The payments industry has gone through some pretty rapid changes over the last ten years or so; but just where will we be a decade from now?
Analyzing recent trends and estimating where these can take us is part of the process, but can only take you so far. If the last ten years has taught us anything it’s that disruptive technologies can shift the direction of travel in a way few would expect.
Cash in balance as demand holds firms despite it all
Recent trends will continue to play out in the cash space. Cash will continue to feel a slight squeeze in developed markets, but play a stronger role elsewhere. “Cash might diminish in use in some regions (Western Europe for example), but will elsewhere continue to be used for cultural reasons,” says the WPR 2014 from Capgemini and Royal Bank of Scotland. Nevertheless, electronic payments will also increase as more consumers are exposed to services like payment cards and mobile money. Closed loop payment instruments like prepaid cards will become more popular.
Everything will be real time with a wider choice of payment instrument
The faster payments concept has now been deployed in a handful of countries but is the biggest demand from consumers and businesses. Regulatory pressure in most countries will push the banks to establish real time payment transfer systems that will then become embedded in new services offered by banks and other players. International trading links and competition from cryptocurrencies will then drive cross border real time payment systems.
Cryptocurrencies stick around but don’t dislodge fiat currencies
Cryptocurrencies like Bitcoin have an uncertain future. While some hail these as the future of money, others remain to be convinced. Untangling the web of complexity around them will be crucial for their success. By 2024 we see them triumphing as a means of exchange – as a payment method. But as a store of value it’s hard to see any stability lasting. “These currencies could change the way traditional payments are made, however the real (as opposed to virtual) value part of the transaction will reside with a PSP [payment service provider],” says the WPR 2014.
Two factors they provide that people will still want in ten years are anonymity and the ability to transfer funds in real time globally, across borders. Cryptocurrency technology will enable a plethora of local currencies to be developed.
Biometric authentication will end the PIN
Biometric authentication could be the single biggest change we see over the next ten years as slowly the PIN is replaced with fingerprint, heartbeat, iris and facial recognition technologies. Banks will migrate ATMs tobiometric authentication, while retailers won’t even have to invest in more advanced POS technology as smartphones will enable biometric-authenticated transactions in store. Gartner says as early as 2016,biometric sensors will be featured in 40 per cent of smartphones shipped to end users. Meanwhile, Visa and MasterCard plan to ditch their onlinepasscode systems Verified by Visa and MasterCard SecureCode in favour of biometric technology next year. By 2024 all online transactions will be verified through a biometric method.
Wearables will become seamless
Clunky and a bit too obvious in 2014, in the next ten years wearable payment technology will become embedded in our daily lives as devices become easier and more attractive to wear. Gartner predicts that by 2017, 30 per cent of smart wearables will be completely unobtrusive to the eye.
Annette Zimmermann, research director at the firm, says: “Smart contact lenses are one type in development. Another interesting wearable that is emerging is smart jewellery. Obtrusive wearables already on the market, like smart glasses, are likely to develop new designs that disguise their technological components completely.”
Data convergence creates a single entry point
Currently, customer data is spread across multiple layers – financial institutions, card providers, retailers, utility providers, internet companies, governments and so on. We have different accounts and log-ins for every part of our lives. In ten years’ time, we could see the convergence of data into a single place, and a single point of entry to it all. Central to this will be the use of biometrics to ensure security while not offering the same levels of convenience. Indeed it will be the disruptive force of biometrics that will lead this change as separate PINs or passcodes will become redundant.
Cheque out as seamless payments become the norm
We don’t see much future in checks. Imaging technology is a final throw of the dice, but ultimately one that will be short lived. By 2024 most mature markets will have ditched cheques in favour of more seamless peer-to-peer channels like Paym in the UK, or new social media systems like that apparently being looked at by Facebook. Wearable devices already allow people to simply deliver a voice command to send money. In ten years whether it’s through your phone number, social media account or even just your bank details, it will be a simple tap of the smartscreen or voice command to your smartwatch to send money instantly.