Payment service providers face a challenging year as the payments ecosystem shifts and evolves. Here are the four considerations payment service providers should consider to remain competitive.
As we move into 2019, many are wondering what is on the docket for payments and fintech innovations this year. As more payment service providers emerge, each is looking for new ways to differentiate and meet consumers at the intersection of convenience and security.
Given the trend towards mobile, much remains to be seen on how payment service providers will adapt and grow to meet the needs of consumers on this channel. One thing remains consistent: speed and convenience are high priorities across the board. What’s more—payment service providers will need to accommodate these demands without sacrificing security.
A new report from Juniper Research projects that nearly 2.1 billion global consumers will use mobile wallets for payments or transfers this year. That signifies roughly a 30% year-over-year growth from the 1.6 billion global consumers who used mobile in 2018.
As merchants, banks, fintechs, and payment service providers evaluate priorities, it’s worthwhile to look into alternative mobile payment options such as PayPal and Alipay. Juniper also posits that these options post a great opportunity in terms of globally converged wallets. Other mobile trends include both QR code-based contactless mobile payments as well as NFC-based mobile payments. These mobile payment methods present convenient options for consumers who are making both in-store and online (or in-app) purchases.
Convenience and speed have both been integral to payments for both the in-store and online channels. As consumers increasingly look for quick and easy ways to pay, this trend will continue to impact the types of payment platforms, solutions, and services that payment service providers offer.
Swipe cards have fallen into the category of legacy payment methods as they are considered one of the slower forms of payment (and less secure). Add to that the increased number of alternative payment channels, and payment service providers are facing disruption from every level. Wearables and contactless payment methods are rising in popularity as they enable people to skip lines—and avoid fumbling with wallets. Smartphones, smartwatches, and other smart devices are changing not only the way people pay, but the way they bank and engage with brands.
Convenient access to payment applications is key. On-the-go consumers expect real-time payments that are as easy as a swipe of the wrist.
Security is more important now than ever. New payment methods opens consumers, banks, and fintechs up to new vulnerabilities. It’s critical that payment service providers keep a finger on the pulse of new payment security features and methodologies to combat increasingly shrewd fraudsters and hackers.
Biometrics is poised to be a rising star in 2019. Juniper Research expects that 770 million biometric authentication apps will be downloaded annually this year. As with mobile and other emerging types of payments, this technology faces adoption hurdles. That said, it also offers a promising way to authenticate and secure payments.
As touch ID hardware becomes ubiquitous in smartphones and as it is increasingly used for tokenization and contactless payments, it poses a unique opportunity for a frictionless and secure payments experience.
Cryptography has also emerged as a proven security method for payments. In June of last year, the Payment Card Industry Data Security Standard (PCI DSS) issued new requirements for payment service providers. The requirements called for more secure encryption protocols for transactions, including discontinuing the use of Secure Sockets Layer (and earlier versions of Transport Layer Security) in favor of the more secure encryption protocol - TLS v1.1.
This new TLS protocol is cryptographic and establishes a secure communications channel between two systems in order to authenticate each. As a cryptographic protocol, it secures the integrity of information transfer between the two systems as well as the confidentiality.
Not only do these new technologies lead to improvements across the entire payments security landscape, they foster consumer confidence in emerging payment methods.
Payment service providers that want to remain on the forefront of the wave of disruption happening in the payments space need to have an eye toward the future. This means embracing new technologies, new best practices, and new security protocol.
As the Internet of Payments (IoP) gains traction, fintechs, banks, payment service providers, and merchants need to be cognizant of new consumer expectations and new security vulnerabilities. The number of connected devices is drastically increasing; Business Insider predicts over 24 billion internet-connected devices will be installed globally by next year.
This convergence of the internet of Things (IoT) and IoP will cause a spike in non-cash transactions. Traditionally non-payment related brands will begin to offer payment services, making nearly everyone a potential competitor. Brands like Garmin, the brand known for its wide array of fitness watches and devices, is already offering payments services via their popular smartwatches.
Banks are taking the cue as well. Banks like Australia’s Bankwest has launched trials on a contactless payments ring, providing touch-and-go transactions at the point of sale. Others are also exploring innovating banking solutions that utilize contactless, NFC payments technology paired with popular devices.
Payment service providers—and fintechs, banks, and merchants—must respond to evolving consumer demands, which largely revolve around frictionless, secure payments. The balancing act of adapting to alternative payment options while maintaining end-to-end security will become commonplace. Those that are able to walk the fine line while providing a positive customer experience will be in a position to capture more business in 2019 and beyond.