Jim Bowers Payments Solution Specialist @ IR
Zil Bareisis Head of Retail Banking @ Celent
Host: Janae Smith
Speakers: Zil Bareisis, Head of Retail Banking, Celent | Jim Bowers, Payments Solution Specialist, IR
Hello and welcome to today's webinar on Managing Through & Beyond The Changing Times in The Payments Industry. My name is Janae Smith and I'm the product marketing manager here at IR. Joining me today, we have Zil Bareisis, Head of Retail Banking at Celent, and Jim Bowers, Payment Solutions Specialist at IR. At this time, I just wanted to take a moment and let our speakers formally introduce themselves. With that, I will pass it over to you, Zil.
Thank you, Janae. My name is Zil Bareisis. I head the retail banking practice here at Celent. I'll introduce the company in just a moment as part of my presentations but on a personal note, I've been in the advisory consulting industry for the last 25 years or so. The last 10 of those spent with Celent which is a division of Oliver Wyman consulting company where I came from. Much of that time I've been focused on In payments and also identity and authentication in my research. We also run a model bank program, which is the awards program for financial institutions. I've been chairing that for the last five years. I’m delighted to be here. Thank you to colleagues at IR and I look forward to the session today. Jim.
All right, thank you, Zil. I am Jim Bowers, a Payment Solution Specialist here at Integrated Research and also have an extensive history in the payment industry. I've spent the vast majority of my time in retail banking card, non-card consumer merchant processor space, as well as the treasury banking wire ACH on the corporate side of the house. After having spent an extensive amount of time in both of those two areas, I’ve delved back into the fraud risk management side that kind of covers both of those areas. As well as covering applications. Dealing with the other infrastructure, the high risk infrastructure that goes across all those sorts of applications. I have over eight years of monitoring experience with Integrated Research and Solutions, plugging our capabilities into all those various processing entities.
Before we dive in, I just wanted to cover a couple of webinar logistics. The slides are available for download under the attachments tab. If you have a question, please send it through and we'll address it at the end of the webinar. We suggest that you enter full screen for better viewing. This webinar will be available on demand so please share it with your colleagues.
We would greatly appreciate it if you could please rate the webinar and share feedback to help us improve for next time. As always, please visit us online for additional resources. I'll pass it back to you, Zil.
Thank you Janae. Before I begin my part of the presentation I just wanted to quickly introduce Celent. I hope that many of you are familiar with us. If not, we are an industry research and advisory firm. We're focused on the exclusive financial services industry and how information technology is applied within banking, insurance, capital markets. We serve the entire financial services ecosystem from banks, technology vendors and service providers, investors and consultants. Anyone that's interested in the industry and technology trends there.
What we do is basically as we look at those trends, we analyze what's the how that shaping the industry itself. We provide technology primers. We do vendor analysis, understanding who plays in what different areas, as I mentioned, model bank. That's basically a huge repository of case studies and best practice usage of technology in banking. We tend to work on a traditional sort of subscription-based model. We provide consulting and bespoke advisory. But essentially, that's our small team that covers a lot of ground here.
What I wanted to do today, given the theme that, obviously, we all live through very difficult and uncertain times, I just wanted to take a moment to kind of capture the story so far, but also, try and look ahead a little bit to see how the pandemic is shaping the payments industry. What recommendations, what advice can we can take from that?
First and foremost, I think we just need to recognize that COVID-19 is a global human tragedy. I think so many of us have been affected in many different ways. It's a human tragedy, but it's also causing a significant economic disruption.
Obviously the pandemic itself has a major impact on all payment flows. We did a sort of quick analysis looking at what are the different flows, for example, when individuals pay businesses C2B, that's typically for goods and services, versus if B2B or government payouts to businesses payments. By the way, on this slide, for some reason, the video, at least those of my screen, it's not rendering correctly, where you see an empty circle, it should actually be a full circle. For whatever reason that doesn't come through correctly. We were trying to fix that right before the call, but not sure why that happens.
Basically, when you see an empty one, imagine it's a full circle. In other words, it's a major impact. I'm going to talk mostly today on paying for goods and services, the retail payments side, but I wanted to highlight on this slide that the impact has been quite significant across the board, whether we're talking about the disrupted supply chains and supplier payments, the government has stepped in ways that used to be unimaginable in terms of providing support to businesses, to individuals.
The only area where probably we've not seen the impact yet is actually individuals paying back to the government. Although again, as unemployment increases, we expect to see those flows disrupted as well in the form of smaller tax bills, for example.
Focusing on the retail payments side, first and foremost, I think the most obvious one is that cash has been really the biggest victim. There were very quickly early reports that cash is not clean, it spreads the virus, and customers really took that on board. Of course, it doesn't help when a lot of shops are closed and restaurants and bars are shut, as well, and you're forced to stay at home. So not many opportunities to spend cash. You can see these on the left-hand side here, a couple of charts that show in the UK transaction data from LINK, the ATM network. You can see how 2020 data just just went down.
On the credit side, the story is very similar. It is again the transaction volumes have gone down and the data I have here is from their quarterly report. Then you could look at the broader impacts. Visa is obviously only a part of the story but given its role and how big it is, we thought it was pretty indicative. So for me two messages, there is the first of all, I think debit suffered less and credit declined more.
There are some signs of recovery which is good news. Obviously, as the lockdowns are easing in many different parts of the world, as the economies are restarting, payment flows are coming back as well. If you look at credit, transaction flows are just part of the story. There's also the credit aspect of it. Many customers have taken advantage of various forbearance programs. Whether it's in the US, where something like 150 billion of debt was put on hold. In the UK, there's been lots of payment holidays as well. Customers got to get access to free overdraft. The message here is that some of those impacts, we won’t know until quite a bit later to see whether that results in delinquencies or what the real impact of that is.
On the other hand, contactless payments, cards and wallets in particular have seen a large boost to the extent that people can still go to the shops and transact with the physical point of sale. They want to do it in a contactless way. So contactless limits have been raised. All the data that you see in here, whether it's Visa or MasterCard, they are all reporting a nice increase in contactless transactions. Some of it has been growing already in the US, in particular. The networks have been pushing issuers to reissue the cards, the terminals. The merchants have been turning on their terminals to accept those transactions. Again, this is not a brand new trend but clearly seen a massive boost during the Coronavirus.
The other interesting thing to look at is the impact which has been very uneven across different sectors. In some categories you've had panic buying. Toilet paper being the best example. In there, merchants had to deal with it by even restricting purchases or limiting range, delaying delivery.
I remember trying to order something from Amazon. It wasn't available for a month because it was deemed as a non-essential purchase at a time. Of course, essential continued, but even there you have merchants trying to move into online delivery, making adjustments to physical stores, segmenting customers in the UK, for example. There were specific hours introduced for the elderly customers that need to isolate themselves, or for NHS and other key workers so that they could shop for you, as well.
Then you have what we call Skipped Purchases. Things like seasonal wardrobe purchases or even haircuts. The stuff like you could have two haircuts just because you missed one. There would have been some canceled orders. Some deep discounting potentially but that's more of a one-off hit as opposed to if you look at travel or cross border, that's a significant disruption. Not only those purchases did not happen, they're going to be likely factored for the long term. If you're a merchant there, you're probably rethinking your business model, your search for reducing capacity, laying people off and looking at how you're going to continue. The message here is that the impact has been very uneven and the implications on the sectors is going to be very different as well.
Not surprisingly, the crisis is having a negative effect on the issuer revenues as well as costs. Even then it depends on what type of issue you are talking about. In terms of new accounts, for example. If you're a traditional bank relying on branch infrastructure, that's been tough, right? It has been difficult to acquire new customers.
On the other hand, if you had digital onboarding capabilities, it means that you will likely be less affected. Similarly in the transaction revenue side, large debit card issuers, as we already mentioned, have been less effective, especially if your cards are already contactless. Hopefully, you are less affected than some of the credit card issuers or perhaps small debit issuers that used to see how to change revenue as a proportion. Anyone really that has very strong reliance on travel and cross border transactions or affects income. Some of the prepaid card issuers, commercial cards, and then some of the challenger banks really struggled in that. There's some incentive impacts as well, but we don't need to go into too much detail on that.
Similarly, the costs are rising as well. Not least because of fraud. Because the disputes are growing or the many merchants could not deliver on their promises. Also there's been a massive increase in fraud in general data breaches, identity theft.
There's been so many scams and so many phishing attacks that we've seen in industry. Many people suffer from that.
I think as I said, some people just won't stop at anything, even the quarantine puppy scam. Some people even take that-there’s a lot of people who wanted to have pets during lockdown. And people either took advantage by raising prices, or even quite often advertising something and then not delivering.
The last point I wanted to make in this particular section is that there's also been quite a few delays in the regulatory initiatives. Visa and MasterCard plan to have some interchange revisions. Some of that was going up, others were going down. Those were delayed until July at least, and perhaps even April next year. If you remember in the migration, US fuel stations were the last merchant category that was due to have a liability shift which was deferred until October 2020. Now that's been delayed until next April again.
In PSD2, in Europe, PSD2 strong customer authentication requirements already were delayed until the end of this year, but at least in the UK, the government or the FCA announced that it was going to be delayed until now until September. Many other countries and EBA in Europe are under pressure to follow. As you can see here, the list is quite long. There's been some of it like Pay.UK requested paid framework, for example, was delayed and then was finally published recently, as I was writing this report. The point is that the industry has been quite badly disrupted.
What can we expect going forward? It's sort of obvious but I'm hoping that we'll make some interesting points here that we will see an accelerated migration to digital paper. The question is will shopping really become increasingly cashless?
To really get to that point, I think you have to believe that shoppers are going to turn away from cash to digital payments and also that cash decline can be managed, as cash is an important instrument.
Will shopping become contact-free? As you'll see later on, I do want to draw a distinction between simply contactless and contact free. There, the question is not just “do I want this?” but also as an industry “are we able to allocate funds to deliver those experiences?”
Then the final probably longer term question, will central banks launch their own digital currencies, especially as they see cash declining, and want to continue to play a role in payments? Again, I think there's a lot of movement in that space. It's something that certainly we're watching with interest. As you can see, our own confidence is sort of, as the horizon increases, it decreases as well, because the future is very uncertain and so manufacturers outside of the payments industry.
Cash, I think it is something that we should expect to see less off in the future. Again, it's been an ongoing trend. Migration to cashless has been something that many countries have been going through some further away, made further progress than others. Sweden for example, they already use very little cash compared to many other countries. For example, data from the UK shows that customers really want to move away at 76%. This is the data from LINK, the ATM network, 76% of them said that the Coronavirus crisis will affect the way they use cash in the next six months. Many of them will turn to cards more to try to use contactless and mobile will do more shopping online. It's quite understandable.
My personal view is that we're not gonna see a complete disappearance of cash. That's not gonna happen just yet for two main reasons. First of all, cash is inclusive. Anyone can use it. That inclusion story keeps coming back for digital payments. Yes, they're all great. They're all fine, but what if you don't have a smartphone? What if you live in an area where it's not accessible to you? Or what if you are in a demographic, whether it's age or otherwise, that maybe you don't want to use digital payments?
Cash remains an instrument that is inclusive. It also is very resilient. It works offline. We've seen some outages where car transactions couldn't go through. In the past, we all had these machines where you could just take the car details anyway. Now that's increasingly rare. So until digital payments can demonstrate that they can be resilient and inclusive, the pressure to maintain cash and to provide the opportunity to provide access to cash is going to continue.
You see that happening also, sort of at the political level. In the US, for example, some states were looking to introduce bills that mandate retailers to accept cash or banned cashless stores. In the UK, there's been an access to cash review that essentially resulted in creating a specific special group whose mandate is making sure that as the usage of cash declines, the wholesale system for cash distribution remains efficient, resilient and sustainable because your cost per transaction increases.
I mentioned contact-free, particularly contactless. What that really means is that you don't want to be touching the terminal at all. The contactless transactions still means that occasionally you still have to touch. A card is not enough. Because in the card you might need to enter your PIN code or even contactless in certain markets like the US, for example. The way you even have to tap in contactless, you may still need to touch the terminal to accept the payment. Even when you do self-checkout, you actually end up pressing quite a few buttons anyway as you navigate through the terminal.
What can you do to actually eliminate completely touchless, or to make it a completely touch-free experience? First of all, digital wallets themselves make that a really good experience. Apple Pay already authenticated transactions. You authenticate with your thumb or your facial ID and therefore the limits can be much higher.
Similarly, biometrics contactless cards, we would expect that they would receive a boost there's been. So far, the take up has been limited because they are a little bit more expensive. This research shows the customers, even prepared to pay for it because it will offer that convenience as well as security.
We certainly expect to see the resurgence of QR codes. I think many of us view that as a transitory technology to move to NFC. But as we've seen in Asia, many emerging markets, QR codes are here to stay. They do offer an interesting experience that is both contact-free and also interesting from the issuer point of view. We can talk about that later on.
It also means retail format innovations. Instead of this couple of pictures here with the terminal on the stick. Retailers tried to think through how they're going to manage the flows. Some of them are introducing drive thru systems. Contactless payments on the stick restaurants are utilizing open air spaces, or even using teddy bears to enforce social distancing. More interestingly, check-in rather than checkout experiences similar to Amazon Go stores. Amazon began licensing its “Just walk out” cashier-less technology to other merchants as a standalone product. Many other merchants already experimented with those sorts of technologies and approaches. We'll certainly see more and more of those investments going through.
It's also not just physical shopping but in-app, online. Many even traditional offline industries are moving online. Just a couple of charts and the hockey sticks in terms of Instacart downloads or Doordash for food delivery. One of the big questions is voices. It’s potentially an interesting user interface for commerce as well. There's some data here from Voxly Digital which is a company in the US that helps build voice-enabled propositions for various different players in the industry. They've seen that a lot of their customers that use voice already, they expect to use more digital assistants after the lockdown, as they get more comfortable.
As you can see here from the data that before COVID-19, there were 23% that used daily digital assistance for shopping. This is all about the voice. During the covid that present proportion increased up to 33%. People are getting increasingly more comfortable with voice experiences.
Finally, it even means potentially non-card payment rails. We already mentioned the QR code systems and separate systems like Alipay and WeChat Pay, Swish in Sweden, for example. Some of the emerging initiatives in Europe, for example, we have many different points solutions like NatWest pay. One of our winners for model bank awards earlier this year. Also, European payments initiative, originally known as Pepsi, pan-European Payments Initiative. Again, that one is something that many banks are looking to invest as an alternative, potentially to the cards.
The big question on all of this-I think it’s obvious that’s the direction we’re travelling. That question is how quickly will we move and how quickly we'll be able to invest into that payment civilization when so many businesses are fighting for survival? Because this does require rollout. This does require merchant adoption. To me, it's just more of the question of timing.
Finally, I just want to briefly touch on digital currencies. If any of you follow that space, there's been a huge increase of activity. I'm not talking about Bitcoin or Aetherium or other cryptocurrencies like that. It's the likes of Libra and more important to the responses from various different central banks, whether they should be issuing digital currencies of their own.
It's interesting if you look at who is doing what and why they're doing it. Their motivations and approaches seem to be different. For example, China is at the forefront of this and they seem to be the furthest ahead in terms of being close to launching their version of digital currency. They clearly have to fight Alipay and WeChat Pay. There's also probably some ulterior motives in terms of tracking how money is being used by citizens, internationalizing the Yuan, improving the reserve currency status, etc. Where Sweden for example, I mentioned Sweden is already quite far ahead in terms of being a cashless society and the central bank is quite concerned about that cash decline. They're looking at the digital version of E-Krona project to see how they can introduce an alternative. That's a similar model for Bank of England as well, although their stated objectives are quite broad, whereas France is looking at the wholesale CBC, so actually very looking more for interbank settlement rather than as a retail currency.
My other point on this is that banks, for banks, this is an important area. For the payments industry in general this is an important development. First of all, they can and should play a role, but should CBDC be successful, it may disintermediate the banks themselves by increasing their costs of deposits and reducing their ability to lend. If you look at the consultation, for example, that the Bank of England is running, there are some various design choices that can be made from the outset to try and limit that impact. My advice to banks would be to try and engage themselves and understand those and try to influence that design from the beginning.
We started going to talk about what should be the advice for the payments industry for banks, for merchants. My message would be threefold. It's really supporting the accelerated migration to digital while shoring up the defenses and investing into flexibility and resilience.
What does accelerated to digital mean? It's doubling down on that digital onboarding, issuing push provisioning. It says if you're issuing a card, make sure you can immediately add it to a wallet so that people can be using it through a mobile phone wallet. Make sure your cards can be tokenized because a lot of it is going to support all these contact three different forms. Innovate around the product. Maybe a credit card is not the best way to provide credit in this new environment, but maybe there is an installment or other forms of digital credit at the point of sale. Loyalty programs are very different with travel being curtailed. Lots of air miles is no longer a meaningful incentive for customers. How can you rethink the loyalty program? And of course digital servicing, self-service and being able to see transactions is really critical.
Fraud and risk management tools. Many of them probably need to be updated. This is because suddenly the pandemic has thrown a lot of historical forecasts, historical models into the air. You can't really predict how people will behave in this way. We already mentioned that disputes are on the rise, and collections will be on the rise. Again, those capabilities probably need to be strengthened.
You can't drive the ship by always looking backwards. You need to have modern monitoring, reporting tools, something that can help you predict what's coming, what's next. Make sure that your operations are under control. Our dimension is engaging with central banks around digital currency. Make sure that you influence that design and you protect your interests long term. Finally, it's clear that as the impact on volumes has been so dramatic, and different segments were affected differently, the fact that we had to lock up and move to work from home almost overnight. That clearly implies the need to invest for resilience and flexibility for rethinking your partner strategy like who you work with. How is your payment infrastructure? How could you modernize it? Can you leverage cloud to get that flexibility?
Going a little bit deeper in terms of where we are in around dispute management collections. There's a lot more. It's no longer just simply making sure that you don't forget to do step-by-step and sort of having good workflow management tools. There's a lot of analytics, there's a lot of Intelligent Automation. First and foremost, preventative. By providing additional information such as a map of merchant location, you're going to help customers remember the transaction and maybe it's not going to raise a dispute in the first place. If payment holiday maybe is a good way to help customers when it's a difficult time for them. You’re preventing and avoiding delinquents in the first place.
Being predictive, being able to understand where the next issue is gonna come from, whether it's a network outage or customer that’s most at-risk or a bad actor that might have a fraudulent attack on you is going to be important. Being smart. Is this going through a formal dispute resolution worth my time? Or shall I just settle with a customer right away? What's my cost versus the likelihood of success?
Use digital channels first, rather than mailing or calling customers. Make it easy for customers to take a desired action. Offer them to pay off debt with a single blade, for example, if you're talking about collections. Finally, the Intelligent Automation point is about augmenting humans with bots, automating mundane steps, so a bit like robotic process automation, but sometimes even more intelligent than that.
The final point is about how volumes are changing. Therefore, we need to be able to fluctuate capacity up or down. Also, prepare for long term structural shifts. If you are running a large ATM estate or if you're big in cash handling, how are you going to manage if those transactions are going down? Can you repurpose that physical infrastructure for something else? Maybe turn ATMs into cash accepting kiosks. Whatever it might be. How could you support different different customers, different segments in a different way? How do you keep lights on remotely? A lot of us move to suddenly working from home environments, many of us may have been more used to working from home, but if you're in the regulated industry, where you have to demonstrate compliance to meet certain regulatory criteria, it's something that it's really hard to do on your own. Working with partners can certainly help.
I think that's probably what I had for my section. We'll be happy to take questions at the end of Jim's presentation, but now over to you, Jim.
All right. Appreciate that, Zil. My portion of the presentation, I built this to focus a little bit more on the merchant processor space and much of what I'm going to be presenting here can have a slight US focus but other aspects of it certainly apply internationally and some of the content covers the globe as well too.
We've certainly hit peculiar bumps in the road here with 2020, right? Most of us had a relatively stapled January. February got a little bit squirrely. In March we saw an incredible shut down of a lot of the business and industry. Everything has predominantly moved online, as we had to close all our storefronts. As Zil was mentioning, telecommuting became the predominant method of staying in business and moving forward.
Now we're entering an era where around the globe, countries are variously looking to open up to cautiously figure out how we can open up and start reopening our economies again.
To that point, it's not a challenge on the internet to find all sorts of various stories about this kind of capability. Really, the challenge is to find the information that we need that's actually meaningful to our business and to what we need to do to strive and grow our corporations as we move forward.
Now, most of our clients do business across multiple states, even process payments globally. They're not just within single states or territories and regions, but even do commerce across the globe. I'm going to focus a bit on that too as we look to try to determine what we need to be doing and what customers are looking at the same move forward here.
What I found is that through all the relevant news and all the information that's available out there, that corporations and businesses are really trying to focus on the strategy they need to reopen. How do they reopen? How is their business going to be changing as they begin to look at reports to determine? How or where is the growth actually happening? Which pockets are actually opening? There's certain risks that areas may even have to shut down again. It’s going to be a bumpy road.
Historically, if you look at pandemics that we've gone throughout history, we almost always have a second wave of some sort. There seems to be a lot of drama in the press about will it be worse than the first, etc. Sensationalism aside, we've generally always had situations where we've looked to reopen. Some people have looked at it historically and said, we did it too early. There's a way, some sort of crests rise again before things start to get back to normal.
The main information that's out there. We have a lot of information that's coming down from your federal governments or top governments. Then we have information that's much more local. The drive here particularly for merchants, and for our customers is going to be much more bottom up than top down. We're going to have to look at information far more granularly and look at things within sight: states, cities, counties, rather than across countries.
Now, roll ups, and views of that information are pertinent and certainly so are regulations and policies. What we've generally seen is that the laws, rules, regulations, the guidelines, the recommendations there's a plethora of information out there about how you should open and what safety concerns we should be addressing. How should we be wiping down and cleaning this information. All these rules and regs and guidelines really boil down to needing to take place at the local locations rather than your cities and states; rather than at your federal or global level.
There are quite a few folks out there that I've noticed have been pulling together decent information. It's not difficult or challenging to get on the internet and read the stories and find news on the various topics, but to find meaningful, relevant information always takes a little bit step further interrogation. What I found is that a lot of the processors, the ISOs, the PSPs, the payment processors, and even certain merchant retail property management companies have been doing a fairly decent job of pulling together this information for the merchants. I suspect many of you are already looking open or engaged. That's where you're driving to get your information.
I do want to point out that a lot of the merchant processors have some very valuable statistical information, where they're able to delve down and look at very granular levels of information as businesses reopen. That's going to become very critical as we move forward here. I believe that it's going to be important to still have that historical view and look at things from the historical perspective. The look of things across that we've done for a year, year upon year, year after year, but we're going to be looking at information quite a bit differently.
Are we really open for business? There's been a lot of discussion. What does open mean? It's not really the dictionary definition of open.
What it boils down to is that most companies would argue, I've always been open. I've always been available online for internet purchases and delivery. Now that I'm beginning to reopen my storefronts, well, it's more simply being a definition of not being closed than rather business as usual. Generally speaking, it's not a matter of business as usual by any stretch of the imagination. The real question becomes is: what is going to be business as usual? How am I going to be able to get there as quickly and as profitably as possible?
Some of the questions where we've been engaged with a lot of our merchants and merchant processors, some of the queries that have been coming up is are folks really still comparing this year's or this month's activity to last year's activity? The answer to that is absolutely, yes. It is still meaningful.
I found a stat recently where United Airlines had said that their June bookings were down 85% and they're July is down 75%. That's still a terrible number. It's very painful to hear, but it does provide insight to some degree or level of rebounding. More and more, what we're finding is that merchants begin to open their business to being much more tactical than that. They need access to information and are able to slice and dice this information much more granular than they have before.
Some of the questions they're having are “How do I staff? Am I going to have new peak hours? What are those hours?” We have folks now that aren't working in business parks. The vast majority of Americans and people around the world may still be telecommuting. The locations where people go to shop and eat are going to be drastically different stil, before we get back to that business as usual where we're fully open.
As such, you're going to see spending in different areas and different zip codes in different zones. Where things are going to open and money and transactions will be flowing, but it's going to look quite different than it did today. We're going to see questions and queries of things “were today's sales total’s a fluke, whether that was a good day or a bad day. How is that indicative of my business? How did they do it in any particular store within certain areas or cities compared to other cities?” And, frankly, even consortium type data. How am I doing compared against my peers or others in my industry with it, or inside the same cities or areas or states. The level of granularity of information we're looking at is quite different. It is going to open then rely on your typical business patterns and the typical queries that people would be facing.
Where we come into play with integrated research is our ability to provide the analytics on all this and the couple of this information with your KYC or know your customer data. We can really help you complement how you take your known customer information and complement that with all the patterns and sales that you're seeing through all your terminals and storefront activity.
We are seeing an increase in the number of queries just across the front right there's many more people wanting visibility into what these stores and these patterns are right trying to sort through the tea leaves and find patterns and understand exactly where they can forecast or better be able to forecast the growth and the reopening of their economies. Again, many of our customers are publicly traded companies and so, the ability to forecast and to understand the new patterns becomes very, very critical into not only the market facing representation, but for the room profitability and growth as well too.
We are seeing a little bit of reduction in the annual to quarterly release queries because we think that there's just more hands on focus of how storefronts reopen. I do think that we're going to still see that comparative analysis like I had mentioned with United and others too. I think shareholders and others are going to want to understand what was the full impact of that. Some of that is going to be sensationalist news type sound bites, but the level of granularity runs your business and that factual representation and being able to forecast in your position is going to be absolutely critical.
We are, too, seeing an increase in requests for consortium analytics. Merchants want to know well, how am I doing compared to others in my town in my city. How am I doing across the different states? We are going to understand more of this bottom-up type of querying and knowledge. It's going to require much more granular activity of understanding in a transaction and patterns down to things like postal codes as granular as we can find as possible.
There are all sorts of additional demographic information too. We're finding that customers are or some merchants are actually understanding their audience, the demographics of their audience and then understanding where the shoppers are. Where is the spent? Are we going to see more of the teenagers spend, because they're less liable to suffer the impacts of the pandemic? If they have income and they are out shopping, maybe we need to cater more towards that audience. To that extent, we're beginning to see much more analysis being done around the Generation X, Y, and Z.
Merchants, in particular storefronts, and particularly more, perhaps in retail than other businesses, where you can make those types of adjustments and you can make those types of changes. Finding the shoppers, finding the folks that are out, and then again, being able to provide better forecasting with that kind of capabilities.
This kind of ties back into Zil's debts that he presented in great detail. I found a different analysis that I thought was fairly interesting. This is statistics that were done by a payment partner processor of ours. What I found was unique about this is that they had actually done this survey and this analysis prior to COVID being released. They gathered data from 2019 and pulled it together and then published this result in January. What I think is interesting about this is going to be two bits. One the value of the data, as I'll present it here in a bit, but then also the fact that it's really a snapshot of where we felt we were immediately before the virus hitting. It's going to be interesting to come back in a year or two and actually see once we've understood what the new patterns are, and what we see with these new shopping peaks and hours are and how the economy does begin to reopen, what sort of impacts that had historically compared to the predictions that were made here.
In North America, one way that they've looked at the analysis in 2019 and forecasting of the 2023, you see in North America that Zil was pointing out, cash is by far the almost the least common method of payment. The real battle and the discussion in the marketplaces is going to be how everything becomes digital on electronic payments. The vast majority of payments and retail payments in North America are card-based payments. No surprise there. What I do think is surprising. What I do think is going to change quite a bit here is the adoption of the digital wallets.
To see that there is only a 4% increase between now and 2023, When we come back and look at this in the next year or two we see that after the COVID impact that the digital space and even the cash are going to be likely the most impacted. Card being the largest component out there for North America will likely stay relatively flat. In EMEA, you start to see patterns initially here that just show that look, we are not the same across the globe. Cash and card are almost equal, generally speaking throughout Europe. Their digital wallet adoption is looking to be in line with the amount of activity in North America.
In Latin America, digital wallets are slightly less. The opportunity for digital wallets over there, the demand has the most potential growth. Cards and cash again are almost equal. There’s been plenty of studies that have been done over the cost of cash, the risk of cash, getting the cash to the banks, the cost of lockboxes. Much of this has been done and reported on in North America for decades now. Eventually you're going to see in Latin American an increase likely more so in digital wallets than in cards. Because by the time you begin to invest and look at the opportunity that's out there, you're going to see that the consumers with their mobile phones and the ability to conduct payments that way, are likely going to be able to exceed the costs and capability of the banks rolling out all the different cards and refreshing all the cards with all the various technologies. I think there's gonna be a tremendous amount of potential growth there.
Asia is clearly radically different. It's almost 33% across the board. One-third digital wallets, one-third cash, one-third through cards, but the digital wallets are leading the pack. This really ties back to Zil’s presentation. Earlier he was talking about all the digital currencies that are being invested in internationally. I always say, you want to follow the spend. Look at where the governments are spending the money. Where's the IT spend going and in the investment going within these countries and within the payment space? Because that's going to be the act of where you're going to see the most growth and the most potential.
In North America in the US, we tend to be the laggards in trying to roll out that digital technology. I'll even go out on a limb and say that I think that we're going to see a huge push here for the US to take leaps and bounds forwards. We look slightly here beyond just the retail payments base, the consumer to business payment, and you start talking about business-to-business payments and the advantages that some of those international communities are going to have some of their faster payment initiatives to be able to reconcile and then move money faster. Those international companies are going to have strategic advantages over corporations and banks within the United States. The United States is going to have to make a concerted effort to catch up with some of the foreign countries.
Otherwise, our businesses run the risk of falling behind and being less competitive than some of the others who are able to take advantage of the investment. The foreign entities have taken with their digital currencies with their ability to move and settle money even faster. That goes well beyond the consumer-to-business space.
Going back to the consumer-to-business space, what we do see is the fact that contactless payments and digital payments are simple. They're secure, they're fast, they're cleaner than cash. There are a number of NFC terminals that are available out in the field today. They're going Double by 2022. We may see the COVID, that's a conservative estimate, that we're going to see far more terminals in the field that already have the capability that are going to be turned on and enabled by the merchants. You're going to see adoptions of new devices and new registers able to handle raises. They're going to be able to be updated, and to handle all these new currencies and new payment capabilities that consumers are likely going to want to use.
It's been a lot of talk around Apple Pay and Google pay and Samsung Pay and the digital wallet space. Statistically, they still look relatively low, but you've got to remember that we're talking about billions and billions of dollars. One percentage of that business is still billions of dollars of money that's being moved through those avenues and no merchant ever wants to be able to turn down business because of a lack of ability to accept a payment or to have a payment relationship with the consumer. It does put challenges in front of merchants that yes, the payment space is going to continue to evolve. It is going to involve new technology and it is going to require refreshes with the terminals and the payment capabilities through your PSPs and your ISOs. That's the sort of the nature of the beast in the business that we're in. It provides for a fantastic, capitalistic environment where the best can survive and the competitive pressures to adapt and be able to handle all of those different payment methods are going to come to the forefront.
We're going to see continued investment renting the global expansions of wallets and currencies as well. That's going to largely take place throughout the rest of the world rather than North America and South America, but eventually it is coming. It's out there and I do think it's inevitable. For a while, we were talking about the technologies of blockchain. It's a solution looking for a problem. Now, we're getting to the point where it says no these technologies and these capabilities do have their place and they're going to work their way into the system.
We're also going to inevitably see the rollout of the mass deployments of mobile phones, the watches, the wearables, and NFC enabled pause terminals and other devices, dongles, etc, you're going to still continue to see technology evolve. You're going to be able to pay for the internet of things where different appliances and devices that we have to be able to initiate payments and conduct payments are going to become more and more common. We already have the rollout of all of these voice commands capabilities in our home where we can speak to Siri in different boxes and appliances, etc, to order goods and purchase goods. None of that technology seems to be slowing down. We're gonna have different payments and different capabilities with different devices here that are even beyond what we could comprehend in this at this time.
To tie it all back to what we do here at Integrated Research, we're providing you with the visibility, with the analytics to take that information that you have on all your payment transactions. Not only are we providing you with the ability to keep those systems up and to troubleshoot any issues you have in your payments, but the analytics, the data warehousing of these transactions, and to be able to help you better forecast and understand your businesses as you grow and move forward here. That's the area that's been most critical to us here. That's what we've been focusing on now. The ability to automate your systems to keep them up to have the least amount of human and operational impacts and lower your operational costs of performing those payments is critical to the processors, to the banks, to their profitability. It's largely a numbers game, it is a transaction volume game. On the retail banking side, particularly with debit credit card transactions. The evolution of some of those businesses can be cannibalized and move over to digital payments as its general focus, where you'll find all the brands and all the payment partners are wanting to look and analyze that information. In Integrated Research, we're providing the capabilities to drill down into that provide the business entities with that information of where the transactions are moving, where the business is moving. How does this match into their profitability, so that even as transaction volumes may decrease, you may actually be able to find pockets where you were actually more profitable to drive businesses. Improve your bottom line by doing even less business. There are certainly instances in cases of that.
With that, we’d like to wrap up here with a little bit about Integrated Research. We have been around at Integrated Research, as long as I've been in payments since 1987. We have many of the top processors across the United States and across the globe. We have over thousands of customers, we are a publicly traded company on the Australian Stock Exchange. Very financially sound we better are, even with the COVID epidemics here. We've had a fantastic 2019, one of our better years on record. And so the growth the investment that we've been able to make and continue to provide in our products or applications has me very excited about the future. With that, I'm gonna turn it back to you Janae to see what kind of questions that may have been submitted.
Awesome! Thank you. Great presentation. Thank you both for sharing your insights. I also wanted to just thank everyone who joined us live or on demand today. Just a couple of quick reminders before we get to Q&A. Zil and Jim's contact information can be found on the slide. We encourage you to follow up with any questions, thoughts or experiences on the topic. Again, the slides are available for download and the on-demand webinar will be available soon. Lastly, we would just greatly appreciate it if you could rate this webinar to help us improve for next time. It looks like we have a couple of questions that have come through. The first question is, which of the various contact free solutions do you think will take off first?
I suppose I introduced the term so I should probably take that question then, but Jim would welcome your thoughts as well.
Sure, no worries.
Well, I think probably the most natural one is the one that already exists in the market today. So it's all the different wallets that exist on phones, the likes of Apple Pay and Google Pay because as I mentioned, they do offer that authenticated experience. For example, in the UK if you have a contactless limit today of £25 or £30, which has been raised now, during the pandemic. Historically, there's always been a limit, whereas with these newer wallets, you don't. There is no limit so you can transact, and I think we'll see more. That will definitely drive and I think to the extent that with what Jim was saying. He was expecting to see more of those digital wallet transactions. I completely agree. I think we'll see far more rapid migration to those that wanted adoption.
The rest of it is going to depend on the industry's ability to invest. That's a much harder crystal ball to say at this stage. Some of the initiatives are in flight like the ones like API. Obviously, it is a big commitment for the industry across Europe. Things like QR codes could probably launch quicker but still requires the rollout across merchants in the industry this year. It certainly needs coordination and then management.
Probably, to add into that is the case that a lot of it just boils back to the fundamentals of risk and opportunity. The digital wallets and those payments have the capability to extend way beyond what we typically consider credit card or debit card type purchases. A lot of financial institutions are looking at that from both the risk and opportunity side to determine how they roll out these new currencies and what markets and areas they want to focus on first.
Awesome and we are at the top of the hour. If we were unable to answer your question, we will follow up with you individually after the webinar. Thanks again, everybody for attending. Have a great day.
Thanks, everyone. Cheers.