The Payments Industry has been an early adopter of technology and introduced innovative solutions to further expand in the changing market environment and drive penetration. Digital payments have transformed the way we conduct financial transactions and lead the way to this modern era of contactless payments. Digital payment offers a convenient, fast, and secure way to pay, promoting financial inclusion, and enabling economic growth. In this modern era, technology has modernized the traditional way of exchanging money, making it easier and more convenient for individuals and businesses to conduct transactions. Thus, financial institutions were able to deliver the best of services to customers, which in turn, led to the building up of customer confidence in innovative solutions – while further driving adoption and usage.
Key drivers that have contributed to the widespread adoption of digital payments:
- Rapid adoption of Internet and Smartphones
- Seamless payment experience: From previous trend of click and go we moved to touch and go, wave and go, face and go
- Financial Inclusion: reaching the remotest corners with the help of technology
- Buy Now Pay Later
Evolution of Technology
Widely Adopted Technology
- EMV (Europay, MasterCard and Visa) technology
- Unified Payment Interface (UPI)
- Innovative POS Technology
- QR code
Emerging Technology – The Game Changers
Artificial Intelligence (AI)
AI is the ability of systems to perform tasks that require human intelligence. AI is already having a thoughtful impact on the way we live and work, and its potential for future innovation is virtually limitless. The personal voice assistants like Siri, Alexa enables a more natural way to interact with the technology. Payment related use cases of AI:
- Fraud detection: Analyze patterns in payment data and detect fraudulent transactions in real-time.
- Risk management: Analyze data to identify potential risks in payment processing, such as high-risk transactions or suspicious behaviour.
- Personalization: Analyze customer data to provide personalized payment experiences, such as recommending payment options based on past behavior.
- Chatbots and virtual assistants: AI-powered chatbots and virtual assistants provide customer support and answer questions about payments.
Blockchain provides a decentralized, digital ledger that allows users to record and verify transactions without the need for a central authority. Blockchain is a database that gathers data in groups called blocks. These blocks have a fixed storage capacity and when filled are connected onto an existing block to create a chain. Every event that happens in blockchain is recorded on a public ledger, which is a record-keeping database that ensures the participants’ identities are kept secure and pseudo-anonymous. It is virtually impossible to alter or delete data in blocks as each block in the blockchain contains a unique cryptographic hash that is dependent on the data within that block, as well as the hash of the previous block in the chain. As a result, any attempt to change the data in one block would require recalculating the hash of that block, as well as the hashes of all other blocks in the chain. Simply put, data in blockchain is immutable. The transaction gets completed in real-time in the blockchain network due to fewer negotiators. Various public blockchains are global and can transfer money anywhere in the world. Blockchain technology has numerous use cases in payments and here are few examples:
- Peer-to-peer payments: Faster and more cost-effective transactions between individuals, businesses, and organizations
- Remittances: Allows payments across the globe quickly
- Micropayments: Small transactions that are typically too expensive to process using traditional payment systems like, subscriptions, etc.
- Stock Exchange and Share Trading: The traditional stock exchange process takes more days but with blockchain the exchange is immediate as there are no intermediaries.
Metaverse is a virtual environment that exists in a shared space – it is not device-independent, nor owned by a single vendor. It is an independent virtual economy, enabled by digital currencies and non-fungible tokens (NFTs). The metaverse refers to a virtual world where users can interact with each other and digital objects in a three-dimensional space. While the metaverse is still in its initial stages, there is a growing interest in exploring how to implement metaverse related use cases, few examples:
- Users can buy and sell digital items and even virtual real estate
- Book and pay for virtual events
Overall, as the metaverse continues to evolve and become more mainstream, there will be a growing need for payment solutions that integrates to the virtual world. This could present a significant opportunity for payment providers and financial institutions to expand their offerings and provide new, innovative solutions for users in the metaverse.
Digital payments have become increasingly popular, but they can also be vulnerable to security risks, such as fraud and identity theft. These risks need to be minimized with robust security and risk management practices. Transactions should also comply with latest regulatory requirements and industry best practices.