Payments, like so many other industries, is going through a period of profound flux brought on by the growing use and prevalence of digital channels, says Gilles Ubaghs, senior analyst, financial services technology at Ovum.
"In all markets globally, consumers are moving from cash to electronic forms of transactions, while mobile and online technologies are bringing up new ways to shop and pay both online, and in-store," he states. This extends well beyond just tapping a phone at the POS, into deeper methods of targeted customer engagement.
"These trends provide huge opportunities for fast moving innovators to launch new products, or even unique approaches to older technologies," he states.
Ubaghs notes payments is still dominated by very large companies, and payment schemes and networks.
"While innovation is coming from these avenues, these are huge global conglomerates that can often lack the nimble agile development of smaller startups," he points out.
"The thinking behind a lot of startups, and more critically their investors, is that payments is still for the most part reliant on decades old technology, that in many instances is fairly slow, cumbersome, expensive and not that user friendly."
"The expectation is that the market is ripe for disruption," he states.
"There is no magic bullet and disruption will occur, that's just the nature of modern technology but there is nothing that states it has to come from startups," he states.
He says for traditional providers, focusing on flexibility and adaptability to new shifts and trends, including updating core IT infrastructure to enable this, will go a long way.
"The bottom line in today's market has to be on simplifying the experience for your customers at whatever level, and incumbent organisations are still very well placed to do this.
"That can be hard to do, however, particularly as so many organisations remain closed off to collaboration or working in a more open manner."
A lesson from the core players is that they have recently been focusing on maintaining their own position in the value chain, he states.
This is done largely through new technologies like tokenisation, and through greater use and openness to using APIs (application programming interface) and SDKs (software developer kit)
These have really opened up the market for collaboration across and in many ways undercuts what could be potential rivals by giving them the tools they need to innovate, thus keeping the incumbents in the game, he says.
"They're giving developers the tool to innovate on the front end, which is where the vast majority of innovation is occurring, while cementing their role in the background," says Ubaghs. "This means these incumbents will benefit from the growth in the market, by relinquishing some of the control they are used to having."
He says the sharing economy gets a lot of hype these days but believes the payments industry is really heading towards the API economy.
"The ramifications of this are still being worked out, but will ultimately benefit the market as a whole, except for those who are too slow to adapt," he states.