THE FUTURE OF PAYMENTS

Indisputably, 2020 was a significant moment for payments. Economies were hit hard as the coronavirus pandemic reached almost every country in the world, having an impact on all aspects of daily life forcing businesses to close their doors and adjust to a new safe working environment. Unfortunately the original economy we all knew, will never return. We saw fears of using cash during the global virus outbreak become deeply ingrained and well-established corporations began to prohibit payments via cash in store.

Electronic payment methods are on the rise, not only credit and debit cards, but also bank transfers, direct deposits, and online payments. For the payments industry, the pandemic and its consequences have accelerated a series of existing trends in both consumer and business behaviors, and introduced new developments, such as a restructuring of both supply chains and cross-border trade.

The pandemic has accelerated the move from “physical” to “virtual” banking with a huge amount of institutions and corporations seeking to offer virtual cards along with clients accounts. Banking giant HSBC is closing 82 branches across the country this year in a radical shake up of its network with many other institutions evidentally following suit as TSB are going to close a further 164 branches and Barclays also revealed plans to close 63 branches in the first quarter of 2021.

Consumer banks effectively are reducing staff as the need for people to manage the process of handling the business of cash transactions are unnecessary due to the rise in online payments,transfers and lockdowns whilst the virus still spreads.

THE FUTURE

Banks have reached a critical window of opportunity to roll out Open Banking and drive API innovation with a significant amount of neo-banks emerging and strategic partnerships being built. By utilising BaaS, Financial services companies can optimise operations in this sector without actually having to hold a banking license itself.

Banking as a Service allows third party organisations to draw off of the existing banking services through APIs that communicate between banks and third parties. These APIs allow the use of these banking services by fintech companies, programmers and developers, and other non-financial companies.

By allowing third parties access to their ecosystem, during the new economic restructure, fintech companies have already started working towards solving the concern of users privacy and security bringing new abilities to the banking/payments sector for users such as 2FA (two-factor authentication) which is an extra layer of security helping to protect online accounts.

More than ever, companies are seeing the benefits of supplying E-money services within their operations, as more attractive innovation tools through technological advancements are making it easier to adapt to the new economy and provide services such as In-app payments for their clients. Advancements in technology in recent years have paved the way for payments to be made via Fingerprints/biometrics, Iris scanning, Augmented reality, VoiceID, Face ID and Microchip/wearable technology allowing payments and transfers to be more accessible and processed instantly.

HSBC is set to create digital service branches that will have no counter service, meaning customers therefore, will have to use 'self-service technology'. In the UK, 24% of the population are using mobile and digital wallets for payments and transfers, with payments accelerating in real time speed on both a local and global scale, becoming easier and more convenient. In 2020, there have been over 779 billion digital transactions worldwide, this number is expected to grow at a 13% rate in the coming years considerably heading towards the cashless economy model.

Point-of-sale (POS) terminals are going to continue adapting with contactless limits being raised accordingly, Google pay is evidence that mobile wallets allow time saving and risk free payments for customers. The success of mobile wallets may also pave the way for the broader adoption of cryptocurrency as many institutions and entities release their versions of cryptocoins or allow payments to be made using cryptocurrency.

Governing bodies have for decades, been tackling the heavy use of cash that has been repeatedly associated with crime, particularly drug-related crimes. Whereas electronic payment methods on the other hand are completely digital and eliminate the use of Fiat facilitating crimes. As we become a cashless society, this will allow governing bodies to easily monitor transactions and record data in the new digital economy with the aim of lowering such crimes as tax evasion, money laundering and drug related crimes.

Once the new digital economy is established and settled, the next task within 10 years is to make cards redundant too. As we currently transition from cashless to contactless, there is going to be a growth in the amount of plastic produced. World organisations will pursue further investing R&D into technology advancements for the demand of safe and secure electronic wallets.

E-wallets also enforce secure transactions by using randomly generated payment codes and real time OTPs for payments made in-store or online. Virtual cards are now advantageous in both reducing the amount of plastic produced, and are suited for digital payments for products, software and services. All you need to do is pay via the e-wallet app on your smartphone or scan your smartphone device to a compatible NFC PoS system to make a successful payment

Frankly, it's simply too convenient to make payments electronically, especially with the Internet, as well as the fact that merchants and vendors can now be hundreds or thousands of miles away if not globally with the expansion of new jurisdictions.