Five themes are driving change in payments today. Individually they have a significant impact on the way we pay. Combined, these effects are amplified, creating a powerful force on the payments landscape, which, if you like, we can call Payments^5.

Firstly, across Europe are preparing for PSD2 inJanuary 2018, much of it focused on building open API capability. Our advice to clients is to launch with minimum viable API products based on the data they have and what they know the regulation requires. As the payments API economy grows in 2018, these APIs can be rebuilt quickly, and often, to meet market demand and opportunity.

Secondly, the new PSD2 requirements for strong authentication will impact every customer payment interaction. Banks and other PSPs are caught between the regulators focused on fraud prevention and merchants focused on seamless shopping. The answer is biometrics, in particular, behavioural biometrics which allow strong, continuous, invisible authentication.

Thirdly, instant payments are coming to Europe, with most CSMs investing in real-time capabilities. However, banks face a dilemma—they struggle to find a compelling business case based on hard numbers, but intuitively they know instant payments are essential in a digital economy, and they can see the successes in the UK, Sweden and Denmark. To progress, communities of banks need to move together, focusing on the substitution of internet and mobile banking payments to instant.

Fourthly, robotics can provide fast ROI to automate away repetitive manual tasks in bank payment processes, reducing costs and improving STP and customer service, while AI can tackle more complex tasks such as AML screening.

Lastly, cloud is coming to banking and to payments. Cloud is ideally suited to payments processing with its peaks and troughs of transaction flows, with the move to open APIs and with the proliferating ways to pay, 24&;7. Cloud is the cornerstone for ubiquitous payments, anytime, anywhere, from any device.

This is Payments^5. It is pointing towards a new world of Open Banking, a world in which consumers do their banking outside the banking environment, for example on merchant apps. Living Services—on demand, immediate, digital services mashed together from multiple service providers—will now include payments and other banking services, delivered through open APIs. A Cambrian explosion of APIs will develop, leading to API consolidators and aggregators, and to new businesses and new business models. Life as we know it in banking and payments is changing—for ever.

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