Payment service providers face a challenging year as the payments ecosystem shifts and evolves. Here are the four considerations that payment service providers need to follow to stay competitive.
As we are well into 2021, many are wondering what is on the docket for payments and FinTech innovations in the coming months. 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.
1. Omnichannel
A new report from Juniper Research projects that by 2025 the total spend via digital wallets will be over $10 Trillion. That signifies a hike in transaction value via digital wallets by almost 83% from 2020 to 2025.
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.
2. Speed & Convenience
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 also 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.
3. Security
Security is more important now than ever. New payment methods open 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, particularly in the field of identity documents will be a rising star in 2021. It also offers a promising way to authenticate and secure payments. According to recent reports, $3 trillion of mobile payment transactions will be authenticated via biometrics by 2025.
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.
Not only do these new technologies lead to improvements across the entire payments security landscape, but they also foster consumer confidence in emerging payment methods.
4. An Eye Toward the Future
Payment service providers that want to remain at 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 protocols.
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; according to Statista over 75 Billion Internet of Things (IoT) connected devices will be installed globally by 2025.
This convergence of 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, are already offering payments services via their popular smartwatches.
Banks are taking the cue as well. SEB recently partnered with Fidesmo to launch wearable payments services in Finland and Denmark. Others are also exploring innovating banking solutions that utilize contactless, NFC payments technology paired with popular devices.
Wrapping It Up
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 2021 and beyond.
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