Alex Mifsud, Founder and CEO, Ixaris
With business-to-business (B2B) payments accounting for $705 trillion1 in annual transaction values – and growing – it comes as no surprise to hear that this sector is emerging as the new fintech opportunity. And Europe, on the verge of implementing the revised Payment Services Directive (PSD2) and other progressive regulatory changes, will see some of the biggest disruption.
The results from the latest Global Payments Innovation Jury Report, which consists of insights from 70 payments and fintech experts around the world, offers an interesting understanding of what our peers see as the key drivers to shape the delivery of financial services in an increasingly digital world.
The report highlights that, although fast-growing markets such as Asia, the Middle East and Africa will continue to focus on B2C payments (78%), it is Europe (76%) and the Americas (55%) that will dominate the B2B innovation agenda. The majority of respondents believe that B2B business models offer higher profit potential, a confidence reflected in a healthy increase in investments in B2B technologies – up 40% between March 2015 and 2016.
Enter Europe, previously rated last by this group of experts for innovation potential, now in second place behind Asia. The report ascribes this new-found optimism to a mix of progressive regulation, thriving innovation hotspots in London and across the continent, and signs that previously apathetic consumers have a greater appetite for change.
Experts in all markets agree that APIs will play a major role in the development of the payment market.
This is truly the start of an ‘open era of financial services’ where open APIs, open banking platforms and data sharing with third parties will be dominating the European financial services agenda for years to come. And the rest of the world is watching.
The industry is under no illusion that there will be challenges, including concerns over security and fears over revenue losses among the incumbent providers. In the B2B space where payment transactions occur across many different instruments and the needs of business are hugely diverse, the associated technological complexities have, understandably, suppressed much-needed change.
The proliferation of public payment APIs is already a reality, and the regulatory mandate across the EU will greatly increase the number and power of payment APIs in the next few years. Connecting together these APIs into services that bring value – rather than confusion – to customers is going to be a major challenge.
Two years ago, with funding from the EU Horizon 2020 programme, we set about building an open ecosystem that accommodates any payments API, and offers the means to orchestrate transactions across these APIs. This has never been more relevant than today.
A public beta version of the resulting cloud-based payments API framework, which we have called the Open Payments Cloud (OPC), launched at FinDEVr London in June 2017. The OPC is a practical means for all parties to collaborate in creating solutions that are in line with the new regulatory measures coming into force in the UK and across Europe next year.
With the OPC it is now possible to incorporate the flood of diverse payment APIs into coherent and wide-coverage B2B payment solutions for businesses of all sizes.
The Global Payments Innovation Jury Report is a timely reminder that B2B payments are ripe for disruption. Innovators in Europe have a unique opportunity to lead the drive to untangle supplier payments and bring corporate treasury into the 21st century. We’re excited to be part of this revolution and look forward to collaborating with partners across the financial services community to make this happen.
Find out more about Open Payments Cloud and join our beta programme at www.openpayments.cloud
1McKinsey Global Payments Map, 2015