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Innovations in payment technology

by  David Dwyer on  18/07/2018

After 3 years, it's time to review and update the subject of payment technology

Three years ago we wrote about Visa Europe Collab, looking at innovations in financial and payment technology.  As we’ve said many times at Inspire one real time month is closer to one web year, so we thought it was time to review the subject of payment technology.

It's an interesting subject and unsurprisingly it mirrors the changes in technology more generally.  What we’re currently seeing, in broad terms, is not so much the introduction of massively innovative or disruptive technologies into the payment marketplace, rather the continuing maturing and the further adoption of technologies which have existed for some time but for various reasons, possibly because they were new and therefore strange, had not been fully embraced by consumers.

Peer to peer payment (P2P)
In 2017 circa 69 million consumers, that's one third of the total population of smartphone users, used a peer to peer payment method (PayPal, Venmo, Zelle) to pay for goods, services or simply just to transfer money to another individual. These figures are increasing.  They represent rising consumer confidence in the reliability and security of payment systems albeit systems that have been around for some time.

Mobile Commerce
At the same time with the rising dominance of handheld devices, we see an increase in the number of transactions performed on a mobile commerce (mCommerce) platform. There is nothing particularly leading edge here but again we are seeing consumers becoming far more comfortable with the available technologies and more willing to use these technologies for their convenience. There has been a reported growth in activity on mCommerce platforms of around 6% between 2016 and 2017, outstripping equivalent desktop activity.

There is an excellent (if lengthy) paper published by Capgemini which explores these trends, drivers and implications.

Digital wallets
The use of digital wallets* - Apple Pay, G-pay and Samsung Pay - is showing increasing growth globally: at least according to those most closely allied to the technology.  For our purposes, we are referring to the use of smartphone apps allied to NFC (Near Field Communication) technology which allows a user to complete a payment by tapping their phone as they would a contactless payment card. 

Apple claim that Apple Pay transactions have increased over the last year by 450%, with a 300% increase in the UK alone.  One might lean towards a slightly cynical view of these claims; percentages are a good way of obscuring absolute figures but Apple’s Tim Cook claims that the service is seeing “phenomenal traction”.

Whether digital wallets will ultimately see the level of popularity that contactless card payments have reached is open to discussion and impressive though those percentages might appear, a recent Goldman Sachs report observed that Apple Pay adoption and use was “underwhelming to date by nearly every objective standard”.  (See the summary from Business Insider) It appears that we like to shop on our phones, but we seem far less willing to pay using NFC.

The onward march of Artificial Intelligence
The increasing use of artificial intelligence (AI) by financial institutions large and small continues to improve the process of verifying the identity of a customer in real time.  The ability to track and analyse transaction behaviour has made it easier to identify anomalies in patterns of spending leading, theoretically, to increased security. This increasing confidence in the safety and security of online transactions is driving a boom in their acceptance by consumers. There is an excellent overview from GlobalSign of the increasing role played by artificial intelligence in consumer banking  - Next-Generation Mobile Banking Security Enhancements by AI.

Behavioural changes driven by technology
It was noteworthy that during the recent turmoil surrounding the ill-fated TSB upgrade that, although the underlying banking system was unaffected, the considerable outcry was caused by the inability of customers to access their accounts either via mobile devices or from the desktop.  There was good coverage of the problems and their ramifications over at The Week if you wish to know more.  It was evidence, if any were needed, that consumers have fully embraced online financial services and judging by the various complaints aired during that period, the way that people access and use their accounts has changed fundamentally.

Innovative technologies

On the horizon
What of Visa Europe Collab?  VEC continues to drive innovation by supporting startups and leveraging emerging technologies.  They recently partnered with Blippar to incorporate payment technology into an augmented reality app.  Essentially this allows consumers to point their phone at something in which they are interested, the outfit worn by a model for instance, or a friends handbag, and have the application recognise it, source it and present the user with the option to purchase the item and have it delivered to their door.  This technology is being trialled at House of Holland menswear and it is hoped that, following this proof-of-concept phase, it can be rolled out into the wider retail environment.

Blockchain, beloved of Cryptocurrency geeks, is also under the microscope with one application of the technology being to facilitate cross-border financial transactions.  This is of interest not only to consumers but to large industrial concerns where the components of a final product may be sourced from multiple locations and can cross borders many times before final assembly.

The aim is to use emergent technology to find way to reduce both the costs and inconvenience of transferring funds, simplifying the process and forcing financial advantages at the same time.  It is predicted that Blockchain technology will have a major effect on the broader financial services industry; about this disruptive influence although this is such a large and technically challenging subject we can only hope to scratch the surface at present.

[Ed: We are extremely cautious about cryptocurrency and would advise any of our clients to undertake the fullest due diligence before considering any sort of investment]

The Internet of Things (IoT)
The Internet of Things, the interconnection of smart devices all linked through the internet, has been a talking point for many years and we are still some way from its fullest flowering.  Often discussed in terms of our fridge detecting when we run low on an item and automatically reordering it for us, its potential stretches far further.

Imagine a train journey that requires no ticket, no barriers, few staff - you simply turn up, get on your chosen train, leave when you reach your destination and you are automatically charged for the journey.  The technology for this is available already; your smartphone has geolocation, most have NFC capabilities, all are inherently networked devices that could talk to a network-enabled train.  Once the train ‘knows’ when you got on and off, the systems behind it can calculate the fare and debit the amount from your account.

Likewise a car driver travelling through toll roads where they do not need to stop, or a Fast Food drive-thru where your order is placed based on previous purchase.

Inherent in this vision of the IoT is a degree of trust in the security of any payments;  in this version the commuter is not being asked to approve payment - the process is utterly seamless.  Technology will be required to create the necessary degree of trust between consumer and service provider. However the prospect of increasingly seamless transactions is so appealing to all concerned that we confidently predict that the necessary technological advances will happen sooner than you might expect.

See our article explaining the concept of IoT more fully – we’ve been on this since 2015 when it was all very cutting edge and a bit ‘out there’.

Where is it all leading?
All of this underlines the importance of properly integrating current payment technologies into websites and mobile offerings and keeping a weather eye on emerging technologies.  The easier consumers find the overall experience, and the more confidence they have in them, the more likely they are to complete their purchase.  The more consumers encounter and use integrated services, the greater their expectation that all services will be integrated.  The increasing levels of comfort with current technologies suggests that there will be less resistance to new developments, such as the Blippar augmented reality, when it finally arrives on their smartphones.

Baffled? Know you need to embrace this but no idea how?  Know a bit but need to move forward?  We can help from a complete e-commerce website delivery to enhancing your digital marketing strategy. 

Do give us a call on 01738 700006 and we’ll happily conduct a complimentary online presence review of your business and help you plan the way forward.

*Digital wallets, an electronic device or online service that allows an individual to make electronic transactions. This can include purchasing items on-line with a computer or using a smartphone to purchase something at a store.

Customer Service, Internet of Things, m-commerce, Mobile Commerce, Online Banking, Security, Selling, The Evolving Web
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