Six reasons why the next decade of payments is pivotal
Science fiction from decades ago may have imagined the 2020s as a time when we had colonized Mars, were driving around in hover cars, and automation meant we barely lifted a finger to do menial chores.
Of course, the reality is a little off, but technological advancements have revolutionised the way we use our money, from online banking to shopping and transferring money. Digital payments have become such a huge part of our lives now, it’s hard to believe that they are still a relatively new phenomenon and there is still a huge scope for them to grow and diversify.
Here are six reasons why the next 10 years represent a key period for the payments industry.
Faster connections means faster payments
With 5G technology being rolled out and advances in wifi increasing speeds, payments are becoming virtually instantaneous. This has implications for blockchains and how they can be used to link high-speed networks and create a fast flow of transactions across the globe.
The next decade has the potential to see such fast, real-time payment become the norm, and with increased speed comes an increase in volume.
With such relentless advances in technology, traditional borders will be broken down and the limit of transactions will be the efficiency of your server rather than which country you are in.
Also, because higher speeds will lead to a great volume of transactions, there is increasing scope for automation to be brought into the payment network.
Non-traditional players coming onto the scene
Online payments have been around since the 1990s, but it was the introduction of companies like PayPal at the turn of the millennium which saw the practice come into the mainstream and become widely available to consumers.
Since then, various established banks and financial institutions have introduced their own forms of payment software, which have allowed consumers to transfer funds between accounts and pay for goods and services online.
The last decade saw the rise of apps like Apple Pay and Google Pay and the next 10 years is likely to see a great influx of more non-traditional players into the sector. The rise in cryptocurrencies and the proliferation of fintech companies means there will be a great and more flexible range of payment options to companies and consumers alike.
Regulation must keep pace with digital payments
Just like the internet itself, progress has moved more rapidly than existing regulation can keep up with when it comes to payments.
An entirely new form of finance has sprung up in the digital age, so much so that how to police it has proved a constant headscratcher for regulators.
The rise of digital has blurred the lines between countries and even currencies themselves, and this hasn’t just led to problems for regulators, it has forced nations into taking measures to protect their own currencies. One such move has seen China create its own digital currency and others will likely follow suit. State-controlled or other digital currencies are likely to present a huge challenge for financial regulators over the next decade.
The fight against fraud will intensify
Whether it is physical cash being handed over or digital money being sent all around the world, it will always be at risk of theft by fraudulent activity. The area of payments has been a particular target for online fraudsters with over £200m worth of payments being stolen in the UK in the first quarter of last year.
With an increase in payments over the next decade, the opportunities for fraudsters will increase. Practices such as Authorized Push Payment (APP) fraud are already widespread and involve unsuspecting individuals being sent messages purporting to be from banks or other financial companies inviting them to click through to an unsafe link and enter their payment details.
Security measures have evolved, with features such as fingerprint and face recognition required to unlock phones and payments apps, but the price for the constant convenience of digital payments is equally constant vigilance.
Data is fast becoming a currency all of its own
Financial transactions may be the main aim of the game when it comes to the various payment platforms out there, but the trade in data is becoming just as competitive. Every time you perform an online transaction, you reveal a little bit about yourself and that information is highly valuable to payment companies.
The next decade is likely to see the trade in data to become more sophisticated and diverse. For the payment industry, this means that more value will be placed on data and gaining access to that data will prove vital as it can provide useful insights into consumer behaviour.
Although the trading of data may cause a ripple of concern among consumers, canny customers can actually use it to their advantage and become savvy traders themselves. Many consumers can get better rates on payments by agreeing to share some of their data.
A greater take-up rate in fintech payments, especially among older users
While the term ‘silver surfer’ was coined to refer to older users of the internet, there remains a slower uptake for various forms of newer technology such as digital payments. Things are changing, with more and more over 55s using cashless and fintech payment options.
This is likely to grow a lot more over the next 10 years as a more tech-literate generation reaches their senior years and fewer people become used to older methods of payment.