With global payments shaping the future of commerce, post-pandemic retailers and merchants are moving fast to adopt smart innovations with the least friction and best sustainability. This year, payment transformation has been much more than a mere settlement of transactions or collecting funds. Boston Consulting Group (BCG), citing data by a global finance message provider SWIFT, has forecasted that global payment revenues could rise by between 1 percent and 4 percent until 2024, depending on how soon the economy recovers from the coronavirus pandemic. A model report by BCG on future global payments shows credit cards generating the most revenue as they are used by roughly 50 percent of customers worldwide. The use of debit cards and credit transfers will also see high growth rates despite regional variations. The effective use of virtual payments and accessible online retail will also rise, offering many unexplored payment options.
At the same time, conventional payment methods may see a decline. Management consulting firm McKinsey & Company found that banks in several countries have closed some of their branches and removed many of their ATMs. In India, ATM usage fell by 47 percent in April this year, while in Britain it declined by 46 percent between March and July. Australia's top four banks have removed 2,150 ATMs and closed 175 branches since June. The projection followed a survey in cash-preferring countries such as Germany, Japan and Italy between May and June, which showed cash usage had declined by 30 percent. These shifting trends challenge retailers to earn revenue in real-time transactions while reducing health risks. Merchants receive revenue from direct and indirect distribution channels driven in the most minimal and instant, yet intricate way.
Technology giants such as Amazon, Google, Apple, Samsung, and Alibaba are more invested in developing revolutionary customer-centric payment methods, replacing traditional financial services with their own systems. Merchants will have to embrace more massive transformations in the future as the growth in payment systems continues to accelerate.
Artificial Intelligence and machine learning-based payments
Artificial intelligence (AI) and machine learning (ML) technologies define the future of payments. These smart solutions are capitalising on financial data to automate fraud detection and streamline internal processes. Other applications include automatic alternative payments, customised commerce, and propensity-to-pay prediction.
The combination works intelligently to ease recurring payments and customer-account updates by identifying patterns and adjusting demands with available data. Payment intelligence improves sales conversion with necessary updates available for customer's options. A card, bank, or credit information update is a few steps away to be securely changed. American multinational financial services company Wells Fargo has its own AI application, known as Predictive Banking, to handle recurring bill payments, money-saving notifications, and other rudimentary functions.
As financial services increasingly move to digital-based environments supported by mobile payments, e-commerce, and online banking access in every handheld gadget, AI-based payments provide an ever-growing list of alternatives for customers to choose from. The International Data Corporation forecasts global spending on AI to increase to over $110 billion by 2024 from $50.1 billion in 2020. For the payment industry, this growth defines an outsized prospect to improve the payment ecosystems for banks, providers, and merchants.
Nevertheless, there is an increased risk of fraud in a vast industry consisting of merchants, brands, and customer data. According to Juniper Research, card-not-present fraud poses a $130 billion threat. The risk will encourage payment companies to invest in sophisticated AI-powered fraud prevention and detection technologies. Biometric processing systems are currently introduced in many payment applications, and at this rate, voice-processed systems are expected to be fully developed soon. The swift adoption of AI and ML supports merchants to keep up with borderless e-commerce.
Cross-border transactions with faster real-time operations
Faster real-time payment systems are needed nowadays to reduce time and friction as this not only increases sales but also ensures a better customer experience. According to a report by MasterCard, real-time payment systems are available in more than 20 countries, including the UK and Singapore. Last year, almost 50 percent of transactions in the US involved real-time systems.
A customizable application programming interface (API) to leverage system interactions with a more secure transmission process is the key to this global development. Open APIs allow customers to initiate payments from authentication to connect with their preferred payment providers via any handheld device from anywhere at any time. This is crucial for merchants because having the capacity to conveniently accommodate any payment method will accelerate sales conversions.
Real-time payment systems can help merchants reduce cash-flow pains, and if the speed is enhanced with the right level of convenience, it would enable easier access, better user interaction, and more secure data transmission. India's Unified Payments Interface (UPI) provides tools that enable bank account holders to instantly send funds with their mobile devices through the country's Immediate Payment Service. UPI is becoming more popular, with its transaction volume increasing 100-fold to 9.2 million in just nine months since its launch in August 2016. With clients such as Tez and WhatsApp, UPI has processed 754.5 million transfers in June this year alone.
Visa and MasterCard also have facilitated developments in real-time cross-border payments as it persists in meeting exact demands and adding revenue at the same time. An example of the continually upgrading system can be seen in the originally buy-centric PayPal, which has added a lending service option to always keep up with the competitive industry.
Seamless and secure payments to avoid cart abandonment
According to e-commerce personalisation company Barilliance, global cart abandonment in the retail industry increased by 77.73 percent last year. The spike was due to complicated payment methods, along with limited payment options that do not meet customers' demands for fast and convenient transactions. Merchants must acknowledge customers' choices as it is common for them to adapt to a particular payment method.
Additional charges, such as shipping costs and taxes, without clear details, potentially lead customers to abandon sales even with a variety of payment options available. Account-required checkouts may also contribute to cart abandonment. The sign-up and login processes are complicated but can be solved by seamless payment solutions such as guest checkouts. Large companies provide multiple alternatives in terms of payment channels, such as pay-by-text, mobile applications, virtual payments, and interactive voice response. Platforms such as Facebook, Twitter, and Instagram updated their systems with a "buy" button for direct purchases. A step-by-step seamless and secure payment direction allows customers to finalise the purchasing process. The introduction to new or different payment methods encourages people to continue their online buying experience. Among other innovations, payment orchestration probably has the best mix of smart technology, flexibility, and a seamless process to change the payment game.
By orchestrating multiple endpoints with a single API, payment orchestration is designed to integrate all payment systems in a single layer. Amid immense growth in global payments, the main challenge is to manage millions of payment transactions in multi-currency with additional fees and a higher risk of fraud. Payment orchestration is designed entirely for that purpose – a one-size-fits-all digital checkout experience that could optimize both acceptance levels and cost-efficiency.
Due to their disruptive growth, global payment trends are already blooming sooner than expected but not beyond reach. As technology innovation is developing faster than ever, retailers should investigate the data, embrace the trends, and anticipate the growth. Neil Smullian, vice president of business development at global tech consultancy DataArt, recommends that companies of all sizes quickly upgrade their payment game to develop their customer base, considering the many forms of disruptions in fintech. "Integrating the latest tech stack in processes and looking out for future payment technologies is vital to remaining competitive. You don't have to be Google to implement the latest tech," Smullian said.