The scope of payment options has expanded globally. Emerging payment technology is making digital payment smarter and safer.
Today, payment technologies are handling the current digital payment demand accurately. Technologies are making transactions faster, safer, and more convenient, benefiting customers and businesses.
What is Payment Technology (PayTech)?
Gartner defines payment technology as:
“Payment technology includes systems and processes that allow online payments through cards and mobile devices. Technologies for payment systems include artificial intelligence, Blockchain, and machine learning. The techs embedded into chips, QR codes, and online networks are used for making payments.
The technologies read customer data and initiate the required payments through different platforms and modes.”
According to an analysis by PwC and Strategy &
Clearly, the payments technology sector is innovating at a good speed. Let us trace this growth.
What are the key Payment Technologies Today?
1. Biometric technology
Biometrics helps to secure payments with a physical or behavioral characteristic. A fingerprint or facial recognition could maintain the security of digital payments. Biometrics also improves the overall user experience by reducing friction in payment processes.
2. Blockchain technology
The decentralized nature of Blockchain makes speedy transactions possible today. It maintains transaction records and removes the need for a central authority to verify transactions. The tech has helped digital payments to be more secure, transparent, and efficient.
3. AI and Machine Learning
AI and ML together help in creating a more integrated payment ecosystem. The chips embedded in cards and QR codes in online payment include AI and ML technologies. They read data and initiate payments faster. AI also provides alerts through one-time passwords (OTPs), security codes, or even asking for bank pins to verify the payment.
4. NFC and magnetic secure transmission (MST) technology
These key payment technologies have made digital payments possible anywhere and everywhere today. NFC technology allows a connection between two electric devices in a short distance.
It also allows customers to pay through mobile wallets like smartphones or smartwatches. Conversely, MST technology uses a magnetic signal from mobile devices to a card reader. MST tech makes digital payments compatible with most payment processors.
What is the Future Like?
PWC’s report, Payments 2025 & beyond – Navigating the Payments Matrix, showcases some scenarios to expect in the payments sector over the next few years. Here are some quick facts the report shares:
Cashless transactions – driven by technology and the blurring of global currency boundaries over the next few years.
The volume is all set to increase to almost 1.9 trillion transactions forecasted for 2025.
According to the PWC analysis cited above
Digital financial inclusion will be driven by fast-developing mobile technologies like 5G and 6G. Over the next two years, over 80% of the globe will use smartphones. With the right security policies in place, this surge in mobile banking will drive digital inclusion and financial ease of transactions across geographies.
It will also be responsible for the rapid proliferation of eCommerce, and hence, digital payments will grow. By 2024, more than half of payments for eCommerce globally will be digital.
A smarter digital payment infrastructure will certainly help to bridge the gap in underbanked communities’ digital financial services.
Their inclusion will add numbers to payment tools, and enable greater financial inclusion and stability on a social scale. At the same time, it will help scale the innovations to the market, increasing user numbers.
Cross-border payments: to drive one world, one currency concept. The Nordic regions already have this concept in place. This is the P27 initiative that brings together 27 million residents of 4 countries in the region using one payment system.
PWCs survey strongly pointed to almost half the respondents opining an acceleration of cross-border currencies over the next five years.
Global eCommerce market: as per Fintech 2030
Of this, 54% of the payments will be on mobile. That’s the area where maximum tech innovation will take place for Payments.
BPNL to outstrip other payment modes: The report also states that BPNL (Buy Now Pay Later) will be a USD 306.8 billion market for e-commerce purchases.
Technology integration for smarter payments: As per the report Top 9 digital payment trends in 2023
Innovations in these technologies will definitely drive innovation in the payments landscape.
Enhanced security tools: security will become extremely critical for digital payments over the next few years. As the cyber-attacks business booms, banks and Fintech will use innovative tools to fight their impact.
Smarter encryption, advanced biometrics, and perhaps newer tools from Blockchain will aid this activity.
The future of payment technology shines because it has great acceptance worldwide. Companies are taking forward steps in developing their payment space.
However, they should invest in the right technologies and tools that integrate with their processing systems.
It’s important to match the pace of innovation taking place in digital payments.