To accompany the report, 2000 consumers were also polled on their attitudes to current payment methods as well as what they would like to see in the future. The results have clearly demonstrated that, whilst we are a nation that is still getting to grips with a whole host of new ways to pay, the appetite for innovation is accelerating.

Empowering payers to make informed purchases in a way that suits them 

83% of consumers surveyed by VocaLink admitted they check their bank balance before making a significant purchase – highlighting that banks have a pivotal role to play in innovating ways for customers to maintain visibility and control of their money. It is likely that in ten years’ time, making informed decisions on expenditure will become even easier since portable communication devices (from smartphones, to watches, glasses, etc.) will help us budget more effectively, providing more options for ring-fencing funds within our bank accounts in seconds and even automatically helping consumers access better ‘deals.’ Over 50% of consumers would be interested in these sorts of apps.

However, flexibility in how we pay is already an acute need for many today. The employment market is changing with a growing number of workers reliant on multiple income flows, rather than having one steady and periodic source of income. One prediction regarding this issue is that by 2025 incomes could become even more erratic so should be met with technology that offers the necessary agility to accommodate these customers.

Similarly, another contributor to the Moving Money whitepaper believes that one of the most successful future innovations will be to make it easier to quickly ‘undo’ payments made in error to the wrong person or organisation.  This is a problem nearly 1 in 4 people in the UK, (rising to 1 in 3 for those under 45), have already experienced according to VocaLink’s consumer research. Of these, approximately three quarters eventually got their cash back whilst the rest simply did not see their money again, highlighting the need for a universal process to be devised and adopted in the event of erroneous payments.

Greater security demanded – but flexibility over identity authentication is expected

However we end up paying for things in 2025, security is the number one concern for consumers – 65% identified this as their number one priority when it comes to financial transactions. Contributing experts to the paper agreed, predicting that by 2025 there will be multiple ways of authenticating identity before payment can be made. In fact, as smartphone security increases, physical payment cards are expected to become obsolete since account details will be stored on the device itself. We’ve already seen a glimpse of the impact that biometrics-initiated mobile payments could have in the future and VocaLink’s research has found 1 in 4 UK consumers would consider using biometric technology to access banking or payment services². However, by 2025, some experts believe biometrics will be the principle method to authenticate our identities, with the usage of facial recognition in particular significantly reducing fraud and time/hassle constraints in making payments.

Real-time payments will offer certainty

Over the next ten years we will likely see an increase in adoption of immediate payments, via the Faster Payments system, as well as new innovations which build on this existing infrastructure. Larger transactions will become available on an immediate basis, particularly as the value limit on transactions rises past the current level of £100,000. This has obvious benefits for SMEs who will make and receive payment quicker, providing greater cashflow certainty and enhancing growth potential. Paying staff salaries will also be increasingly easy, as a payment can be made at the end of a week to reflect the exact hours worked with the employee receiving their salary immediately.

“The UK is in a fantastic position to make real time payments and all these other predictions a reality over the next decade. We have a world class digital payments infrastructure and this puts us at a distinct advantage – however if we are to stay ahead of the crowd, it is vital we start laying groundwork for the future now,” explains Chris Dunne, Director at VocaLink.

“The collective insight of this whitepaper has shown us what we could and should be able to achieve in the payments sphere. Disparate corners of the UK’s society and economy will benefit hugely if we can map their needs against the evolution of the UK’s payment system and the burgeoning technology that supports it. This collaborative effort is only the beginning; we are keen to catalyse discussion across all relevant parties about what comes next and set the wheels in motion to make future payment technology a reality.”

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The research also reveals that mobile first has now become mainstream, while innovative disruptive technologies such as block-chain will potentially become a very attractive alternative to traditional payment methods, transforming payment processing and acting as significant drivers for change this year.

The fourth annual report, ‘The Changing Face of Payments: A Review of Current Payments Infrastructures and Implications for the Future’, predicts that several trends have reached their tipping point. According to 90% of responses, mobile devices will represent a mainstream option for person-to-person or person-to-business payments within the next five years.

What are the key infrastructures you process payments through today?

Digital wallet features continue to be developed, a trend encapsulated by the launch of Apple Pay, which has made such offerings more accessible. The executives surveyed predict the continued influence of such brands, with 39% of responses suggesting that Apple and Google will dominate mobile payments over the next five years.

The study also highlights that cryptocurrency and block-chain technologies are now seen as real drivers for change and are gaining mainstream recognition, particularly in back-office infrastructures.

The emergence of digital-only lenders such as Atom Bank in the UK emphasises the conversion of previously marginal initiatives into the everyday. However, the report has one caveat: that regulation and the use of cryptocurrency markets and Bitcoin will potentially be a major issue for payments regulators and participants in 2015, not least given how fast these new entrants have evolved from emerging technologies to real contenders in the payments industry.

Change leaders in processing infrastructure

For the first time, regulation is not seen as stifling innovation anymore and those surveyed rank the two as equally important in terms of short-term industry development (32% and 33% respectively for banks, and 34% by those from non-banks).

However, innovation is seen as far more important in the long-term, due to competition, market opportunities and an ever-increasing need for more agility for faster time to market solutions (29% of all surveyed consider innovation a priority, compared to 17% for regulation).

Both regulation and innovation are now key considerations for companies striving to optimise customer journeys that are cost efficient, safe, flexible and secure, making them a real investment priority. The importance of innovation is being driven in particular by new entrants to the industry that are major sources of disruption in establishing new ways to pay and to disintermediate or differentiate in a fluid market.

“The payments industry continues to face an unprecedented pace and scale of change, driven by a potent mix of social, technological, political, competitive and regulatory factors,” says Tony Virdi, Vice President of Cognizant’s Banking and Financial Services Practice for the UK and Ireland.

“Innovation is crucial and traditional players need to adapt quickly, with agile and secure technologies to improve their business models and deliver better customer experience. The speed at which these innovative concepts have developed from ‘new kids on the block’ to major agents for change is extraordinary and the key to winning in the ‘Innovation Game’ is to be a part of it. It is essential that financial institutions are able to diagnose, adapt and respond to the changing market with agility in order to respond to ever evolving customer needs – a positive customer experience is key.”

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