Payment ecosystems across the globe became one of the most technologically influential sectors in 2020. Unparalleled shifts in economic, political, regulatory, and social conditions resulting from the pandemic accelerated payment trends ahead of analyst projections, sparking a revolution in digital payment technologies that will continue in 2022 and beyond.
Universal demand for instant access to financial services; highly integrated B2B payment systems; and digital payment systems offering speed, convenience, and ease of use drive initiatives that will reimagine how next-generation payments interface with emerging economic models.
What does the future of payments look like at this point?
Digital and Contactless Payment Models
Without question, the pandemic marked a tipping point for the cashless society. As an economic model, Finland, Sweden, China, South Korea, the United Kingdom, and Australia championed fintech innovation to lead the charge in advancing fully digital economic systems. Other regions have joined in, driven in part by regulatory agency recommendations to adopt cashless and contactless payment systems to reduce the contact spread of COVID-19. Cash payments declined sharply, while contactless payments became more widespread. According to Statista, $4.4 million worth of digital payments were transacted in early 2020, up 14% from 2019.
Merchants with contactless payment systems have fared better as consumers transition from contact and cash payments. A study by The Futurist Group found that 38% of U.S. consumers now view contactless payments as a basic need for businesses to be successful. The expansion of mobile payment and digital wallet offerings, including digital currency platforms, has heightened security and safety protocols for many businesses. The simplicity and popularity of peer-to-peer payment models like Venmo and Zelle will likely influence digital payments in business applications.
Increased Demand for Frictionless Payments
Customers and merchants expect digital payments to provide frictionless checkout processes. Numerous studies have shown that friction points in the payment process quickly erode competitive advantages, diminish conversion rates, and create barriers to future commerce.
Fewer steps in the payment process reduce customer wait times, both online and offline. For online merchants, this translates into less cart abandonment and more sales completed. Frictionless systems make it possible to offer convenient payment choices, including mobile, one-click, recurring, contactless card, and digital wallet payment options.
Merchants need their reliable software partner and multichannel payment methods embedded properly and securely. With the right partner, merchants can achieve seamless payments through application programming interfaces (APIs), Internet of Things (IoT) technologies, open banking system connectivity, and adaptive omnichannel platforms designed to future-proof business systems. In the coming years, integrated payment systems like pay-by-text, money wire transfer, pay-at-the-pump, parking meter, drive-through, and in-app purchase, will increase as society replaces legacy systems.
Adoption of Real-Time Payments
Real-time payment networks across the globe are experiencing record usage. According to FIS, one trend driving this growth in certain regions includes request-to-pay (R2P) payments, allowing individuals, businesses, and governments to request payments from third parties.
Since the U.S. launch of the Real-Time Payments (RTP) network by The Clearing House in 2017, consumers and businesses have been able to send and receive money in a matter of seconds. Unlike Same Day Automated Clearing House (ACH) direct-bank transfers, which processes in batches and settles after funds clear, RTP network payments clear and settle individually in real-time 24/7, with immediate funds available to recipients. Accessible through FDIC-insured financial institutions that hold 70% of U.S. demand deposit accounts, real-time “credit push” transactions require in-person instruction to transfer funds from a qualified account to reduce fraud risk. Uniform RTP pricing transparency helps businesses manage costs.
Artificial Intelligence and Machine Learning
Artificial Intelligence (AI) and machine learning (ML) will play an even more significant role in active fraud detection and customer service for businesses moving forward.
In April 2020, fraud rates soared 33% as hackers sought to exploit security vulnerabilities when businesses and customers migrated from offline to online systems during pandemic lockdowns. Industries impacted experienced substantial revenue losses, according to Experian. The layering of AI and ML technologies automates many processes, including intelligent call routing, customer feedback monitoring, chatbot activities, product information releases and recommendations, customer analytics, dispute resolution handling, and other critical customer service and sales activities.
In combination, these technologies can engage actively, learn, and collect data in real-time based on customer patterns and behaviors, regardless of the device used. Businesses deploying these technologies have an opportunity to personalize customer experiences and avert fraud by detecting abnormal behaviors as they happen.
Introduction of Digital Currencies
As more countries turn to cashless systems, they exchange the currently used fiat currencies in digital form via credit cards, contactless portals, and mobile devices. The transition to other forms of digital currency, including cryptocurrencies, is not a far stretch.
Digital currencies gain momentum as well-known financial brands, commercial ventures, and governments explore the development of their own cryptocurrencies and partnerships within existing blockchain rails. Visa, Facebook, JPMorgan Chase, Walmart, Amazon, and Google pursue digital currency initiatives, including filing patents to protect products once launched.
Global reaction to pandemic-induced economic and social conditions has accelerated payment digitization much faster than initially predicted. The melding of AI, machine learning, real-time payments, digital currencies, and seamless contactless payments empowers businesses to forge ahead with best-of-breed solutions that integrate easily and optimize security to protect the health and data of systems users.
A recognized and trusted consolidated gateway solutions leader since 2008, we offer best-of-class online, mobile, and contactless systems to support payment digitization on one platform. Our developer team continues to guide payments integrations catering to banking, medical, finance, payroll, utility, property management, leasing, insurance, religious, nonprofit entities, and more.
Contact iCheckGateway.com for digital payment solutions to future-proof your business operations.
Date Originally Published: December 22, 2020
Date Updated: August 1, 2022