Digitalization of the economy goes far beyond just dealing with digital data. It translates more literally to the interconnectedness of the economy through various technologies. Analog payments have been pushed back ever since the global pandemic. Today, APIs are taking center stage as the buzzword for embedded digital payment gateways and other concepts such as open banking. While the legacy systems have not been ready for this wave of change, this is a crucial time for committing to the virtual economy as the FinTech industry is breaching the $300 billion mark.
The payments industry is changing rapidly, and banks must prepare for new technologies, regulations, and expectations. Banks should look at their payment systems and explore the potential of cloud-based architecture. They must also collaborate with experts to find an apt API solution for their business. As the central banks are globally considering the opportunity to introduce CBDCs, the need for suitable technology partners cannot be overlooked. From payment processors to IT experts, solution builders are inherent in the payments industry. Let us discuss at length what the future of payment technology holds.
Assessing the Changes in the Payment Industry
As the payments industry is experiencing a period of disruption, the future of payments is being shaped by new trends in the market that are corollary to consumer habits.
- The wide variety of payment channels has put pressure on retail POS, making it challenging to manage customer preferences. The vendors are therefore exploring the prospects of m-commerce and social commerce. The influencer marketing trend has picked up during lockdowns, and 70% of those following their live streams in the U.S. have confirmed their inclination to follow the recommendations.
- Expectations around how we pay have also evolved, from cash-only transactions in the mid-twentieth century to credit card payments today. These will continue to proliferate as more people adopt digital forms of payment, such as digital wallets. As per Insider Intelligence, the share of cash and check transactions for retail purchases is forecasted to reach 18.5% in 2022, drifting further down the line.
- Customers have been leaning toward E-commerce since the COVID-19 blow, but the trend continues for various reasons. Convenience for consumers and cost savings (if done right) for merchants are the two primary reasons for the growth of E-commerce.
- Ever since credit cards were invented, the fascination with using them has been maintained up until now. Cards still dominate in-store payments, but debit has overtaken credit payments in the U.S. to control financial risk and uncertainty.
Collaborate with Experts to Find the Apt API Solution
Regulations have changed significantly over the past decade to facilitate the safe transmission of electronic payments, from anti-money laundering laws to Know Your Customer (KYC) requirements for financial institutions. Regulators have created significant obstacles for businesses to navigate before launching/expanding into new markets or introducing new products into existing ones.
You want to be sure that your API solution will work in sync with the rest of your technology infrastructure so that payments can be processed seamlessly and reliably. Additionally, ensuring that any solution you implement is built on a foundation of trust and transparency, is vital.
When looking for a partner to create an API for you, it’s vital to find an organization that has experience working with financial institutions so they can understand what kinds of challenges are commonly faced and how best to address them.
Explore the Potential of Cloud-Based Architecture
When it comes to payments, the potential of cloud-based architecture is unparalleled. Cloud-based solutions can help with speed, flexibility, scalability, and security. They also reduce costs by allowing you to pay only for what you need rather than purchasing all of the hardware necessary to run your payment system. Payment-as-a-Service from popular FinTech platforms are built for cost and effort optimization by businesses.
Cloud technology offers organizations the following benefits:
- Cloud solutions are faster because they allow companies to scale quickly without any upfront investment in infrastructure or staff training for various payment rails. This allows for a significant reduction in processing fees.
- The ability to “grow as you go” leads directly to cost savings over time, as you won’t pay more than your business needs at any moment. This is because no lengthy contracts are required for most cloud services (if you have one, it will likely be for the short term).
- This flexibility allows businesses to focus on achieving their goals instead of worrying about how best the cloud server can be managed.
- The security feature with SSL encryption and AI/ML process automation minimizes fraud, leading to lower exposure vulnerability.
Getting the Payments Processes Together on a Single Platform
There are three essential parts to an online payment system, namely the processor (third-party IT company), the gateway (middleman for data transfer), and the merchant (receiving bank account). When the payment process is outsourced, it becomes easily manageable, reduces the compliance burden, and is more secure. All you need to do is create a payment page with all the relevant payment options and integrate it with the processor. It’s a simple plug-and-play for most organizations these days.
A single platform is a must-have in the payments industry. The benefits of a single platform include:
- Faster time to market
- Increased efficiency and reduced glitches
- Enhanced collaboration between teams
- Better data visibility and insights into customer activity across all channels
Latest Innovations in the Payments Industry
The way we interact with our money is being reshaped by new technologies. Consumers now have an array of contactless payment methods at their fingertips, including:
- Mobile payments (m-Payments) with ubiquitous QR codes
- Biometrics such as fingerprints or facial recognition for context-based payments
- Open-loop payment networks like Apple Pay and Samsung Pay
- Blockchain technology for cryptocurrencies like Bitcoin or Ethereum allows users to make P2P transactions without relying on centralized authorities like governments or banks. Approximately 70% of smartphone users in 2025 will use P2P.
- Internet of Things (IoT) devices such as smart watches, home assistants, or smart refrigerators that connect directly with merchants’ point-of-sale systems through secure protocols such as BLE (Bluetooth Low Energy) or NFC (Near Field Communication).
Focus on staying in the game
If your payment technology is not ready for the future, you could lose out on valuable opportunities. The pace of innovation has accelerated due to evolving consumer behavior. So, both the financial institutions and merchants should prepare for new technologies, regulations, and governance. By collaborating with experts and exploring the potential of FinTech pillars (AI, Blockchain, Cloud architecture, Big Data), banks can get their payment processes together on a single platform to help them survive in tomorrow’s world.
If your organization is looking to integrate these technologies, we encourage you to reach out to our team of global payment professionals right away.
