What to Expect from Payment Trends in 2021 and Beyond
Rapid changes are taking place in the banking and payment processing sector. These changes are also being witnessed in the information technology domain, and many companies are rushing to adopt them.
1. Increased Demand for Frictionless Experiences
What does it mean to offer a frictionless customer experience? When it comes to payments, a frictionless experience minimizes the barriers involved in the checkout process for both online and offline hubs.
A streamlined checkout process eliminates or cuts down waiting time by reducing the number of steps needed to make a purchase. When it comes to making a payment, a frictionless experience includes convenient choices like mobile payments, one-click payments, auto-renew subscriptions, contactless card payments, digital wallets, and other invisible payment methods.
Thanks to the ubiquity of the internet and easy access to smartphones, markets around the world are gearing up for an explosion in digital payments. COVID-19 has accelerated the adoption of this method as retailers increasingly turn to contactless payments. According to The Futurist Group study, about 38% of consumers now perceive contactless as a basic feature of payments. The Juniper Research report says that half a world population will use mobile wallets by 2024.
While these were, at one point, alternative payment methods, they are quickly becoming consumers’ preferred means of transacting.
How DataArt Can Help
When it comes to integrating multiple payment channels, you need a reliable software partner like DataArt. We are trusted by companies like Stripe and have vast experience setting up e-wallets and contactless payment channels.
Recently, DataArt integrated 10 different global payment gateways for an online retailer in the U.K. All of the channels were mobile-friendly, and each was set up differently with regard to PCI, GDPR, and DSS compliance. But they were all unified under a single system, allowing the merchant to operate on a global scale.
DataArt has also built mobile-supported apps for governments, public services, and non-government organizations, so they can make or receive payments securely. We have also been involved in building platforms that reward authors with either fiat or digital currency through smart contracts.
2. Worldwide Adoption of Real-Time Payments
Merchants around the world are increasingly adopting real-time payments (RTP). Their efficiency enables merchants, buyers, and individuals to send and receive money in seconds. But what is the driving force behind real-time payments? The tremendous changes taking place in RTP systems are rooted in the proliferation of smartphones, P2P apps, social pay, digital currencies, biometrics, and real-time settlement systems. The need to change and meet the growing demands of customers is the real motive behind the adoption of immediate payments. Competition from new, aggressive players with fast-growing business models has also contributed to the growth of real-time payments. Other factors include merchant expectations, regulatory pressure, and globalization.
Once in place, RTP will help treasuries manage working capital and shorten the time it takes to recognize a receivable. Push transactions will enable anyone to authorize payment securely. Additionally, immediate payments will improve data posting and management of processes resulting in lower operational costs.
How DataArt Can Help
DataArt developed an ISO 20022-compliant payment messaging system for a leading supply chain finance solutions provider. The client’s customer base was growing, and many new customers preferred real-time payments.
The project was completed in six months, and, after the new system was implemented, the client’s customer base grew by 5%. The critical process automation of the RTP system reduced operational costs and minimized the risk of downtime, as well. Find more details about this project, “Cash Management Solution ISO 20022 Adoption”.
3. AI and Machine Learning Gain Momentum
If your company has several payment integrations, it likely stands to benefit from artificial intelligence (AI) and machine learning (ML). According to a publication from IDC, financial companies will spend around $11 billion on AI and ML in 2020. So, the million-dollar question is: are you ready to refine your payment processors by deploying these intelligent technologies?
Here are the few ways businesses are utilizing the power of AI and machine learning:
AI-based fraud detection is becoming a basic need for every financial entity. Currently, fraud rates remain high, particularly due to the growth of online transactions. According to research from Experian, fraud rates rose during the COVID-19 lockdown by 33% as hackers sought to benefit from the pandemic’s disruption. At the start of the lockdown, many companies moved their operations online and went cashless. Those with vulnerable security walls exposed themselves to fraudsters, losing millions of dollars in the process.
For financial companies, the best systems with the highest-grade security have AI capabilities. Through machine learning, your applications will be able to detect and block any potential security breaches. Since the systems are intelligent, they can adjust themselves in real-time, providing active fraud detection.
Cheaper customer service
AI can have a particularly large impact on customer care. Companies are often inundated by transactions, leading customers to inquire about delays or other pressing issues. More than ever, customers expect instant responses to their questions. Chatbots can help tackle basic questions and provide customers with instantaneous responses. In fact, most of your company’s competitors are likely using chatbots to streamline customer support.
According to Juniper Research, chatbots can save banks and other payment processing companies billions of dollars by taking over so many costly operations. Companies can also save millions of hours on dispute resolution. AI and machine learning can also provide invaluable customer care duties like personalized product information, customer feedback, intelligent call rerouting, process automation, and high-impact customer analytics.
Facilitating digital transformation
AI is a game-changer for digital systems by making them smarter, faster, and more effective. Payment processors can rely on AI and machine learning to analyze huge data pools and unearth useful insights and other profit-generating patterns (personalized services, targeting, and loan eligibility). Reward systems, inventory processes, and sales optimization will also receive a boost through AI inclusion.
Every eCommerce hub is currently working to integrate multiple payment channels to increase client satisfaction rates. Unfortunately, creating a new payment system and maintaining several existing systems can prove to be quite costly. There are also many blind spots involved in adding new payment methods.
Payment orchestration allows companies to avoid guessing games. With an orchestration strategy, companies know what it would take them to integrate a certain payment method. An AI-powered payment orchestration layer also provides analytics on how chargebacks, fraud, and transaction success rates change in real-time. Companies can then use this information to decide how to process payments efficiently.
How DataArt Can Help
DataArt is highly experienced when it comes to building AI and ML powered systems. We can create or replace outdated fraud detection systems with next-generation solutions. Your company can also request custom chatbots, predictive systems, and other tools that improve business processes.
For one of the ACH payment processors, DataArt developed a bespoke anti-fraud system utilizing AI/ML techniques, e.g. supervised learning, unsupervised earning, and time-series. Advanced analytics implemented by DataArt helped the client significantly reduce fraud losses.
4. Cloud Migration to Suit Tomorrow
Cloud migration is ubiquitous, and those with legacy systems are modernizing them in order to reap the benefits of cloud services. Today, most banks and other financial firms have efficient legacy systems. But, this may change soon. By adopting cloud services, payment processors will be able to store, access, and process data over the internet, not on physical devices. There are four main reasons why cloud technology is enticing: agility, scalability, low operational costs, and better security.
Processing payments via cloud systems allow customers to transact through their mobile phones. Furthermore, there is an added flexibility of working hand-in-hand with EFTPOS systems that allow integration services like Google Pay, Apple Pay, Alipay, and other similar payment channels. Many financial entities are moving over to the cloud in a bid to beef up security. While still a new option, cloud services have proved to offer robust security which makes it possible for payment processors to get the green light from PCI and other regulators.
Data is a company’s most valuable asset. In order to leverage its full potential, you need it on the cloud, so your other systems can easily access it. But there are a few things to note before jumping on the cloud train. First, figure out whether private, hybrid, community, or public cloud services best match your company’s needs. Then, develop a migration strategy for critical systems that need a revamp. Examples of companies that have moved a bigger chunk of their operations to the cloud include Deutsche Bank, Credit Suisse, Barclays, and HSBC.
How DataArt Can Help
DataArt can help with infrastructure migration to the cloud (including re-engineering legacy systems) and other cloud-related services. One of our latest projects involved migrating applications to the cloud for an Asia-based financial service provider. The migration made the whole business scalable and more flexible that eventually enabled the company to expand to other regions. Find a detailed project story about Cloud Migration and Payments Integration.
5. Open Banking Accelerating Innovation
Open banking is now a global trend, which is expected to improve in the coming years. Traditional banking can no longer serve the needs of the digitized world. Tapping into open banking opens a company up to limitless opportunities. According to research from Accenture, 30% of small businesses and 40% of large corporate enterprises use open banking. The same report indicated that this trend is expected to boost organic growth by 10% over the next 3-5 years.
However, the process will not be easy. Some European banks have shown resistance to adopting open banking, which could slow down its progress. Nevertheless, those bold enough to see the benefits of the change stand to gain. So how will open banking impact payment-related transactions? First, open banking fosters real-time credit transfers. This can help businesses ship products right away. Companies will have full access to customer information and can customize offers for them while being able to safely manage risks. Open banking is centered on an API, which can make it easier to integrate with other platforms. This can spur a massive digital transformation resulting in smooth and faster processing times at a lower cost.
How DataArt Can Help
Financial companies interested in open banking need to first update their existing legacy systems. DataArt has a team of skilled software developers that can modernize old systems to work with the latest tools. We can also set up AI-powered solutions, consolidate disparate data, and create cloud service solutions that offer seamless customer journeys.
6. COVID-19 Accelerates Digital Payments Usage
The COVID-19 pandemic marketed a tipping point for the cashless society. The payment industry saw a sharp decline in the use of cash as contactless payments and IoT payments exploded. Prior to global lockdowns earlier this year, digital currencies were growing quickly. In the early months of 2020, over $4.4 million worth of digital payments were transacted. That is a 14% increase from the previous year, according to Statista.
So what’s the driving force? Before the pandemic, the growth of eCommerce and increased use of mobile and desktop devices were the core growth factors. But when COVID-19 became a serious issue, regulators recommended a shift to cashless systems to curb the spread of the virus.
How can your company benefit from this paradigm shift?
- Develop your contactless payment systems—many people fear being infected and prefer touchless payment systems over contact and cash methods. And now that many people already embrace digital transactions, the trend is likely to catch on quickly.
- Expand your digital wallet solutions—since every business will expand its digital money offerings, those with more wallet solutions will have lower cart abandonment rates. Make sure each wallet offers convenient features like reporting, transaction monitoring, digital IDs, and savings goals.
- Stabilize digital currencies — despite the growth of digital currencies, most still struggle to position themselves as a universal payment system. This is why most people look to governments to maintain national reserves. Therefore, to stabilize a digital currency, you might want to consider swap lines offered by the US Federal Reserve to other global central banks.
- Ration cash—slowly start easing away from cash transactions as your digital currency programs pick up speed.
Implementing digital currency platforms will not be an easy task. Banks and payment providers must develop innovative strategies that put them a few steps ahead of their competitors. Curious to know how the technology landscape will look like after the pandemic? Check out this post.
How DataArt Can Help
DataArt can help by creating smart contracts, blockchains, and modernizing or re-engineer your existing tech stack, so it can accommodate the latest payment integrations.
7. Digital Currency Era Approaching
The digital currency era is slowly approaching. With major fiat currencies existing in digital form, you can now send, receive money or pay through credit cards, contactless portal, and mobile devices. Many parts of the world are already going cashless. Well-known financial brands and governments are already contemplating creating their own cryptocurrencies and other digital currencies. Recently, VISA filed a patent to create its own digital currency with Ethereum as its core blockchain. Other global corporations working toward digital currencies include Facebook, JPMorgan Chase, Walmart, Amazon, Tencent, and Google. Central banks are also clamoring to develop their own digital currencies. The Bank of Japan has plans for a digital yen, while China is thinking of a digital yuan. But at the moment, no central bank has a working central bank digital currency (CBDC).
There are many digital currencies that have already broken ground and are widely recognized. These include Bitcoin, Ethereum, Ripple, and many more. Some of these cryptocurrencies (especially Bitcoin) are accepted in places like Starbucks, Shopify, Overstock, and others. Companies that are already launching their own currencies are likely to attract a new client base who want to make or receive their payments through digital currencies.
How DataArt Can Help
As a one-stop-shop for all software needs, DataArt is well known and well-placed to handle the intricacies involved in developing a digital currency. We can create a cryptocurrency exchange platform, a blockchain, and many other services that pertain to digital money.
For one of its clients, DataArt implemented an institutional contract management platform based on Distributed Ledger Technology (DLT).
There are a lot of changes happening in the payments world. Some of these changes, like digital currencies, are already gaining ground. By starting early, you can outshine your competitors and emerge as a trusted business that caters to the changing needs of its customers.
If you are not sure what systems or software programs are needed to give your company a competitive edge, you can contact a reliable software provider like DataArt. Once we take a look at your firm’s tech stack, we can advise you what systems are outdated and what is the best way to modernize them.