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 explore the hot topics of this belief as we look to discuss methods to both send and receive payments, like buy now pay later (BNPL), early paydays and much more.
We kick off our month looking at payment innovations, namely the biggest in the last 12 months. Reaching out to the fintech industry to hear differing views on what has excelled in the last year, we hear from MOCA, volume pay, SoftServe, Oliver Wyman, Blackthorn.io, Dropp.
Single-use card numbers
Kelly Payne, chief marketing officer at MOCA said, “Virtual card payments, including single-use card numbers, are one of the biggest payment innovations from the last 12 months. With more consumers opting to transact digitally, as a result of the pandemic, physical cards are simply not as necessary or useful as they once were. Virtual cards allow for contactless transactions and easier digital wallet use – which is also more popular than ever. Single-use card numbers help consumers protect their card data when shopping online. With card fraud running rampant today, single-use card numbers are one of the best innovations our industry has made to cut down on card fraud.”
Improved payment gateways
Simone Martinelli, founder and CEO at volume pay, said, “With complex checkouts and dated e-commerce payment gateways costing businesses millions in lost revenue each year, the last 12 months have shown a growing need to improve how consumers transact with online shops. Merchants have been paying between two per cent and eight per cent of every sale to debit and credit card, e-wallet and BNPL facilitators. Much of this is often passed to consumers. Through open banking, innovations from payment providers like Volume have started making the checkout process far more seamless, allowing merchants to reduce associated fees. Volume does this by leveraging the variable recurring payment mandate to significantly speed up open banking-enabled direct account-to-account (A2A) online payments. As well as doing away with the need for payment processing intermediaries and expensive third parties, it eliminates a number of steps in the checkout process.”
Payment convenience – NFC payment interface and geo-fencing
Alfredo Rubina, ESG expert at SoftServe, analysed the biggest payment innovations from a consumer’s point of view. “The most interesting part in the payments sector is how it affects me personally – as a consumer. One main factor here is the ubiquity and convenience of payment – I want to be able to pay goods and services wherever I am, as simple as possible. With that, the ability to load a virtual credit/debit card on my mobile phone and use it via the NFC (near field communication) interface for contactless payment was the greatest advancement for the payment space, along with the confirmation of transaction details in real-time. This concept is key to building trust in this payment method, and mutual trust with the consumer.
“Another great innovation in the space has been geo-fencing. To further increase trust in the payment infrastructures, some card users are now able to configure their own geo-fencing, allowing travelers to activate and deactivate their card for specific regions. Of course, card issuers also directly benefit from such a function, as it reduces the chance of fraud. This allows card users to feel in control.
“Additionally, the possibility to defer payments is another great innovation for consumers. We see a lot of new ‘Buy now – pay later’ or BNPL initiatives, offering a variety of new ways to shop without being tied to a specific institution and their interest level.”
Stephen Whitehouse, head of payments at Oliver Wyman, said, “Biometric authentication has been around since the fingerprint ID, but it’s continuing to evolve. With fraud ever on the rise, especially in the digital age, payment players must balance a multi-layered security strategy with consumers’ demand for frictionless payments. We’re all familiar with the ‘selfie pay’, utilising more traditional biometrics like facial recognition (now available even with face masks). This is now moving towards more advanced forms like vein mapping or heartbeat analysis, and even to behavioural biometrics – the way you type, swipe, or hold your phone. Look out for expanding use cases of digital identity in the coming years, which will fundamentally change the way our payments are processed.”
Payments in developing countries
Chris Federspiel, CEO and founder of Blackthorn.io, said, “The biggest news is one-click checkout with the rise and fall of Fast.co and the controversy now surrounding Bolt.
“The bigger innovations are happening outside of the US, many of which are in Nigeria, so much so that there’s a fintech association in Nigeria. There isn’t a singular innovation that was popular in the last 12 months, but rather the movement of many fintech companies getting funded in developing countries.”
Increase in small digital payments
Sushil Prabhu, CEO and Chairman of Dropp said, “The payment industry is undergoing a significant transformation with digital payments with a need from consumers for frictionless payments and the need from merchants to offer multiple payment methods and instant settlement to reduce risk.
“In the last couple of years, the usage of digital services has grown significantly, with a significant shift to digital payments by consumers. Consumers are now comfortable making digital payments of all values ranging from $1 to large amounts at physical and online stores. Small value payments under $25, typically done in cash, are increasingly digital. This escalation in the use of digital payments does pose a few challenges for the merchants who end up paying a higher transaction fee for small value purchases, an increase in fraud and chargebacks, and a lag in settling the funds with the credit card network.
“Technology advances in emerging high-performance new distributed ledger technologies, biometrics/NFC on smartphones, and the recent advances in banking technologies are reshaping the payment industry. The banking industry worldwide is increasingly looking to support real-time payments and settlements. The crypto industry has already solved the problem of real-time payments. But the usage of crypto assets for payments is still in its infancy for mass adoption. In the US, most recently the RTP network was introduced by The Clearing House to facilitate real-time payments and settlements. RTP is a significant development for the US payment industry. Settlement in real-time reduces the risk for merchants and increases cash flow. We can expect many new products structured leveraging the RTP Network and new high-performance distributed ledger technologies like Hedera Hashgraph.
“Another need in the market is the need for a secure and convenient method of payment. Especially as the usage of digital payments and digital wallets continues to rise, consumers will need frictionless and safe methods of payments. QR code and NFC are two technologies that make it convenient for consumers. QR code is a machine-generated code that your smartphone can scan, read and direct your wallet to the exact web location to make a payment. It takes away the hassle of typing a web address or typing in digits. Manually typing is error-prone, cumbersome, and slow. When presented with the QR code at the point of sale (POS) or on a website, the code has the invoice, the merchant details, and all information required to make a secure payment encoded. This new simple encoding technology has made payments seamless.”