The first prediction we made was that the focus would continue to be on the user experience by reducing friction in the payment process. Here we are, one year later, and providing well-designed and frictionless user experiences is definitely still a work in progress. The best sign of others recognising the importance of user interaction and UX design is perhaps the rise of the neobanks.

New players - such as Revolut and N26 - have managed to capture large consumer segments in many markets. Much of their success comes from offering a better experience to the end-user. Interestingly, the competitive edge here isn’t with the features - most neobanks are built on existing payment platforms and infrastructure. Instead, they’re simply providing a better experience for the end-user.

Our second prediction was the “death of OTP by SMS”. We wouldn’t say that this prediction has come entirely true over the past year, but it is clear that we’re getting closer. While there are still some SMS users for authentication, those are mainly located in the UK - one of the countries with the furthest pushed-back PSD2 implementation deadlines compared to the rest of Europe. So by next year, we’ll probably see SMS for SCA as a rarity in the market.

Our third prediction was seeing a “rise of digital identity (eID)”. This prediction has definitely come true - even the EU got involved in a proposal for a cross-Europe eID wallet! However, a big challenge with eID is the network effect. For service providers, merchants and banks, an eID solution isn’t valuable before a significant percentage of the potential customers have access to it. And for end-users, eID solutions are of no interest before they can be used with the same service providers and banks. This means that it will probably take a while before we have a genuinely successful pan-European eID infrastructure, as it requires government and industry support.

Our fourth prediction was that IoT would make an impact on payments. Why? Because more and more devices are getting connected to the internet. Whether talking about light bulbs or cars, everything seems to come with some form of network connectivity these days. But, we’ve still not seen any good business cases for implementing secure payments directly on IoT devices.

Still, as with any new technology, this might be changing. An excellent parallel example is how the first iPhone made it evident that capacitive touch screens were the future, influencing all other existing smartphone manufacturers to change their strategy. We’re still waiting for the same thing to happen with IoT payments.

Our final prediction was that 2021 would see a rise in Open Banking. While there has been a significant increase in open banking users over the past year, it is clear that the existing “card rails” are still maintaining their hold on the market. 

In the UK, which probably has seen the most usage of open banking so far, the estimate is that 4 million users are now using services powered by open banking. We believe that Open Banking will continue to grow, particularly as we move from “tap to pay” to “app to pay”. This change will be pushed both by merchants and by PSPs, as it provides both lower fees and a potentially closer relationship with the customer through payment apps.

The future is hard to predict, but we did a great job in predicting the past year. Perhaps the most influential trend we missed was the rise in cryptocurrencies, with some of them making incredible gains. However, because the increase in cryptocurrency valuations has not been mirrored in their actual use, it is still challenging to predict what will happen in the future. 

If you’re interested in hearing about some 2022 predictions, head to the Open Banking Excellence’s blog. Here they will feature our - and other industry expert - insight on everything related to Open Banking, finance, and beyond for 2022.