As global economies look to the post-pandemic era, they’re also finding that the fintech revolution didn’t stand still amid the waves of COVID. The pandemic has accelerated how fintech is transforming payments and finance around the world. Now payments companies are looking to use fintech to improve security and convenience for customers while supporting sustainability-focused initiatives.
Here’s a remarkable statistic: Visa added more than 30 million small businesses to its network that were not selling online before the pandemic, according to Ryan McInerney, President of Visa Inc. At Rakuten Optimism 2022, McInerney chatted with Masayuki Hosaka, Representative Director and Vice Chairman of Rakuten Group and President and CEO of Rakuten Card, in a discussion that covered the global economy, how payments are evolving and the need to combat global warming through sustainability policies.
Buy Now, Pay Later and Tokenization: Fintech trends reshape banking & payments
“People are spending quite strongly in the current environment,” said McInerney. “We’re seeing more buyers online than we ever have, we’re seeing spending in new ways for groceries and food delivery — things they weren’t doing before the pandemic.”
In a wide-ranging discussion, McInerney touched on a few key fintech trends that are reshaping banking and payments as they scale. One is open banking, which allows third-party access to bank accounts to improve products and services — a feature which McInerney believes will allow all banking to be “open” by 2030. Real-time or account-to-account payments, such as India’s Unified Payments Interface, allows businesses and individuals to reduce cash usage and pay bills more efficiently. Buy now, pay later (BNPL) short-term financing options are increasingly popular among consumers, and Visa aims to enable BNPL functionality in every card.
The payments giant is also focused on crypto as a payment technology and tokenization of credit card numbers as a means to ensure safer online transactions.
“Visa has led the way to make it safer and easier to pay online,” McInerney said. “It [tokenization] reduces risk, builds trust for merchants and consumers, and it reduces fraud, all the things we’d want to have happen. We recently issued our 4 billionth token, and we now have as many digital tokens as we have physical cards around the world.”
From transport to QR codes: Cashless payments accelerate
Hosaka pointed out another trend that has come to the fore amid the pandemic: the acceleration of cashless payments. In Japan, traditionally a cash-loving country, cashless has topped 30% of all payments. Hosaka believes this will increase with the spread of credit cards, QR code payments and other solutions. In Italy, cashless payments accounted for over 50% of payments, up 14% over the past year, and in the United States they increased to 85%, a gain of 22%, McInerney added.
“COVID revealed, in an abrupt way, that digital payments are a better way to pay and be paid, and we think that’s why we’ve seen cashless adoption grow so much in Japan and all around the world.”Ryan McInerney, President, Visa Inc.
“COVID revealed, in an abrupt way, that digital payments are a better way to pay and be paid, and we think that’s why we’ve seen cashless adoption grow so much in Japan and all around the world,” McInerney said. “Digital has become the typical way that people pay and are being paid in almost every segment of the economy in most countries.”
One of those segments is transportation. Japan adopted contactless digital payment smartcards for its renowned public transit systems decades ago. Now transit providers around the world are also incorporating digital payments, but many are open-loop systems. They afford users the convenience of riding by simply tapping their credit cards when they pass a payment point. That ease of use can encourage more people to ride transit, cutting greenhouse gas emissions, Hosaka pointed out. To support this trend, Visa has helped bring open-loop contactless payments to transit networks in more than 550 cities worldwide.
Empowering a greener society through next-gen payments and commerce
In line with the “Tech & Green” theme of Rakuten Optimism 2022, Hosaka and McInerney also discussed broader sustainability initiatives. Both Visa and Rakuten have pledged to become carbon neutral, with the former achieving that status in 2020 and the latter aiming for 2023. McInerney described sustainability as a building block for Visa, and outlined several endeavors the company is pursuing to reduce environmental impacts at its 120+ offices globally as well as at partner organizations.
Aside from supporting public transportation with more convenient payments, Visa aims to be at net zero emissions by 2040 and then climate-positive, in other words removing additional greenhouse gases from the atmosphere to fight global warming. On a customer level, Visa is working with Germany-based sustainable banking startup ecolytiq, to offer carbon footprint calculators for purchases, carbon offsets and other features. It’s also creating tools that can help customers track how much energy they’re consuming with their purchases. In addition, it launched Earthwise, a payments card made of up to 98% upcycled plastic.
“We’re focused on making payments and commerce as energy efficient as possible,” emphasized McInerney in his concluding remarks. “We’re helping consumers understand their impact on the environment and we’re encouraging sustainable consumption and behavior. We’re doing this through our consulting, products and services with clients all around the world.”