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It is set to be a transformative year for payments say those in the industry. The pandemic will continue to have a huge impact, particularly in digital payments and open banking.
While digital payments have grown over the past few years, they became an essential, as merchants and consumers reacted to the crisis. According to Visa, 77 percent of all in-store payments in Europe made in 2020 were contactless, an increase of more than 20 percent from the year before.
The new year brings its own challenges as the pandemic persists and a new payments landscape emerges. Here’s what firms are looking out for in the new year.
Growing adoption of contactless payments
QR codes are a widely popular payment method, particularly in Asia. GSMA recorded 30 percent ($13trn) of mobile payments made in China in 2018 were completed through QR codes. The study found it was becoming an increasingly popular payment source in other countries.
Abdeslam Alaoui Smaili, CEO of HPS, predicts a surge of 300 percent in QR code payments over the next five years as merchants will be relying on contactless technology due to the coronavirus.
“The technology features the holy grail of consumer adoption – convenience, as it’s easy to use via any smartphone at incredible speed. But merchants are now also realising the ROI adoption can bring. With QR codes, there is no need to handle the POS lifecycle, the merchant just needs to print a barcode or provide it on a device.
“The rich amount of data being collected can also be useful, particularly for SMEs. It can help them monitor business performance by integrating data from banks and third-party financial institutions to provide a holistic view of metrics, from sales and cash flow to refunds.”
Seamless experiences essential for survival
Payments are becoming increasingly important in providing great customer experiences, said Nick Raper, head of Nuapay.
“The rise of seamless mobile payments enabled by technologies like open banking will lay the foundation for superior customer journeys. As the pandemic has moved more business online than ever before, and face-to-face trust cannot be built, merchants will need to become creative. A clunky checkout experience or, worse, significant numbers of failed payments induced by 3DS are not an option for businesses that want to survive,” said Raper.
The growing demand for faster and frictionless payments by consumers is being replicated on a corporate level, according to Paul Thomalla, global head of payments at Finastra.
“Corporates will expect manual processes to be replaced with digital methods that are quicker, cheaper and incur less friction,” said Thomalla, via email. “CFOs will want to make instant payments and have certainty that funds have been received, akin to their personal banking experience. Corporates won’t be forgiving of banks that don’t allow them to execute payments with the same speed as consumers.”
Regulations to look out for
Conversations for the first six months are going to be “heavily focused” on managing the impact of Europe’s second payments directive (PSD2), according to Aaron Begner, EMEA general manager at Forter.
“With the enforcement of PSD2, merchants will have to drastically change their processing methods and integrate an additional layer of Secure Customer Authentication (SCA) to comply with the need for multi-factor authentication. To minimise 3DS friction and reduce cart abandonment rates, merchants will be looking to limit SCA’s impact on their conversion and revenue generation. This is on top of the existing business challenges imposed by the coronavirus.”
The European Commission’s Retail Payments Strategy, introduced earlier this year, calls for the roll-out of instant payments by the end of 2021. This is something firms operating in the EU should be looking out for, according to Thomalla.
“A key goal is to deliver a ubiquitous way for citizens and corporates to pay anyone in the EU within seconds. The adoption of instant payments will be speeded up by Request to Pay – improving the user experience for managing and settling bills. To truly flourish, ubiquity and interoperability across geographic boundaries are a must with banks needing to address any fragmentation in the process.”
Financial regulators will be looking closely at a range of issues from privacy and data security to consumer protection and licensing issues, according to Mark Chorazak, partner at Shearman & Sterling.
"As payments evolve, we should expect regulators will take a very close look at market players and asking whether our existing regulatory framework is adequate."
Michael Donald, CEO of ImageNpay, said the new year calls for the need to look at rule sets around consumer data in payments.
“GDPR and PSD2 in Europe still seem to be diametrically opposed. We need to increasingly look to legislation that levels the playing field and loosens the grip that Apple, Google, Visa, Mastercard and Facebook have on consumer data.”
Combatting fraud in payments
Tackling fraud will become a key focus for firms, says Shamus Rae, Founder and CEO of Engine B. The pandemic saw a large rise in cybercrime including scams using near-human virtual voices over the phone. According to a UK Finance report, impersonation scam cases increased by 84 percent in the first half of 2020 compared to the same period in 2019.
“The use of artificial intelligence to remove and reduce fraud is going to increase quite dramatically over the next 12 months. A lot of fraud can be reduced down further by bringing different data sources together in real time. You can use knowledge graphs to do quick fraud detection. The payment mechanism will be more secured because of the fraud and facial recognition,” says Rae.
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