The financial services sector is undergoing a massive transformation, and one area which is reporting accelerated growth is payment systems. We are currently witnessing a groundswell of convenient alternative payment systems, such as open banking, distributed ledger tools, e-wallets, Apple Pay, Yandex, mobile payments, and prepaid cards.
These payment models owe their sudden popularity to their convenience, speed and easy functionality. Furthermore, they cater to customers’ global needs, allowing users to make purchases online, as well as send, receive, and withdraw money, all within a short time frame.
To understand the way this market is adapting, let’s take a look at the core trends transforming the future of global payment systems — as foretold by global payment experts.
Payment Trend #1: AI and ML as Part of Payment Systems
Artificial intelligence (AI) and machine learning (ML) capitalize on data — the most valuable resource any company can hold right now. Financial companies have been using these technologies for process automation and fraud detection, but their true capability extends far beyond these simple functions.
AI-embedded tools can read customers’ operations history, including their buying and spending habits, and predict their future activity. These tools can then suggest to each user an alternative payment method, for example cards with reduced fees or rates, or their preferred form of payment. This is just one example of how AI-enabled systems can assist and direct payment activities.
AI and ML are also extremely reliable in customer service, thanks to their ability to parse petabytes of data; this can improve a user’s experience, which directly impacts revenue.
Your company may already be using AI and ML to streamline internal processes. Future applications of AI will continue to revolve around customer experience, sales, product recommendation, and communication.
REAL-WORLD USE CASES FOR THIS PAYMENT TREND
- Bank of America uses «Erica» (derived from «America»), a chatbot that provides balance notifications, report updates, money-saving tips, and other simple customer services.
- Wells Fargo uses Predictive Banking, an AI-based smartphone app to improve customers’ personal finances. This tool handles recurring bill payments, travel plan alerts, money-saving alerts, and over 50 other rudimentary functions.
THE FUTURE OF PAYMENTS: HOW THIS TREND WILL SHAPE THE INDUSTRY
Voice-activated payments are on the horizon thanks to AI and ML. Currently, voice serves as part of payment processing systems where biometric security and smart assistant verification are required. But this area is expected to grow with the development of this technology.
AI also plays a huge role in RegTech. Since regulators’ guidelines are constantly in flux, an AI tool which reads and disseminates the salient changes is incredibly useful. It helps your company to operate within the law and avoid non-compliance, without the manpower cost normally associated with this cumbersome task.
If you’d like to widen the functionality of your AI/ML algorithms, why not ask DataArt for some help? Our global software engineering firm has 23 years of AI/ML experience, and is ready to assist you. Just drop us a line!
Payment Trend #2: Seamless and Secure Payments are a Priority
There are still many companies — both online and offline — that require customers to file paperwork and complete long-winded forms before they can inquire, buy, or sell. This barrier to entry is a deterrent for many, especially when there exist financial providers who can provide more seamless and safer experiences.
Cart abandonment statistics show that many buyers fail to check out because of payment issues. For instance, when they have to create an account before calculating their total, and then proceed through a complicated snaking checkout process.
Simplifying payment channels is a must to ensure customer retention. This needn’t be as complicated as it sounds — it simply requires harnessing software expertise to include embedded payments that streamline the payment process.
REAL-WORLD USE CASES FOR THIS PAYMENT TREND
- Uber is a perfect example of a company excelling because of its superior customer experience. Uber uses a frictionless payment system that totally eliminates the checkout process. Charges are automatically deducted from the user’s credit card at the end of their ride.
- Bank of America also offers unified service. Their omnichannel experience allows users to deposit checks, schedule appointments, and pay monthly bills all in one.
- Chime, the leading digital-only bank in the US, offers everything through their website and mobile apps. They also lack the steep fees and rigid structures of traditional banks.
THE FUTURE OF PAYMENTS: HOW THIS TREND WILL SHAPE THE INDUSTRY
Multi-channel delivery will become the norm as we move forward with service integrations. Companies will need to invest in sophisticated data analytics and big data tools that offer reliable predictions about customer behavior, so they can tailor custom solutions and recommendations. Brands will offer seamless experiences through APIs, IoT, open banking, and omnichannel platforms, all to meet the ever-growing needs of their clients.
Payment Trend #3: Payment Channels in Strange Places
People seek the most straight-forward, simplest route to completing their tasks, and this trend drives invention. As payment channels become easier to embed in apps and other APIs, this driving force is noticeable almost anywhere.
For instance, intelligent cars now have integrated payment systems that allow drivers to pay for gas, parking, and drive-throughs, without touching anything. But for connected devices to actually communicate with each other, you need to include IoT as an integral part of your technology stack.
REAL-WORLD USE CASES FOR THIS PAYMENT TREND
- Users can now send and receive money through Facebook Messenger, once one’s account is linked to a bank. Credit and debit cards can also be used.
- Social media used to be a place for simple interaction and marketing, but now customers are routinely exploiting social media to shop, thanks to Facebook and Instagram Checkout buttons.
THE FUTURE OF PAYMENTS: HOW THIS TREND WILL SHAPE THE INDUSTRY
In the future, banks will introduce multiple options for customers to make payments. A few examples include Pay By Text, mobile apps, virtual payments, interactive voice response, credit and debit cards, and automated clearing house payments, which do away with paper checks.
Payment Trend #4: Data Remains the Most Precious Resource
Data is (and will always be) the major resource in financial decision-making. Its uses are endless: understanding a customer’s shopping behavior and spending patterns, delivering relevant product recommendations, targeting ads, customizing user experiences, and so on. E-commerce giants like Amazon already use data to target buyers for upselling, cross-selling, and for personal recommendations. Banks and other financial bodies, though, are dragging their feet in this critical area.
Data is only as valuable as its analysis. Without robust analytic tools, you will be unable to understand customer’s habits. In short, data will help you make decisions that scale your ROI.
REAL-WORLD USE CASES FOR THIS PAYMENT TREND
- UOB in Singapore relies heavily on data analytics to manage risk. It used to take the company hours to assess each new risk, but thanks to big data this now happens instantly. They have also recently adopted AI and ML to remove customer barriers and increase productivity.
- JP Morgan is another global banking giant that uses its 150+ petabytes of data to better customer experience, calculate each customer’s lifetime value, manage credit, detect fraud, and even monitor the US economy.
THE FUTURE OF PAYMENTS: HOW THIS TREND WILL SHAPE THE INDUSTRY
In the future, banks will be able to analyze customer purchases and recommend extra products — like car insurance after a new car purchase — in a timely and appropriate fashion. Loans officers will be able to monitor those receiving large bills and propose products to lower their costs.
Data will also help companies to calculate their clients’ risk, based on previous payment history and social media comments. Most of these changes will be based on currently available data pools, so no new data gathering is required for this trend to take off.
Payment Trend #5: Mobile Commerce Expansion
According to research by Rescue Time, people spend on average over four hours on their phones each day. The stats for millennials are even higher, and will grow in 2021 and beyond.
There are countless inventions in the mobile sector which are contributing to the escalation in phone use. Facebook, Twitter, and Instagram now include ‘buy’ buttons for direct purchases via social media. Other retailers have introduced one-click checkout for a frictionless process.
In 2019 alone, the number of mobile phone app downloads reached 204 billion, and this number will only go up. Any company that streamlines their mobile services stands to gain. Financial companies, for instance, can introduce multiple mobile payment options, make their website mobile-friendly, and even introduce gamification to appeal to millennials.
REAL-WORLD USE CASES FOR THIS PAYMENT TREND
- Ally Bank is an online banking solution that lets you send and receive money, transfer funds between banks, pay bills, deposit checks, and organize your savings plan, all through its mobile app.
- Paypal, Stripe, Payoneer, Neteller, and many other online payment platforms make it easier to buy or sell goods online. You can also send and receive money on your phone through these mediums. Visa and Mastercard also allow for easy mobile checkouts.
THE FUTURE OF PAYMENTS: HOW THIS TREND WILL SHAPE THE INDUSTRY
The future of mobile banking will exceed simply using phones to access, send, and receive money. Additional services like money management tools and financial wellness scores will become par for the course for most users.
Mobile wallets are also gaining in popularity, as they remove the inconvenience of using a physical credit card while shopping online. Digital-only banks (neobanks) will also become more of a reality as their regulatory chains loosen. An ideal example of this technology in action is Chime, a US-based online bank with over five million users.
If you want to launch reliable mobile platforms and other digital financial solutions, schedule a call with DataArt to learn how to succeed. We have experience creating blockchain-based payment apps and mobile solutions for governments and nonprofits, which can support varied sales processes, such as POS and e-wallets.
Payment Trend #6: Cross-Border Transactions
Traditionally, cross-border transactions have been slow, expensive, and time-consuming. Hard currency compounds this, especially when factoring in government regulation. In some developing countries, simply opening a bank account causes almost insurmountable difficulties. Barriers to entry have spurred inventors and businesses to find alternative methods to streamline cross-border payment systems.
Currently, the largest and most successful technology making international payments possible is the blockchain. This technology introduced Bitcoin and over 3,000 other cryptocurrencies around the world. It is essentially a shared ledger, where every transaction must be approved by a network of computers before it is recorded. Once documented, the record can no longer be edited.
The transparent and immutable nature of blockchain makes it ideal for international cashless currency. Facebook is among the global giants that wish to create virtual currencies, despite government regulations hindering them.
By engaging with digital currencies and omnichannel payments, your company will be able to cater to its customers, both locally and globally. This is one surefire way to stay relevant amongst your competition.
REAL-WORLD USE CASES FOR THIS PAYMENT TREND
- Goldman Sachs adopted blockchain not only for its security and decentralized nature, but also for its ability to support faster cross-border transactions.
- Barclays, HSBC, KB Kookmin Bank have also launched similar projects with the aim of speeding up international payments. In total, there are over 500 financial companies worldwide with either a pilot or fully functional blockchain program.
- VISA and Mastercard also play a huge role in facilitating cross-border payments through their cards, which have lower fees as well.
THE FUTURE OF PAYMENTS: HOW THIS TREND WILL SHAPE THE INDUSTRY
In the future, many nations will realize the need to create their own government-backed digital currency. Companies too will invent their own digital currencies, peer-to-peer payment platforms, and other solutions that will streamline cross-border transactions. Additionally, banks are going to improve their cross-border processes through the use of API’s, for faster real-time processing. The era of days-long transaction times has come and gone.
Payment Trend #7: Multinational Tech Companies in the Payment Domain
Google has Google Pay, Amazon — Amazon Pay, and Apple — Apple Pay. The currencies from these already massive firms may not be a threat to financial providers now, but certainly will be in the future. With every day that passes, Google is researching ways to broaden the scope and adoption of their currency. Recently, they announced a move into the world of e-commerce, allowing both offline and online businesses to create custom buttons that allow customers to place orders and pay through an app. Currently, Google Pay also offers contactless payments that streamline the checkout process.
Amazon Pay is also laboring tirelessly to provide its clients with secure, barrier-free checkouts. It incorporates Alexa Skills into its fabric to enable voice shopping. And it’s not just these two; Facebook and Apple Pay are making similar moves in this area.
REAL-WORLD USE CASES FOR THIS PAYMENT TREND
Some of the biggest tech companies in the world have their own revolutionary payment methods, including Amazon, Google, Apple, Samsung, Alibaba, and many others.
THE FUTURE OF PAYMENTS: HOW THIS TREND WILL SHAPE THE INDUSTRY
Essentially, big tech companies are looking to assume the role that credit unions and other financial companies have typically held. They are able to poach this business because of their streamlined, friction-less processes, and their zeal to push beyond the peripheries. In order to survive, banks and other small to mid-sized financial bodies will begin to emulate big tech companies by introducing customer-centric models.
Payment Trend #8: A Collaborative Future
It’s possible that your company is not going to make it alone. Competition from larger firms, buy-outs, or a lack of innovation are just some of the reasons you may not survive. The likes of Google, Amazon, and Facebook do not owe their success solely to their in-house technology — they succeed because they frequently partner with others, including fintechs, to expand their reach and influence.
For example, Amazon collaborated with Kohl to improve its efficiency. And Alphabet, the company that owns Google, comprises 200 companies. This includes mergers and acquisitions and collaborations.
Attempting to always go it alone will become increasingly difficult, and CXOs can expect many more partnerships with competitors, and on a cross-disciplinary basis.
REAL-WORLD USE CASES FOR THIS PAYMENT TREND
Some recent notable mergers and acquisitions include Fiserv and First Data, Visa and Plaid, Total System Services and Global Payments, and PayPal and iZettle.
THE FUTURE OF PAYMENTS: HOW THIS TREND WILL SHAPE THE INDUSTRY
Banks are going to need to collaborate with other banks and fintech companies in an effort to offer a wider umbrella of services. Trends that are triggering partnerships include behavior changes in customers, increased use of mobile phones, and advances in cloud computing.
If you’re in the market for collaboration, schedule a chat with DataArt’s experts, so you can effectively circumvent integration issues.
Payment Trend #9: Old Tech is a Negative
Innovation lag has brought down many companies in the past, and will continue to do so. Some that filed for bankruptcy probably never saw their demise coming — even giants like Eastman Kodak, Polaroid Corporation, and Compaq have fallen victim to stagnation. But besides the inevitable fallout of failing to remain competitive, many companies misunderstand the need to remain relevant. Insisting on using a tech that does not meet the latest standards — just because it cost the company a lot initially — can actively alienate existing clients. Retaining an old tech says just as much about your company as failing to provide a new one.
The Future of Payments Starts Now
There are a lot of disruptions happening in fintech at the moment, and they come in many forms. Although the big boys may have little to fear, mid-sized companies need to evolve quickly in order to retain and grow their customer base. Integrating the latest tech stack in processes is vital to remaining competitive.
You don’t have to be Google to implement the latest tech; a good software partner may be just what you need to stay within budget and make needed changes. DataArt is one example of a leading software engineering consultancy that can help you to create and adopt the latest inventions, including blockchain, mobile APIs, digital platforms, and other digital solutions.
Reach out to DataArt’s experts today to understand how they can help you incorporate the latest payment methods into your business.
Originally published at: https://blog.dataart.com/nine-payment-trends-disrupting-the-future-of-payments
