The introduction of Apple Pay and contactless in 2015 revolutionised the way we pay and undoubtedly heralded the start of a brand new era for the payments sector.
So what does 2016 have in store? Direct Debt and payment-processing solutions provider, First Capital Cashflow, asked the experts what they predict will be the next big thing in payments over the next few months.
Here’s what they had to say:
1) Contactless will continue
There is no doubt that contactless payment has taken the UK by storm. It is now used for one in four pay-as-you-go transactions on the London tube and research from Payments UK found that 771 million ‘Faster Payment’ transactions were made in 2014, predicting that this will rise to 1.94 billion by 2024.
Ray Brash, Managing Director of PrePay Solutions commented on this growing trend: “Contactless is obviously the word of the moment when it comes to payments. With the limit having increased to £30 at terminals, contactless will take off further as customer demand for convenience grows.”
However, like any trend, it will not be universally accepted overnight. John Cooke, Commercial Director Card Services at allpay Limited warns that “change in payments is usually very slow… Contactless has been around since 2008 and it’s still not accepted in most supermarkets.”
Nevertheless, we can be sure that the contactless wave shows no signs of slowing down anytime soon and small retailers will need to ensure they are prepared.
2) UX will become increasingly important
User-Experience (UX) is a buzzword right now as the public increasingly demand easy-to-use and responsive technology to make their lives easier. The likes of Uber and Amazon have perfected the user-journey, setting the bar high for the rest of us.
A research report published by Infosys entitled ‘Payments Strategy – Renew the Old, Ring in the New’ commented that: “Customers now expect a Netflix-style experience across channels, in which they can pick from one channel what they left in another channel.”
Is an omnichannel experience therefore set to be the next big thing for the payments sector?
We think so.
By allowing bank, card and virtual payments to be accessed via one easy-to-use system, it is hoped that this kind of approach will eliminate the administrative burden currently facing businesses and consumers alike, resulting in a ‘frictionless’ and less confusing payment solution.
3) Evolution of the banking sector
Challenger banks have continued to emerge over the last few years, giving consumers more options when it comes to who they place their trust in.
The traditional banks have therefore had to up their game in order to compete, and nowhere is this more obvious than in the development and widespread use of online banking apps.
So what is the next stage of the banking evolution?
Mike Laming, Lead Technologist at Adaptive Lab, has predicted that “software companies, with banking licenses, are going to redefine what it means to be a bank… They have the freedom to reimagine from the ground up what a bank should be.”
More drastic changes will certainly be seen in 2017 when the second generation Payment Service Directive comes into play. This new directive will require all banks to open up their Access to Accounts (XS2A) leaving the door wide open to new entrants into the payments marketplace. Banks must evolve if they are to survive.
4) Fingerprints will be used to fight fraud
With 2015 being a year of data-breaches, calls for cyber security to be tightened has thrown up challenges for the payments sector.
Way back in 2006, when EMV (better known as Chip and PIN) replaced magnetic strips, fraud cases dropped dramatically, but issues at CNP (card not present) transactions still remained. Fingerprints, or biometric authentication, may be a way to reduce some instances of fraud but it would not remove the issue completely.
The Infosys report mentioned earlier has suggested a solution in the form of ‘Big Data’ where each transaction is analysed in real time, noticing anomalous activity straight away. This technology does require a lot of additional research and development but it is looking like a promising option moving forward.
5) Cash will remain king (for now…)
This is probably the most shocking prediction of the five but it is one that should not be ignored.
Statistics from the Bank of England show that the number of banknotes in circulation is now higher than ever, increasing from 1,895 million in 2004 to 3,239 million by the end of February 2015. Production has also increased from 469 million in 2006/7 to 843 million in 2014/15.
Peter Moore, CEO of Consolis commented: “To ignore cash is to ignore vast swathes of the population and the businesses that cater to them. For example, convenience stores and small, independent cafes and retailers still rely on cash as the cornerstone of their businesses… Cash is still king [for many] that rely on these corner shops and cafes for their everyday needs.”
However, this is not to say that the evolution of payment technology is by any means superfluous. For the B2B sector specifically, it is of great importance that the payment industry continues to innovate and become more receptive to digital technology due to the issues that occur with ‘late payments’.
The need for a dynamic and progressive alternative to the somewhat outdated payment systems that are still in existence is necessary if our businesses are to compete on a global stage.