By Heather Ribbans, Head of Partnership Sales, Railsbank.
The financial services sector is entering another decade of massive transformation. With a new wave of fintechs coming, we are seeing a multitude of alternative payment trends such as open banking, crypto, mobile payments and wearables embedded into a variety of industry sectors, whether this is to streamline operational processes, enhance an existing offering or introduce a new payment product, gaining momentum and traction.
The COVID-19 pandemic has had probably one of the biggest impacts we have ever witnessed on the payments space, accelerating the transition towards a “fully” digital payments landscape. In June 2019, a UK Finance report suggested that ‘only’ 10% of UK adults were choosing to live in a predominantly “cashless” way. In early 2021, after 9 months of lockdowns, COVID-19 related restrictions and social distancing measures, YouGov reported that 7 in 10 Brits do indeed favour contactless payments to cash. According to UK Finance, the total value of contactless transactions between November 2019 and November 2020 increased by 44%.
As digital finance goes mainstream and the idea of a cashless society becomes reality, the question we now need to focus on is the following: what new great technologies will become ubiquitous in the payment field over the next decade? Here below, I would like to focus on 6 key developments:
- Optimised reality: Artificial Intelligence (AI) will surely have a key role to play with the digital transformation of payments and finance. As a late 2020 McKinsey Insight highlighted, banks are already expanding the use of AI technologies to improve customer experiences and back-office processes. From biometrics (voice, video, print) to authenticate and authorise payments to smile-to-pay facial scanning to initiate transactions; from machine learning to detect fraud patterns to virtual tools that provide verification and pre-qualification for things such as car loans, AI is set to transform banking payment services in front of customers’ eyes.
- Space payments: The progress towards space tourism raises interesting questions especially in the payments space as to what an interstellar transaction could look like. Practical work on space payments is already underway. Four years ago, First Data and Nationwide Building Society completed the first contactless transaction at 100,000 feet above Earth’s surface. On Earth, authorising transactions, checking fraud happens within a blink of an eye. However, completing a transaction between Earth and — let’s say — Mars could take up to 45 minutes. Will blockchain, which is showing us how to fix cross-border payments, be the answer to ensuring that interstellar transactions complete in the same timeframe as on planet earth?
- Crypto: 2008 saw the invention of Bitcoin. Since then, cryptocurrencies’ usage has increased exponentially. According to statistics, the number of users of various cryptocurrencies has grown by 66 million between 2018 and the last quarter of 2020. The rising crypto market is not only attracting retail investors, but also traditional financial institutions and large corporation that are looking to profit from the emerging trend of digital assets. Since Facebook’s idea of launching Libra (a project now called Diem), cryptocurrencies have come under increased scrutiny from governments and regulatory bodies. With daily cryptocurrency transactions rapidly rising, the future of money and finance looks strongly intertwined with this new technology.
- Super Apps: Many large companies, from Walmart to Amazon, are in a race to build the next ‘Super App’. Especially in East Asia, where the ‘Super App’ concept had gained popularity, super apps are created in a way where people never have to leave them. Think of WeChat’s virtual universe: you can browse the products, make purchases, make payments and complete the whole cycle within the same app. Whilst in the West there is still a certain degree of reluctance towards the adoption of super apps, fintech can come to the rescue. Open banking technology and partnerships between big tech firms and incumbent banks could lead to the bundling of services.
- Near-Field-Communication (NFC)-powered payments: The global NFC payments market is estimated to surpass $10.4 billion mark by 2026 growing at an estimated compound annual growth rate of more than 14.5% during the forecast period 2021 to 2026. This trend should not surprise us. Consumers and merchants alike want devices that can be used for multiple purposes and NFC technology enable them to perform fast, easy, secure and convenient transactions.
- Dynamic CVVs: Cybercrime is a big concern for all organization and especially in payments where the security of payment details plays a vital role. Verification of online payments such as 3DS is applied across most cards’ programmes. On top of this, and perhaps the most innovative of all these programmes is MuchBetters’ dynamic CVV. Instead of having the 3-digit CVV on the reverse of your card the MuchBetter CVV is included in the app to make it extra secure, in addition to this the dynamic CVV changes each time you log into the app meaning your number is constantly changing. Technologies like these, will enable us to find new and innovative ways of preventing fraud and keeping accounts as secure as possible.
As technology pushes payments and finance towards new heights and cashless becomes a real feature of our day-to-day lives, what are the key trends, technologies, and innovations that you think will shape the financial services sector over the next decade?
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