Digital is changing the way consumers buy and transact, and thereby influencing how merchants sell their products. Modern consumers expect digital commerce experiences which are personalized, efficient, reliable, frictionless, convenient and secure. They want to engage anytime, anywhere in an omni-channel experience. This evolution of smart commerce has disrupted the payment space and has ushered in a new era of digital payments.
In Part 1 of this two-part blog post series, I’ll share observations about some of the payment industry trends:
Digital Payment Methods
Physical-world transactions are transitioning to online, providing convenience and tangible benefits to consumers. Online commerce and payments are now moving onto smartphones, easing fast, simple and secure mobile payments. Moreover, payments via wearables, automotive, and appliances are also the future. As the IoT technology evolves, the number of device options increases along with it, forcing businesses to adopt a comprehensive, multichannel payment solution.
New Digital Payment methods are emerging: contactless card to mobile, contactless payment to P2P payments, to in-app payments, to store value cards, gift cards, etc. The payment ecosystem is getting complex and big changes are also coming in instant payments, open banking, and the second Payment Services Directive (PSD2).
Rise of Mobile Wallets:
With the growing Millennial and Gen X population, there’s a recent upward trend in mobile payments with providers such as Google Pay, PayPal, Alipay, We Chat Pay, Apple Pay, Amazon Pay, Samsung Pay and Android Pay. These mobile payments, mobile wallets are currently being widely accepted by businesses of all sizes, since it helps customers steadily move away from carrying a physical card, make payments, earn loyalty points and redeem coupons. For example: mobile wallets from financial institutions, retailers like Starbucks and Walmart (offering their own digital wallets for both online and in-store shopping) and many other brands, comes with perks like promotions, cash back rewards, special offers, coupons and loyalty points.
Going forward, brands are working hard to orchestrate the right offer, loyalty and redemption experience for customers. We also see the potential out there for the offers and rewards to be more predictive; for example, brands can help a customer orchestrate the food they are buying at the moment, the rewards and offers could tell the customer “hey this is the best way to spend your rewards and offers on this item”. Thanks to technologies like blockchain, where there could be a potential for more efficient use of the broader, open platform for awards and loyalty and also more consortium of retailers working together.
Unlocking the value of payment data:
Payment players are sitting on a goldmine of payment transaction data. The ability to harness data and turn it into actionable insights about a customer’s spending habits, payment preferences, future needs is key to better understanding the customers and driving growth and assess financial risk. Advanced analytics tools underlined by AI/ML techniques can be leveraged to improve the overall customer experience.
The business world is changing with the introduction of IoT, even whole cities can interact through connected devices. In the future, we can also see IoT devices become the commerce portals forming an “Internet of Payments”—enabling customers to use wearables, such as watches, wristbands, or even your cars to make secure, reliable, and seamless payments. In-car payment technology— incorporating onboard payment technology in vehicles will be the next big trend. You will be able to pay right from your dashboard at the gas station, for parking, for tolls, etc. without having to leave the car. Very soon your fridge will be able to order and replenish groceries, and your washing machine can order supplies. Embedded payment technologies in your smart home assistant will allow you to order and pay right from your couch.
AI in the Payments Industry
AI systems can be powerful at helping companies spot fraudulent transactions in real time, customer risk scoring, identity verification, authorization of payment transaction and monitoring, and customer churn.
With new payment methods like card-not-present (CNP) transactions, comes the persistent and rising challenge of online payment fraud. Artificial Intelligence (AI) and Machine Learning (ML) technology not just detects anomalies and potential instances of fraud, but prevents it before they happen. These AI and ML models can already uncover patterns and drive hidden insights, since they are trained via supervised learning, where the robust models are fed with a huge amount of labeled data. Today the technology is moving past this more static model to unsupervised learning, where the system can refine these insights further and perform more complex processing tasks than supervised learning systems.
Today, conversational interfaces like chatbots are also on the rise to automate and improve customer service.
Regulations such as PSD2 and open banking are forcing traditional players to open up their products (such as banking, payments, etc.) to third-party developers. This type of data integration is possible through open APIs, which enables a two-way data sharing between the banks and the third parties in a secure, scalable, and accelerated manner. This advancement has introduced massive disruption— a new collaboration and race to develop an ecosystem around the brand.
Amazon, Facebook and other BigTech companies are developing payments as a platform, a new concept set to revolutionize payments processing. The innovative new ‘Platform-as-a-Service’ model covers all payments processing needs today and for the foreseeable future, bringing benefits of payment efficiency, faster time to compliance, scalability, and flexibility.
Anticipating and analyzing how these trends may influence organization’s choice of future business models, payment companies need to build, modernize, expand their platforms, and build a solutions approach to achieve their desired future state.
At the juncture, Ness brings next-generation payment & processing expertise for issuers, acquirers and merchants. Our experience ranges from tokenization to card digitization in Mobile Wallets to acceptance of a wide range of payment methods. We also bring a combination of leading-edge payment consulting expertise to hardcore engineering capabilities for helping companies understand their customer behaviours, enable strong engagements, and how to serve new customer segments. With IoT being the game-changer in today’s digital era, Ness brings a unique combination of expertise in IoT and Digital Payments to help hi-tech, device manufacturers, and industrial companies to offer secure and seamless payment solutions.
In Part 2 of this blog post, I’ll share perspective on the challenges in supporting faster payments and how to build a solutions approach for real-time payments.