The payment sector is at a fork in the road, with FinTech gaining ground globally. Digital payments, assets, capital raising, and payments are explored, and governments look for ways to regulate some of them, as traditional payment systems no longer control the landscape.
Cash, bank transfers, and credit cards no longer dominate the payment system, thanks to new technology and innovation. Instead, the world is greeting an ever-evolving market focused on technological innovation, globalisation, security, and convenience. New players are entering the market at an incredible rate, with Big Tech and FinTech giants like Google and Apple vying for market dominance.
Keep reading to discover what factors will influence the future of payments and how they will affect end-customers’ daily lives.
Photo by Jordan Rowland on Unsplash
Super-apps
The advent of super-apps has significantly influenced the whole payment ecosystem in recent years. This monetisation system was created with the user in mind, providing a unified experience for financial tools.
Here are some examples of European start-ups that have made their intentions towards super-apps clear:
- Revolut
- Klarna
- Lydia
- Bolt.
Super-apps are like a Swiss army knife, with various tools you can use and remove as you wish. They’re built on a platform that offers multiple commonly used app services, like chats and payment. You can create personalised UX (user experience) by selecting and downloading your favourite mini-apps. According to a common belief, super-apps will eventually expand to support Internet of Things technologies, chatbots, and immersive experiences like the metaverse.
In short, the super-app is the front end of a platform that allows you to use mini-apps or mini-programs as needed, thanks to third-party providers and internal developers. The core application has a functionality of its own and can replace multiple apps for your use while helping businesses build a modular, composed business ecosystem.
Cryptocurrency and blockchain
The blockchain argument seems to be never-ending, but this system’s benefits in terms of compliance and traceability are undeniable. Several governments, like Singapore and Ecuador, have already begun issuing their own cryptocurrencies, with other countries in Europe and Asia actively researching centralised e-currencies.
In terms of real-time transactions in the virtual ecosystem, blockchain technology provides various benefits. It enables trust between entities, has a decentralised structure and better privacy and security, and has the potential to cut costs and boost visibility, speed, and efficiency.
Business owners who receive cryptocurrencies for their products or services can benefit from Bitcoin, Ethereum, etc., like any other asset. After they check the current Ethereum price, they decide whether they’re trading the cryptocurrencies for fiat money or storing them for an extended period. Some may also jump on the bandwagon and start trading cryptocurrencies hoping for a higher ROI.
Data
People are increasingly reliant on data in almost every aspect of their lives, from online shopping to financial services and music listening. Worldwide data generation is expected to double in zettabytes by the middle of this decade.
However, data-driven approaches aren’t new to the payments sector, with SEO optimisation, marketing, and advertising encouraging customers to visit e-commerce sites all over the internet. Yet, this is only the beginning of something bigger. The next decade is going to witness the introduction of 5G and 6G networks and an increase in connectivity across devices and, ultimately, across the globe. This will significantly impact the way individuals interact with each other. The amount of data generated will be colossal, and this is going to present considerable opportunities for the payment sector. To better understand customers’ needs and expectations, all payment players may be able to use this data and eventually offer more personalised services and products.
Nevertheless, with new opportunities and technological advances come new problems, too. More data and access to data mean more privacy, cybersecurity, and consumer rights issues, which payment players must figure out how to address quickly.
Digital IDs
It’s common to be asked for identification when making a payment, no matter if you’re checking into a hotel or buying home appliances. Besides an ID, you may also be asked for a passport or driving licence.
Consumers will have digital IDs in the future – validated digital attributes explicitly built for the digital world. Traditional identification cards may have a unique identity number, vaccination code, social security number, name, place, citizenship, biometrics, date of birth, etc. On the other hand, digital IDs would only have a “Yes” or “No” answer to a question identifying the user with the help of a certified provider. Each accredited provider keeps the digital ID components on a secure, distributed system, protecting consumers against fraud and data breaches.
Digital IDs will involve deeper collaboration between the private sector and governments and innovative technologies. Consequently, new standards and regulations will be introduced to foster interoperability and compatibility and deal with the transformation.
The system will require certification measures to increase resilience and safeguard consumers, involving better digital authentication, strong username and password protection, and biometric identification.
Emerging markets
The epidemic has undoubtedly accelerated and highlighted the need for technological developments in the payment sector. Nevertheless, it has yet to succeed in challenging emerging markets. Western financial companies, for example, are facing increased competition from innovative start-ups in Asia.
In the fight for market supremacy, some of these start-ups are jumping ahead of traditional financial institutions, providing payment products and services in line with the latest consumer demands and technologies.
Such marketplaces are incredibly receptive to technological innovation since populations used to obsolete payment systems are increasingly eager and ready to adopt new technologies better suited to their daily economic needs.
The need to make international payments is on the rise
Cross-border payments are a result of the globalization of the economy. The demand to make international payments is increasing, whether it’s individuals sending money to relatives abroad or businesses paying suppliers in other countries.
Traditionally, these payments have been done through banks –
a time- and money-consuming practice at times. However, with the advent of a new generation of payment providers, people are nowadays benefiting from more efficient and cost-effective solutions.
It’s fascinating to see where the financial system is going. However, what’s certain is that technological advances will come with benefits and obstacles, as well as the need for new standards.
This article was provided by Cynthia Madison
