Guest contributor |
Consumers and businesses want convenient, reliable and secure ways to secure financial transactions. Over the years, the financial industry has answered with several payment innovations that push the boundaries of what’s possible. More and more people are turning to digital payments. In 2024, the total transaction value for digital payments is forecasted to reach $11.53 trillion, according to Statista Market Insights.
Whether online or in-store, customers want options in how payments are made. Contactless and mobile payments such as Apple Pay, Google Wallet, and Samsung Pay became the norm because of the pandemic, and they’re still increasing in popularity today. With just a tap or a swipe on their phone, customers can pay for almost anything on the go.
Payment options are also becoming more flexible and accessible. ‘Buy now, pay later’ solutions allow customers to purchase something now and pay in instalments over time, often without extra interest. This approach is reshaping how people handle their finances and is becoming a favourite among both shoppers and retailers.
Speed is an integral aspect of digital payments. Customers and businesses expect to complete transactions within mere seconds and get immediate confirmation and settlement. Instant payment systems around the globe such as FedNow and RTP in the US, SEPA Instant Credit Transfer in Europe, UPI in India, and Pix in Brazil make this possible. They play a crucial role in reducing processing efforts, keeping transaction costs low and improving cash flow.
Innovations in virtual money such as blockchain and central bank digital currencies (CBDCs) are also taking digital payments a step further. Blockchain is the underlying technology behind cryptocurrencies such as Bitcoin. It improves transaction efficiency and security with its decentralised, transparent, and tamper-proof nature. Meanwhile, the world’s central banks are exploring CBDCs to modernise how money works and boost financial inclusion for the unbanked.
With the number of payment solutions rising, customer experience is key to stand out in the space. Banks and fintech organisations need to prioritise creating human-centred, frictionless experiences that make payments a natural and invisible step in the process.
As customer and business expectations evolve, so will payment platforms and services. Next-gen technologies will drive payment innovation further by revolutionising experiences and creating new revenue streams for businesses. In our work as a digital partner for some of the world’s leading organisations, we’ve seen banks and financial institutions maximise available technologies to build successful payment solutions:
Real-time capabilities – Real-time payments are becoming a standard expectation. They allow transactions to be processed instantly, cutting out the wait time of traditional systems. This speed is crucial for meeting today’s demand for quick and seamless financial transactions.
Microservices-based cloud-native architecture and platforms – Banks are moving towards microservices-based, cloud-native architectures. This means breaking down complex systems into smaller, flexible parts. The result is better scalability, quicker updates, and a more resilient payment system.
Blockchain and artificial intelligence – Blockchain and artificial intelligence are shaking things up in the payments world. Blockchain offers secure, transparent transactions, while AI helps with fraud detection and personalising financial services. Together, these technologies are pushing the limits of what payments can do.
Data modernisation – Banks are focusing on better data management and analytics to get valuable insights into transaction patterns and customer behaviour. This helps in creating more tailored and effective payment solutions. Investing in master data management also allows banks to get a better handle on various types of data such as client, reference, and product information. This helps speed up straight-through processing rates and ensures smoother service for customers.
On a global scale, banks, fintech companies, and technology providers are working hand-in-hand to innovate faster and build ground-breaking payment solutions that meet demand. Several technological capabilities are crucial pieces to this collaborative effort. Through open banking, third-party developers can access banking services through open APIs. This openness encourages innovation, leading to new payment solutions and giving customers more options.
Embedded finance and banking-as-a-service (BaaS) are integrating financial services into different platforms. Now, businesses can add financial products to their services, making payments seamless and expanding what they offer. BaaS platforms provide the necessary infrastructure for these integrations.
There are also ongoing efforts to bridge geographical gaps for instant payment systems. Interlinking instant payment systems offers many advantages, but can come with several challenges in interoperability, security, and compliance. Initiatives such as Project Nexus, Project IXB, and UPI Global are helping to solve this challenge and contribute to a more connected global payments network.
International standards such as ISO 20022 are also helping streamline cross-border payments. This standard for electronic data interchange provides a common language to exchange information about payments. It also allows financial institutions to transmit additional information such as invoice data to improve transparency and efficiency in payments.
At Orion, we are building a partner ecosystem that is designed to help businesses navigate the complexities of implementing innovative payment solutions fast. Keeping up with these changes is crucial as we navigate the future of payments and meet customer demand.
Anoop Gala is the global head of financial services at Orion Innovation
This article was originally published in the Autumn 2024 issue of Technology Record. To get future issues delivered directly to your inbox, sign up for a free subscription.