: this transformation has led to multiple challenges and issues Collaboration for Paytech pertaining to data, security and regulations, creating confusion Innovation among incumbents and new providers alike. Consumers expecting facial Section 4: Traditionally, banks have been the cornerstone of the payments 33% recognition to emerge as a leading Balancing Fast Pace of Change ecosystem. However, as consumer expectations evolve with authentication option and Value Addition digitalisation, dissatisfaction with traditional payment options — often slow, complex and lacking agility and transparency — is on Section 5: the rise. The proliferation of mobile devices has further altered Adopting Diverse Business Models consumer behaviour. Figure 1 captures consumers’ evolving to Stimulate Growth sentiments regarding payment services. Source: Frost & Sullivan Section 6: Beyond consumer payments, business-to-business (B2B) payments Conclusion is a complex corporate function, especially for organisations with a global footprint. Multiple components and developments over Ireland's Payments Advantage the years have led to fragmented systems. Companies struggle Glossary to adapt