The Money 2020 , recently held in the USA, discussed several issues regarding the future of the financial industry. One highlight was the Mega Trend that is foreseen to drive the future of payment. During the past years, the payment industry has undergone significant changes and seems to be altering quicker than ever. Thus, banks, startups, and payment businesses can’t fall behind. These Trends are extracted from a survey in 2017 by Accenture conducted with over 1,500 users in the USA and Canada.
1st trend – Gen Z is first to ditch cash wallets and move to mobile payment or digital wallet.
It is speculated that Gen Z will be the core users that mobile payment service providers will primarily approach. This is because they were born in the digital era and technologies such as smartphones have become part of their lives. Also, they are regular users of social networks such as Snapchat and Instagram. In terms of consumer behavior, Gen Z may be the first generation to switch to digital wallets with mobile banking expected to become their primary payment tool. Today, 69% of Gen Z are already using online payment platforms while for baby boomers, it is only 17%. In time, Gen Z will become trendsetters who make other generations turn to mobile payment.
2nd trend – UX will be highly important.
As payment platforms are growing, customer experience becomes the game-changer for various brands, the higher the touchpoints, the wider the opportunity. With digital technologies, using payments to connect with customers can be done like never before. Think of Google, a prime destination for search engines, who gain huge income from advertisements that users may not care. For payment platforms, values are added when service providers can penetrate users’ payment journey regardless of any actual transactions.
3rd trend – Mobile Payment must be all in one.
From the survey, in 2020, 64% of customers plan to use digital wallets which is an increase from the current 46%. This is the moment when mobile payments must development and add value. This is the time of open APIs and open banking, thus, service providers can better deliver experiences that focus on users. Rewards and prompt notifications can be incorporated alongside usual transactions, yet they need to encourage user engagement. It is forecasted that a service that will become valuable and create traction is the single-view account information wherein users can see their account, withdrawal limit, and credit card or other balances all at once.
4th trend – Never disregard rewards when users will switch cards for points.
We see an increasing number of credit card users that collect reward points. In 2016, users rewards account for over 15 billion USD in forms of cash back, accumulated mileage, and points. Moreover, users are willing to switch cards to gain bonuses or higher cashback from a new card. However, although we see an increase in the reward amount, award redeemed in the USA is not highly increasing. Interestingly, convenience becomes the key. The study found that 76% of users prefer to redeem immediately when using the card at the POS. For this matter, technology takes part with items such as Smart Tap from Google that instantly pays and redeems.
5th trend – A good network will bring banks further.
In the digital era, banks establish their own payment system without collaborations with other organizations. However, we see that only a handful has succeeded. However, when banks collaborate with specialize tech firms, they bring payment services further. For instance, US banks and Zelle have jointly developed a software for real-time payment. They have developed an API network that connects over 30 partners and launched a real-time payment service. At present, this service is used by over 1,000 banks with over 1 million customers. Interestingly, integrating technology with the financial industry can create competitive advantages.
6th trend – Together, banks and FinTech startups can create a financial revolution.
The idea of FinTech startup looking to disrupt banks may have threatened people in the industry. They feared that it may replace and even eradicate banks. In fact, not every FinTech startup is successful, either from lack of knowledge or insufficient consumer base. Conversely, banks need new innovative in order to thrive in the market. Therefore, collaboration can improve speed and enhance the financial structure. Similarly, an example in the payment sector is when Bank of America and Paypal agree to provide convenience for their customers. Bank customers are able to link their cards to the Paypal account and effortlessly shop online.
7th trend – Tokenization: The shield in online payment.
We know that using credit cards for online payment has its risks. When we type in the card’s details on a website or application to shop online, that information can be stolen. Today, this outdated process has been disrupted by tokenization. With it, card details turn to codes that randomly select letters and numbers to be a “token”. The random token replaces the card and is used for payment without having to provide actual details. Apple Pay and Android Pay has embraced tokenization and is welcomed by their users. In the future, it is believed that this technology may entirely replace credit cards.
8th trend – Payment can be anywhere.
In the future, more entrepreneurs will emerge due to the advanced payment system. As payment systems flourish, FinTech startups for payment are also successful. An example is Stripe, a dynamic US-based FinTech startup. They launched an online payment service similar to Paypal, Square, or Google Checkout. They rapidly succeeded with transactions via Stripe amounting to several billion USD per year. The development benefit users as more options and services are available.
9th trend – Cybersecurity: A great threat to the digital era.
In online payment, users need to be highly watchful of fraudsters. It is speculated that in 2018, the 31 billion USD global credit card value may be affected by fraud, an 18% increase from previous years. Today, fraudsters not only steal personal information to access credit card, they are using “Synthetic Identities”. Also, they attack credit card identity verification information on mobile phones, online, or call centers. Several banks and credit cards are taking action by using new technologies such as Geolocation. This technology helps banks identify whether the location of the device making the transaction matches the location specified by the user, thus, helping to alleviate fraud. >> Read more at Enhancing Financial Crime Protection with Identity Check via Geolocation.
10th trend – Existing players need to evolve.
Today, revamping the entire payment system is essential for banks and payment service providers. Speed is the key. Services such as the real-time payment that allows users to instantly pay, transfer, and receive money without having to take the time to contact banks. Some countries are aware of the situation and have begun the change. Canada is among the forefront countries who integrated the international standard ISO 20022 for electronic data interchange between financial institutions. It helps increase credibility and make transactions safer. Moreover, it assists those in the financial industry to exchange data as well as easily and speedily process transactions. In the future, financial institutions need to revamp current structures and create a more open and flexible system which will help them adapt to the fast-changing market demand.
The Mega Trends show that an updated vision will open doors for banks, credit card providers, and related parties. Advantages are not for those who wait for change but are for first movers who review business strategies, manage working processes, and update cultures. Follow our blog and update trends like the Digital Wallet at the DV Blog.