In the last decade, massive technological advancements have led to changes in the payments space. As we launch into a new decade, even more substantial changes are on the horizon, so let’s explore some insights into what was, what is – and what’s trending in the future.
More and more cities around the world are adopting contactless technology to deliver a faster, more seamless experience for consumers of goods and services. Signatures are now almost completely obsolete, and tap-and-go cards, mobile wallets, smart watches and wearables are all changing the payments space. Merchants are rushing to upgrade their payments hardware to meet the need to keep up.
Cash is no longer king
A study by McKinsey & Company Financial Services reveals that global cash transactions are on the decline. According to the Federal Reserve, consumers still favor cash for smaller and in-store purchases, but in general, cash is no longer the preferred payment option. Right now, in the U.S., debit cards constitute 28% of payments vs 26% of payments made with cash. With the advent of new payment options and the continued growth of digital commerce, analysts predict a further decline in cash usage over the next 5 years.
Consumers are increasingly demanding a faster, frictionless experience when shopping. Invisible payments remove physical payment methods like cash, debit and credit cards and wearables from the equation. Instead, your payment details are ‘pre-loaded’ in an app, or on file - and the payment for your purchase is taken invisibly. With this trend on the increase, more and more merchants will be exploring the potential value of moving payments to the background to improve customer experience.
The growing reliance on digital payments in all their forms, generates payments data. And as the volume of electronic payments increases, so too does the volume of data. In 2020, the trend will see extended measures implemented to collect and share threat intelligence. This means the adoption of advanced technologies, including AI and biometric authentication (fingerprint recognition) to detect and curtail the threat of fraud.
Data breaches are highly destructive to a company and a major destroyer of consumer trust. No matter the size of a business, there are major trends in digital payments happening today, and data security is critical to the survival of the business. Retailers and merchants are especially vulnerable to data exposure or theft because they are typically the first point of contact for a consumer. These first points of contact include point of sale (PoS) devices, websites, or mobile apps that must all manage and secure data.
The growth of cross-border eCommerce
In today’s connected world, consumers are no longer willing to put up with lengthy delays and overblown fees for processing cross-border payments.
This is likely to lead to further experimentation of blockchain and distributed ledger technologies, enabling financial institutions to transfer low-value payments in real-time at a fraction of the current cost.
In 2019, global eCommerce sales were valued at $826 billion, with an estimated rise to $994 billion in 2020 (+20%). This will lead to the need for public and private sectors to develop new standards and data management systems to govern the flow of money and protect consumer data.
The trends for 2020 clearly show that the payments industry is continuing to evolve. Providers must contend with new competitors, emerging technologies, regulatory challenges and increasing customer demands, as well as the ever-increasing risk of fraud.
So how to you keep up when the pace never slows and the consumer expectation for a seamless, secure experience only grows? Success depends on three factors; reliability, agility and insight. Those organizations who equip staff with the tools and skills to respond quickly to change, simplify complexity and make more informed business decisions are the ones who will prove to be future-ready.