The payments landscape has evolved significantly over recent years and brings with it a set of challenges. To reap the benefits of modernization, these challenges need to be overcome. Read on to know how.

Payment processing is one of the most integral parts of any business. However, many companies are still running outdated payment systems, not taking advantage of the latest technological innovations. There are compelling reasons to incorporate advances in payment technology into your payment systems. The payments landscape needs to keep evolving to welcome improved pathways, but the transformation in the past two years has been unprecedented by all standards. The market for payment modernization is a magnanimous $300 billion, owing to the 2.7 trillion cash transactions expected to make the digital shift by 2030.

The Fintech innovations indeed present opportunities, but the key is to tap them just right and also to prevent the threats they pose. Credit card numbers can get leaked into the public domain somewhere along their journey through various payment networks where transactions worth billions occur every day. Let us discuss some more challenges in the payments industry and how these can be transformed into a success story for your organization.

Source: McKinsey

What are the Challenges in Payments?

Businesses have quickly adopted digital payments in the COVID-19 era, but vulnerabilities have dampened the effort. Data security and fraud protection are top concerns for businesses, consumers, and regulators. Data breaches have been in the news lately, from the massive Equifax breach to the Yahoo! breach that impacted 500 million users.

Several types of fraud can occur during E-commerce transactions, such as card-not-present (CNP) fraud, account takeover (ATO), and unauthorized use of existing accounts. As per LexisNexis, CNP fraud in E-commerce has risen post-pandemic, with $3.75 being the ‘true cost of fraud‘ to US merchants, for every $1 of fraud. Account takeover is another common type of online transaction fraud that typically involves identity theft or using personal information obtained via data breaches to gain access to online accounts opened by hacked customers. Unfortunately, account takeover has become a growing concern for businesses as more consumers use their mobile phones or other devices as their primary means to shop online. E-commerce payment losses have grown at a whopping 14% in 2021 to reach a $20 billion size.

The payments landscape is also fragmented across multiple channels and technologies, making it difficult for businesses to meet the challenges of modern commerce. Most merchants still accept only card payments when consumers shop from their mobile devices due to limitations in their payment systems and a lack of support for alternative payment methods such as virtual wallets. Even cross-border transactions are slow and expensive, making it a significant pain point.

Analyzing what the customer needs

Cashless transactions are convenient for customers and more secure than cash-based transactions, provided suitable security mechanisms are in place. Cashless transactions are more efficient than cash-based ones because each transaction only involves one or two parties instead of hundreds or thousands of individuals who could be involved in the monetary exchange process. Single-click checkouts are the present of payments innovation, while the future is even more elite, consider the likes of—a voice command with relevant authorizations.

Consumers and businesses want faster, more efficient, and more secure ways to make purchases and payments. Companies that provide these services can improve the overall experience for their customers. This is true, especially for businesses engaged in B2B commerce, where there is a high degree of risk due to the nature of selling goods or services over time or distance (i.e., using credit cards). Incorporating advances in payments technology will allow you to offer new types of services and better customer experiences by providing real-time transaction updates.

The pace of innovation and its adoption in the payments industry is critical to the success of digital businesses. There is no scope for integration delays or errors in live systems as the risk is enormous. Once the customers know about a security breach or experience inconvenience in the transactional process, they quickly head out the door. Associations in the fast-paced ecosystem rely on the trustworthiness of and relevance to all parties involved, the most sensitive aspect of payments.

Steadfastness in payments innovation

As you can see, many factors go into making the right decision for your business. The first step is to ensure that it can integrate with the other systems in your organization, such as accounting software and document management tools. Some of these integrations require special software to make them work properly, while others may require changes to existing processes. Whether it’s a new solution or an update to an existing one, integrating payment processing software with other applications helps streamline workflow and increase efficiency across your entire organization.

The advent of Fintechs has given consumers additional options, including some that are built on new technologies to make ‘sending and receiving payments’ easier and faster, even internationally.

The advantages of security in payments modernization

To address the aforementioned concerns, payment processors must ensure that they comply with all applicable data security laws and fraud prevention laws (including PCI-DSS/PA-DSS). They also need to make sure their systems can withstand attacks by cybercriminals who want access to sensitive information such as credit card numbers stored on servers or in databases held by third parties (like banks). These are used for transactions between clients’ websites/apps and payment processors and could be used for fraudulent purposes such as making unauthorized purchases if stolen.

By introducing security measures into each stage of the payment process—from customer registration through checkout, E-commerce merchants can reduce their risk from fraudulent transactions while also boosting the customer experience through streamlined payment processing capabilities.

For example:

  • Requiring users to enter mnemonic codes sent via text message before approving payment requests reduces instances where criminals have gained access and used customer credit cards without authorization;
  • Using encryption tools like tokenization software prevents sensitive data from being intercepted by hackers. It also allows companies more control over what happens with sensitive information stored on servers within their network.

Payment policies can be set differently depending on the industry, but regulatory compliance must always be ensured. While some businesses may have internal rules, others rely on credit card companies’ standards. But they’re all designed to help protect customers from unauthorized purchases or identity theft. Payment processors need to stay ahead of the cybercriminals to avoid leaving any loopholes in the system and make it foolproof. Zero-day exploits could become common if the application performance management (APM) is not proactive.

Power to the Customer

In conclusion, the payments industry is in a state of flux. While there are many obstacles to overcome, the rewards for succeeding are immense. With customers in control of their payment experience, they can pay with their preferred method and enjoy enhanced convenience and choice.

By exploring new technologies and innovative solutions, businesses can increase revenue across sectors, reduce costs and provide more value-added services. This will enable big and small players to stay ahead of the game.

Make us your payment technology partner so we can see you through your success.

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