It is very easy for many who are new to the fintech space to think that financial technology is an exclusive term for payments technology, and while there is some truth to this, it does not tell the entire story about fintech. However, in June, The Fintech Times is looking to indulge this belief as we look to discuss hot topics surrounding both sending and receiving payments, like buy now pay later (BNPL), early paydays and much more.
What are the biggest payment innovation trends from the last 12 months? Let’s hear the views of OpenPayd, Payrailz, Till Payments, Treasury Prime, Adflex as well as Amadis.
Application programming interfaces (APIs) have been a key component in bringing finance into a new era, suggests OpenPayd.
Daniel Belda, head of product strategy at OpenPayd, says: “In the last year, or for that matter the last half decade, innovation has occurred only in the last mile of the payments value chain – where the consumer interaction happens. Examples of this are everywhere. Companies testing ‘pay by smile’, ApplePay or GooglePay enabling easy contactless payments, etc. However, these innovations are being developed on top of an infrastructure that has seen almost no innovation, rather efficiency improvements, such as instant bank payments.
“That’s why we’ve seen massive growth in API-led platforms that are giving companies a way to quickly plug into innovations like real-time payment rails. A modular, API-driven approach has brought down the barriers to adoption, enabling businesses with little financial technology experience or licensing to plug in financial infrastructure and elevate their payment experiences.”
Faster real-time payments… more fraud
For Steven Dubner, VP of payment products at Payrailz, the Covid-19 pandemic has resulted in a revolution in digital payments to adjust with its impact. He beleives the demand for contactless, online, digital, easy flowing and faster payments will only increase as the pandemic continues to force and drive innovation in the payments industry. But with this comes a growth in fraud.
“Consumers have been the focus of many new payment services for understandable reasons since there has been a surge for online commerce and payments. Many fintechs, including Payrailz, will keep offering new ways to make payments targeted at creating faster, and easier payment options. With that has come the insurgence of fraudsters, looking to take advantage of this volume. Many consumers have become somewhat oblivious to the exploits of fraudsters. The trend will be more advanced technologies designed to cut-off digital criminals.”
“Behavioural biometrics, and the use of artificial intelligence, will be required to block fraudsters attempts by presenting authentication prompts, if something is awry is the first step. The Payrailz Pay a Person product uses its proprietary Fraud Monitor tool is an AI based integrated fraud monitoring service that analyses transaction, user profile and user behaviour signals in real-time to identify potential fraud and generates an actionable score.
“Another important trend is faster, real-time payments. As most of us are aware, real-time payments (RTP) are payments that are initiated and settled nearly instantaneously. The Clearing House with RTP and the Federal Reserve with FedNow are paving the way for technology companies like Payrailz, to add these new age options to our existing payment rails.
“The advantage of real-time payments for the financial institutions (FIs) is that it make your funds more readily available, and aid liquidity. Because payments are cleared in seconds rather than hours (or days), you can be much more agile in your budgeting and cash flow management. It can also benefit FIs, merchants and consumers, by offering enhanced visibility into payments.
“Like P2P payments, there is a potential risk. The fact that real-time payments are settled instantly can be is both a positive and a negative. The instant settlement leaves no room for error. Therefore, there is no time to correct any errors that may have been made in payments after they are sent. This means extra vigilance is required and that mistakes can be tedious and time-consuming to correct. This is once again, where the Payrailz Fraud Monitor solution can alleviate this risk.”
Tom Tucker, president of the Americas at Till Payments, also believes the pandemic has resulted in huge innovation in the payments sector.
He says: “The biggest innovation in the last 12 months has been a result of the pandemic. Before the pandemic, people were reluctant to embrace contactless payments.
“Even though it was out of necessity, contactless adoption has increased, and new innovations continue to emerge in various industries. While contactless payments aren’t new, the adoption rate and the various industry use cases that have evolved make it a meaningful innovation.”
Embedded finance, the integration of financial services into non-financial companies, has become a hot topic in the past 12 months says Chris Dean, CEO of Treasury Prime.
“We’re seeing the mass commoditisation of payments. More and more companies are embedding financial products on their platform to drive product value and revenue. For example, look at the restaurant software company Toast, and how they make significant revenue by integrating various forms of restaurant payments into their business model.
“They are not alone. Recent studies find that almost half of non-financial companies in the United States plan to launch embedded finance products in the near future or are already investing in them. Out of those who have already implemented embedded finance, 85 per cent say it has helped them gain more customers.
“The advent of new technology like banking as a service and API software makes it easier than ever before for companies to add a complete payments ecosystem to their line-up to serve their users, increasing profit margins without having to become a bank. Embedded finance is expected to grow 215 per cent over the next five years.”
STP and B2B payments
Straight-through processing (STP) is transforming B2B commercial card payments, according to Pat Bermingham, CEO of Adflex.
He explains: “Consumer payment innovations like BNPL may hog the headlines, but innovation in B2B payments should not be ignored. A key enabler of faster and simpler payments for the business world is straight-through processing (STP). In simple terms, the big difference between STP and more traditional card payment methods is that STP is buyer-initiated rather than supplier-initiated. This flips the standard B2B payment process on its head, offering more control and transparency for purchasing parties.
“Traditional payment methods require the buyer to call their supplier, lodge a card or issue a virtual card by email, and the supplier would then process the transaction via their payment gateway. STP simplifies the B2B payment process significantly by allowing the buyer to send a payment directly to the supplier via a processor.
“Why does this matter? For buyers, it enables fully automated payments and reporting, greater control over cash flow, and improved supplier relationships through prompt payments. By removing the need for additional processes for those accepting payments, STP reduces costs and ensures suppliers are paid faster, reducing days payable outstanding and bad debt. Automation also reduces costs, allowing suppliers to reduce the amount of resource spent on accounts payable, while significantly reducing the risk of costly human errors.
“STP also relieves a significant headache for suppliers, as the buyer-initiated payment means the supplier does not need to handle sensitive card information and therefore benefits from reduced PCI scope and processing fees. This allows suppliers to offer buyers a more streamlined checkout experience.
“What does this all mean? In short, prompt payments. And in today’s competitive markets, this can be crucial in enabling businesses to secure preferred partner status and repeat business.”
The enablement of in-market, in operation and in-inventory devices is helping merchants reduce costs and deliver a richer customer experience, says Fabrice Grenier, business architect, global lead at Amadis.
“The future consumers increasingly demand more efficient checkout solutions, with limited patience for delays, lineups and friction. To thrive, merchants need to adopt a more proactive strategy with payments that respond to today’s market needs, while future proofing against uncertain developments of tomorrow.”
“COTS (commercial-off-the-shelf) devices are increasingly being deployed to accept card-present payments through SoftPOS – a software solution that transforms NFC capable Android devices into fully secure & compliant payment terminals.
“These devices can seamlessly accept EMV contactless payments, and other card present transactions, through universal payment software. Separate physical devices to accept payments are no longer required. Every merchant associate can use their existing mobile device to be a point of sale, anywhere the customer is – in-store, at home, or on-board, purchasing a bus or train ticket. In addition, delivery service merchants and retailers can save one percent on interchange fees through BOPIS (buy online, pick-up in store) or COD, by converting a card not present transaction into a more secure, card present transaction.
“Merchants have the opportunity to adopt COTS payment acceptance through a single device strategy, enabling key functions to be executed on one mobile device: from product scanning to payment acceptance, real-time asset management and more. This single multi-functional COTS device strategy enables merchants to reduce operational costs further, making it easier to scale and manage devices across the enterprise, while driving new revenue opportunities.”