Payment Technology Trends
There's no question that payment technology trends in the financial sector are moving forward at a rapid pace. Financial institutions, especially those handling payments, are striving to provide fast service and a desirable experience. You can't afford to be behind the curve in what services you offer. At the same time, you need to be cognizant of how to provide the best experience you can and build relationships with those you serve.
Financial technology -- you may have heard it called FinTech -- has traditionally been stalled by red tape and banking industry regulations. Past innovations have often taken time to be implemented or have been abandoned because of these restrictions. But with increased security measures and more consumer comfort with using technology, we're starting to see an influx of payment options available to both commercial users and consumers.
The good news is that these trends in payment technology going into 2019, will help level the playing field even more, allowing smaller financial institutions to compete more fully with big banks. Staying on top of the trends can be challenging, but knowing what's coming can help you be ready to give consumers what they want, even before they ask. Here's what to look forward to in the year to come.
New, Frictionless Forms of Payment
Mobile solutions are more than a perk. Now, they're the expected method for conducting financial business. Members of Generation Z -- those born between 1996 and 2010 -- have little knowledge of life before mobile devices, and 70 percent of them have used an app to make a purchase in the past year. Millennials may be older, but they're quick to adopt and use mobile technology as well.
The truth is, consumers of all ages are becoming more comfortable using smartphones to conduct just about any type of financial transaction. The convenience that payments via smartphone offers is hard to turn down, even for established users like Baby Boomers.
Mobile means more than just using a smartphone. Mobile solutions will expand in 2019 to include buttons, appliances, tools and accessories. While smart watches have been around now for a couple of years, people will start to get more familiar with using them as convenient ways to pay. And let's not forget smart wireless speakers like Google Home and Amazon Echo that let you buy via voice command; their sales are projected to increase by 84 percent by 2021.
What's a little slower to gain traction? Mobile wallets are seeing low single-digit gains in adoption, but as availability and awareness increase, we may see an uptick in use. On the merchant end, EMV technology in credit cards -- you may think of it as a "chip" embedded in your card -- presumably makes it safer but is still growing in usage. In the year to come, we may see more point-of-sale terminals and automated teller machines integrate the technology; consumers will prefer the added security that their usage brings.
Increased Security Options Leading to Faster P2P and B2C Payments
No one wants to wait 24 or 48 hours, or more, to receive a payment. Industry giants PayPal and Venmo, among others, have the ability to let you make person-to-person or business-to-consumer payments in real time. Consumers are asking for that option from their financial institutions.
New security measures that confirm user identity can speed up the process of payment for all players. Where once passwords -- hard for consumers to remember, easy for hackers to guess and impossible for financial institutions to truly authenticate -- were the only way to protect account or payment information, now biometric features are permitting fast identification of users. Touch ID, facial recognition and even retina scans can be checked on software carried on mobile devices, so consumers can confirm their identities anywhere to send and receive payments.
What's more, methods of authenticating card payments are improving. Use of tokens (https://usa.visa.com/visa-everywhere/security/tokenization-explained.html), a one-time code generated each time a card is used, is much more secure than simply sending a card number, expiration date and even the CVV 3- or 4-digit code found on the back of a physical card. This encrypts card details and makes it hard for the token to be used for anything other than the intended payment. Advances in encryption technology and ability to quickly encode and send information via a secure network make tokenization and other, similar authentication techniques possible. This is also how services like Apple Pay, Samsung Pay and Google Pay work, by sending a unique token for each mobile transaction right at the point of sale.
Smaller financial institutions can utilize the latest security technology to protect account holders and cardholders from fraud, whether they're accessing their information, making a payment at the corner shop or purchasing online from a huge retailer.
Account Control Features
What's really important to consumers in 2019: Being in charge of their own accounts. App market data analyst App Annie's "The State of Mobile 2019" report reveals that last year, average consumers checked their bank accounts nearly once per day via their mobile devices. That's 35 percent more people than did so in 2016.
Why are people checking their accounts with increasing frequency? Mobile app users want instant access to their accounts with information updated in real time and an edge on identifying security issues.
With instant access to information, consumers can monitor the current state of their finances ("Do I have enough to easily cover that purchase?") and keep tabs on usage by other cardholders, like teen-age dependents, who are on the same account. They can even restrict use and ATM access for dependents, if they need a higher level of control over their children's spending habits.
This might seem like an overload of info, but both consumers and financial institutions benefit. Users get access to their information without the high cost of a real, live teller to answer queries and financial organizations have more savvy customers who are able to curtail spending if funds are low or quickly spot fraudulent transactions.
People are tired of the security breaches affecting retailers that seem to pop up in the news regularly. They want more control over their own accounts and faster access to make changes and cut off unauthorized access. Consumers say they want:
•The ability to temporarily disable a card. Until a breach can be straightened out, consumers want to control their card's usage immediately, from their banking app. If they've lost a card or want to personally limit their expenditures, they can quickly disable the card without involving staff at their financial institution.
•The ability to limit geographic regions. If they're not traveling, most people want to prevent hackers in Russia, for example, from using their card numbers and personal info. Limiting and expanding the geographic area where the card can be used on the fly gives consumers control and ability to travel without hassle.
•The ability to put a cap on total spending over time. Individuals know how much they usually spend in a month and may not want to allow purchases that exceed that to prevent fraud. With easy options for increasing the limit, consumers can buy that new TV when they want to while putting a halt to anyone else's fraudulent usage.
Being able to provide consumers with easy control for their banking needs will be key in 2019 as account access becomes a "must-have" offering for any financial institution.
Payment Technology Data Collection & Customer Experience
In the days of the small-town bank, personal relationships were paramount. The neighborhood bank teller knew your name, your kids, your business and your goals for your finances. Today, small financial institutions can still forge personal relationships better than behemoth banks, but that individual touch is getting lost as consumers who request payment technology trends like mobile banking and fast transactions. In fact, estimates are that by 2025, 95 percent of customer interactions will be managed without a human involved at all.
Financial organizations still collect data on consumers, but it takes the form of bits and bytes in a database. With the mounds of personal data available on each shopper or debit card user, it hasn't been easy to make sense or organize it in a cohesive way. That information has been hard to access and impossible to use in relationship building -- until now.
Payment technology trends are also being affected by the technological advances in artificial intelligence. Artificial intelligence (AI) now can help companies quickly crunch through data and make valuable assumptions about buying habits and preferences. Data can be collected, searched for patterns and insights, and unified for additional, future analysis. This can sound a bit scary at first glance for consumers, but it actually carries the benefit of offering personalized experiences with shopping and making payments.
Payment Technology Trends: Rewards and Loyalty Programs
Payment technology trends are being integrated into every aspect of consumer banking including rewards and loyalty programs. A rewards program without rewards that the consumer values has little or no adoption. But with the customization possible through advanced use of AI, rewards and loyalty programs can be tailored to an individual's preferences and needs.
For example, London-based HSBC has created an AI-powered program that reads customer data to predict how each person is most likely to redeem their credit card points. That way, it can actively market new cards with rewards like travel, cash or gift cards that are most likely to appeal to the targeted recipient.
New payment technology trends are not only advantageous when implemented by larger financial institutions but smaller institutions are seeing just as many benefits. Smaller institutions can utilize the same technology to increase adoption of their products. Fast and easy user identification and the use of AI to quickly analyze data and provide reasonable reward offers can help bring more people on board to use your debit card or mobile app for payment.
Similarly, AI can be used to determine prizes for usage that appeal to each individual. Rather than being earned, such as via rewards programs, contests and sweepstakes randomly reward users for implementing certain behaviors, like swiping a card at a point of sale. Even though consumers have become more savvy, marketing techniques like sweepstakes still work for encouraging behavior.
Payment Technology Trends: Analytics
Consumers are the only beneficiaries of AI and data crunching. Small financial institutions can take advantage of careful analysis of account and card holders' behavior and demographics to help make better decisions about marketing and growing revenue. Understanding how your users implement the services you offer can help you increase your transactions and fix problems with under-utilized products.
More extensive use of analytics can help you identify problems so you can connect personally with consumers who might be experiencing financial trouble. AI could flag all consumers with a certain account balance and a history of 1-2 missed payments so you can help prevent their continued financial free fall. Of course, knowledge of consumer behavior through data analysis must be pursued sensitively, but the ability of smaller institutions to offer excellent customer service is a key reason why you're well-suited to manage these issues, given a heads up via AI.
Analyzing consumer behavior can also help you design promotions that are most effective. Plus, you can segment different offers to different groups in your user base and then circle back around to track how those offers were received. That can help you refine your promotions, increase engagement and bring in more business.
Keeping Up with Changing Payment Technology Trends
As we begin 2019, financial institutions need to be aware of changes in the industry and how those can be implemented to their advantage. Whether it's faster payment options, better security for consumers or improved data analysis that leads to better programs for both you and your users, improved financial technology can bring a host of benefits with its implementation. Transfund offers many ways for you to benefit from new payment technologies and trends that will pop up through the year. To learn more about the products and services that TransFund offers, call us at (800) 588-6816.