Swipe, Tap, or Scan? The Future of How We'll Pay
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Fintech is going through a rollercoaster of technological changes in recent times, and this is all that the masses are talking about, as per reports by Google Trends. Remember the days when you’d hand over a note from your pocket to your vegetable vendor? Now, it’s just a quick scan of a QR code, and you’re done! Cash is no longer the king in 2024, as cashless digital transactions have taken over. The days of digging into your purse and wallet for cash have ended. Speed, security, and ease of payment are what most fintech companies are battling around, trying to provide consumers like you with the most convenient financial services possible. In the following article, we will uncover the historical shift from cash-based to cashless transactions and what the future might look like for the payment industry.
Rise of Contactless payments
Contactless payments have made it really easy to finish digital transactions in a snap! All you have to do is tap your card and pay without making any physical contact. This technology became more popular during the pandemic due to hygiene and safety concerns. From $7.4 trillion in 2024, their value is predicted to increase by 113% in the next 5 years. Campaigns like “Scan and Pay” and “Tap and Pay” have contributed to this projected rise. This mode of digital payment is gaining a lot of acceptance among merchants, transportation providers, eateries, and even big tech companies that are planning to capitalize on contactless payments in their business strategy.
What factors will affect the future of payments?
1) Internet of Things (IoT)
An interconnected network of devices like smartphones and tablets carries a lot of unstructured data. This data can be accumulated to study and analyze user behavior and preferences with the help of artificial intelligence and machine learning. With this technology, businesses can detect anomalies and threats and create stronger fraud detection systems for the safety of your sensitive information. With the integration of IoT in payment processing, users can automate their money transactions and get a frictionless checkout process. It restores consumer trust and boosts a business’s revenue as well.
2) Government and Regulations
Each country operates on its own complex web of regulations to govern the fintech industry. The first and foremost priority for any government is data protection and consumer safety. So a government has to create a balance between modern innovations and securing the interests of their citizens. Governments have to constantly monitor the authentication protocols and safety measures of payment systems and establish frameworks and regulatory policies that need to be followed across the country. Without government support, fintech won’t gain enough flexibility to explore untapped areas of innovation.
3) Super-apps
Ever wondered how you can easily manage your credit card from a food delivery mobile app? It is possible because of super apps. Super-apps are versatile platforms that offer you a wide range of features on a centralized platform without the need to switch between apps. You can access your bank account, make payments, invest in stocks, get life insurance, and much more on a single platform. Businesses can reach a wider consumer base by using super-apps to predict your preferences and behavior and improve their customer acquisition. It’s a win-win situation for both the businesses and the users. Check out this cool video about super-apps.
4) Big Data and Analytics
You won’t believe it if we tell you that the big data and analytics market, fintech, and AI are among the fastest-growing industries globally. Fintechs use big data to store large datasets of your online transactions and simplify finance management. Investing in this technology has been very beneficial for financial institutions as they can predict your behavior and spending patterns through analytics and can influence loan handouts and credit extensions accordingly. With so much information available to them, they can improve customer base segmentation and personalize customer service.
5) Digital IDs
A digital ID is an electronic representation of your identity and can be stored on a cloud or any physical device. Digital IDs simplify your access to financial services by letting you create bank accounts or apply for loans without the need for time-consuming identity checks. You don’t have to scratch your head to recall your PIN number or carry it in your pocket like a physical wallet. Unlike credit cards, digital IDs are not vulnerable to fraud because of their biometrics feature that can authenticate the user by analyzing their biological behavior. We will discuss more about biometrics later in this blog.
Your expectations as a Consumer while making payments
As consumers, you would expect the payment process to be effortless and secure, wouldn’t you? You should be able to pay from any location at any point in time with full accessibility. This is possible if there is the least amount of friction in the checkout process and the transaction process is backed by strong security protocols. Let’s break down some of the other common consumer expectations:
1) Accurate billing
What if you receive electricity and gas bills that aren’t clear or make it difficult for you to navigate through the message? It can be really frustrating to deal with manual errors or outdated technologies. The billing system must have accurate invoices so that you can easily manage your finances and save time.
2) Trust in technology
It's less stressful to make payments when you have established a level of trust with any financial service provider. To establish consumer trust, financial institutions have to make efforts to not just promote their brand and build a good reputation but also enhance the quality of security offered by their payment interfaces.
3) Multiple payment options
Platforms with a few payment options can lose the interest of consumers buying the product at the last stage of the process when the user is almost convinced with the product. With multiple payment gateways, you can choose your most convenient method to finish the transaction and check out your desired item.
4) Smooth user interface
Applying for loans or paying electricity bills shouldn’t be time-consuming. You must be able to navigate easily and make payments in real time. It’s also easier to manage money if an interface can provide all financial services on a centralized platform and help you monitor your income and expenses at the same time.
Now let’s go through the upcoming trends and innovations in payment technology that are introduced to fulfill your expectations as a user.
Emerging payment trends to keep an eye on
1) Buy Now Pay Later (BNPL)
COVID-19 and high inflation rates gave a big boost to the BNPL payment option as consumers became more serious about managing and saving their money. By 2032, BNPL payments are expected to reach around 9226.65 billion USD and are set to become a popular trend for the future of payments. If you don’t know what BNPL is, it is a type of loan that lets you purchase at one time and pay the remaining money after a certain period of time. It helps in increasing the conversion rates and revenues and narrows down your risk of falling into debt.
Source: www.precedenceresearch.com
2) Open Banking
Historically, banks have monopolized your personal finances and transactions. However, the conceptualization of open banking has changed this tradition. Open banking is a norm that facilitates secure data sharing between financial institutions and third-party providers with the help of APIs. It offers standardized protocols that help businesses comply with government regulations. With the open banking trend, users also get to have control over their finances and get the privilege of sharing their payment details with third-party financial providers like investment or expense tracker apps.
3) Biometric Authentication
Biometric authentication systems use your biological or behavioral characteristics to authenticate your identity. They can scan fingerprints, voice, and iris scan features to verify who is trying to get in. These systems have an impenetrable layer of authentication protocols to minimize the risks of identity theft and fraud. Despite being newly introduced in the payment industry, the biometric market is expected to cross $56.6 million by 2028, since this technology is gaining consumer interest with its fraud mitigation capabilities. Here’s a perfect example of its usage, where you can see people buying food through biometric systems with facial recognition technology.
4) Digital Wallets
Physical credit/debit cards aren’t that prominent nowadays, as you can now access your card and banking account information through digital wallets in a few taps. Digital wallets gained popularity with the rise of services like GPay and Apple Pay back in the 2010s and are more commonly used by GenZ consumers (80%). One of their most important advantages is the advanced cybersecurity features, which make it easier for users to trust this payment method across different platforms.
5) Financial Inclusion
Universal Financial Access was introduced by the World Bank in 2014 to ensure that the people who are deprived of financial services get access to their own accounts for making financial transactions. Despite that, more than 2 billion people still don't have a personal bank account, and the ones who do have an account don’t use it frequently. However, this initiative has gained a boost in developed nations due to mobile phones, as these devices offer more convenient and affordable payment mechanisms.
6) Central Bank Digital Currencies (CBDCs)
CBDC is the digital form of a nation's fiat currency with a fixed value, and it is supported and issued by the nation’s central bank. It reduces your transaction fees and provides a secure option to exchange money. Since it fulfills the regulatory requirements and technicalities, many countries have been using this digital currency for cross-border digital transactions. 60% of the central banks are already considering incorporating CBDCs, as per a survey by BIS. You are definitely going to hear more about this currency in the near future.
7) Blockchain and Cryptocurrencies
Blockchain technology and distributed public ledgers have modernized traditional payment systems with their secure and transparent properties. These technologies are utilized in cryptocurrencies that have a huge network for storing records and exist virtually. Cryptocurrencies are not regulated by the government and are very likely to be used for day-to-day payments in the next few years. Bitcoin, Ethereum, and Ripple are some of the well-known examples of cryptocurrencies and can be purchased from online platforms.
8) E-commerce
Many e-commerce platforms have adopted multiple payment gateway options like net banking, credit cards, debit cards, and UPI apps to enhance the user experience and cover a wide range of audiences. It’s a boon for merchants, as they can create safe payment links and share them with customers through multiple channels. These gateways also offer affordable options to users, like cardless EMI, branded EMI, and credit card EMIs, so that the users can opt for loans during the point of sale (POS). With these innovations, e-commerce businesses are creating more value for their customers and earning their loyalty.
Our Fintech software developers know what your customers want
With years of skill and expertise in developing fintech solutions like payment gateways, digital wallets, and payment apps, Webelight Solutions Pvt. Ltd. can help you create quality fintech solutions that give the best return on your investment and build your reputation as an innovative and trusted firm in the fintech industry. Our team also specializes in creating apps where users can manage their wealth, track expenses, and make wise investment decisions with AI-backed technology.
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