Digital technology has all but transformed the way people pay for goods and services.
Where just a few decades ago the term “mobile wallet” was unheard of, nowadays anyone with a smartphone can make a purchase without relying on traditional payment methods such as cash, checks and credit cards.
The emergence of new tech has also meant big changes in the way business owners accept payment.
As technology continues to advance, merchants will need to adapt or risk being left behind.
A recent report from Capgemini titled “Top 10 Trends in Payments – 2017” looks at emerging trends in the payments industry, among them the adoption of digital payment methods and instant payments.
While banks and payment service providers (PSPs) are dealing with the higher-level security and regulatory implications of these trends, merchants are also feeling the impact.
Let’s take a look at some of the key trends outlined in the report and how they may affect your bottom line in 2018 and beyond.
Trend: Digital payments have gone mainstream.
According to the report, “Digital payments comprised of online, mobile, and contactless cards are expected to hit $3.6 trillion in transaction globally this year, which is a 20% growth from $3 trillion in 2015.”
The widespread adoption of digital commerce brings new challenges for merchants, from adjusting to new technology to increased privacy and security concerns.
Merchants should focus on updating their existing infrastructure to succeed in the digital payments arena.
Businesses will also need to work closely with PSPs to integrate payment data and ensure a better customer experience.
Trend: Instant (real-time) payments may be the future of commerce.
Numerous applications are coming to market that are expected to allow consumers and businesses to send and receive payments in real time.
Typically, when consumers make a purchase through their bank—either by wire transfer or an automatic clearing house—it can take anywhere from two to five days for transactions to settle.
With instant payments, funds are available immediately.
While on the plus side are simplicity and convenience, the shift is likely to take some time as the payments industry works out the kinks.
According to the report, “…nuances related to dispute settlement, chargebacks, and refunds need to be fool proofed.”
A key concern is ensuring cross-border interoperability and optimizing clearing and settlement systems.
As with digital payment processing, merchants will likely need to update their existing equipment to support instant payment systems.
Trend: The regulatory compliance landscape is changing.
The report looks at four key trends dealing with regulatory and industry initiatives that have emerged as banks look to redefine the scope of their compliance programs to keep pace with an evolving payments industry.
In adopting a broader compliance strategy, banking institutions will likely be able to provide more value and better services to merchants.
Using virtual testing grounds dubbed regulatory sandboxes, companies called “RegTechs” are applying technology innovations in an effort to provide software solutions aimed at standardizing the compliance process and increasing transparency.
Finally, heavy innovation is expected in the area of cross-border payments in order to improve security, enhance accessibility, reduce costs and shorten transaction time.
This will no doubt impact compliance regulations.
Trend: Banks and PSPs have a new challenger in FinTechs
Banks and PSPs that are “slow to innovate” risk losing ground to pioneering FinTechs. Short for financial technology, FinTech firms are moving in and developing needed solutions, particularly in the areas of user authentication and data security.
“In the near future, disruptive solutions are expected in the areas of payments analytics and authentication such as data aggregation, fraud management, compliance tracking, and authentication using selfie or iris scan or voice biometrics.”
Trend: Security is now more important than ever.
As digital technology evolves, so too does cyber crime—making your company more vulnerable to fraud than ever before.
A pattern of high-level security breaches, sophisticated hacks, Fraud as a Service scams and ransomware attacks has put the payments industry on edge and amplified the need for improvements in consumer protection and payment service security.
At the consumer level, this has led to the implementation of stronger security models such as two-factor authentication.
At higher levels, regulatory requirements will be linked with technology solutions with the goal of making payment systems less susceptible to fraud.
Trend: Back-end systems will need to keep up with front-end innovation.
There are a few things involved here. First, as we pointed out above, there is a growing need for real-time capability among payment processing systems.
Second, back-end data systems need to see radical improvements in protecting customer data and improving security.
And finally, updating older (legacy) IT systems is necessary to ensure an integrated solution that facilitates the tracking and management of payment information and consumer data.
The report focuses mainly on banking institutions and the need to synchronize existing systems, but merchants also can benefit from matching the capabilities of their front-end and back-end systems.
This may involve an initial investment up front but is likely to pay off in the long run.
Now is a good time for a thorough analysis of your merchant account.
If this new report is any indication of things to come, the first step toward adapting to new trends is to take a look at where you are now so you can identify areas of opportunity going forward.
MyWatchmen will analyze your merchant account and assess your current payment system to find ways to control costs.
If you can spare just 15 minutes, we can show you how our time-proven 3-step process can help you maximize your revenue and continually optimize your merchant account so you save time and money.
Call MyWatchmen today at 1-888-256-2845 or schedule a time to meet with us