Economics, money, and the way we make payments have undergone several changes since the time of the Stone Age. In a sense all these are key indicators of our progress as a species. The primitive methods indicated our primitive way of living. Similarly, the current payment methods powered by cutting-edge technology boast our technological achievements of today.
Digitization of payments was a huge jump towards the goal to achieve an easy, convenient, fast, and secure payment method. Arguably, we have achieved all of it. Digital payment methods saw massive developments in the span of four to five years and we are about to see even more changes in the coming future.
In such times, it’s really exciting to see what 2021 has in store for us. In this article, we will closely look at all those digital payment trends that will make it big in the year 2021.
Biometric authentication is a trend that you’ll see quickly emerging in the year 2021. Biometric authentication is a verification method which involves biological and structural characteristics of a person. These verification methods include fingerprinting scanners, facial recognition, iris recognition, heartbeat analysis, and vein mapping.
With the rise in the problems of identity theft and fraud, biometric authentication can become a reliable and secure option for all the digital payments that takes place in the year 2021. Even the stats suggest the same thing. As per Biometric Update.com, 2.5 million (approx.) payment cards will be issued in 2021.
Biometric authentication is a unique and important payment method as it incorporates and provides accuracy, efficiency, and security under a single package. Biometric authentication is a highly-secured method since it involves an individual’s unique characteristics. This factor also helps in building the customer loyalty and trust.
Gen Z: The tech-savvy generation
Before we proceed, let’s understand what generation Z is. The term ‘Generation Z’ or the ‘Gen Z’ is used for individuals that are born between the years 1999-2012. In simple words, all those who are aged 7-20 are the Gen Z which also happens to be the generation of the digital world.
As per Forbes, Gen Z will make up 31% (approx.) of the global population in 2021. This shift in the population will have huge significance. It’s because this shift indicates that the majority of the world’s population by 2021 will be a tech-savvy or tech-exposed generation.
This is the generation will have a higher dependency on the cutting-edge, automated, quicker, and efficient technologies and services. As a result the demand for digital payments systems will see a rapid growth in the coming year.
From cards to codes
Early on, the bank accounts were simply recognized by random combinations of unique digits present on card. However, the EMV technology (Europay, Mastercard, Visa) has gradually picked up and introduced customers with more computerized and secured mechanism for payment.
The EMV technology is known for using codes that varies every time a transaction takes place. This use of temporary codes enhances the security in the bank accounts by leaps and bounds. This example shows us how codes can shape the way we manage bank account systems.
Read More: How FinTech has impacted banking?
Moreover, the future of plastic cards is bound to be overshadowed by cutting-edge payment services that offer more convenient and seamless methods of money transfer and store.
Increasing Demand for Mobile Point of Sale
Mobile-point-of-sale (mPOS) is a revolutionary technology as it frees all the merchants from their bricks-and-mortar locations and in-store payments. It liberates them to go to various places like concerts, trade shows, food trucks, and many other where they can seamlessly accept payments from their customers.
Not only that, the mPOS technology also makes a huge difference in the payment process of a store by making it more streamlined and flexible by replacing the central checkout areas with sales staff equipped with mPOS devices.
mPOS is surely going to be trending digital payment technology and stats suggests the same. As per Global Market Insights, mPOS will have a CAGR of 19% (approx.) between 2020 to 2026.
Smart speaker payments
Home assistants or smart speakers allows its users to give voice commands to a speaker and receive a voice response in return. The user can give voice commands for various things such as getting weather updates, traffic update, ordering from Zomato or booking a cab from Uber.
Many giants have invested in the manufacturing of smart speakers. Amazon was the first one to come up with its first smart speaker in the year 2014. Google Home and Apple joined Amazon in the year 2016 and 2017 respectively.
The speakers which evolved from the smart assistants were primitive in nature as they were restricted to just phone devices. However, with the growth of home automation, the smart speakers also started to go mainstream.
Let’s have a look at some stats to understand the smart speaker situation better. According to Statista, 35% of users use smart speakers for buying products like home care, groceries, and clothing.
Interestingly around 28% of the people used smart speakers for sending money or making direct payments. This is not a huge portion as fewer amounts of people choose to make payments over smart speakers due to the security reasons.
This concern over security is widespread as a press release from TNS found that around 74% of the users have security concerns for making payments over voice assistants. Moreover, they also said that they might stop making payments due to this concern.
Even after this, the future of smart speaker looks promising as big names like Amazon, Google, and Apple are investing to build their advanced smart speakers.
Moreover, the stats also indicate a bright future for the smart speaker payments. BI has estimated that the usage of smart speaker will grow rapidly from 18.4 million users in 2017 to a whopping 77.9 million users by 2022.
Top-rated security powered by AI and Machine Learning
Security is the most crucial element whenever it comes to payment. People will always prefer using a payment method that has a high security. That’s the reason why payment technologies won’t be able to go forward without developing a top-grade security.
Banks receive a lot of customer details and payment data each day. And to detect all the possible threats within seconds, banks are now taking the help of machine learning.
Machine learning is the first step you need to complete to achieve artificial intelligence. Banks continuously feed their software with different and new transactions. The software takes a set of limited transactions and learns to detect fraud transactions in real-time. As the software receives more and more transactions, it keeps getting better at identifying the fraud transactions.
The best example of this is when you receive a text from your bank asking if the transaction was done by you or fraudulent. This cautionary message helps the user and bank to prevent a major mishap. No human sends you these texts. A machine learning software is the one which sends all these texts to you
Contactless payments are another payment method which you’ll see growing rapidly in the year 2021. As the name suggests, the contactless payment allows the customers to simply wave their smartphone across the reader. This method of waving is way faster and more convenient than inserting a card.
Contactless payments are also faster and more secure than the PIN technology as it transfers the encrypted data to the point-of-sale device instantaneously.
Many companies like Samsung, Apple, and Google are already have their contactless payment system Samsung Pay, Apple Pay, and Google Pay respectively. To make payments, all a customer has to do is simply download the app, add card by entering card details, and then wave their phone across any reader.
Contactless payments are possible with the NFC (near-field communication) technology. That’s the reason why they are also termed as NFC payments.
NFC payments are used in many countries. For example, in China it’s used as a mode of payment in public transport. Similarly, in London the NFC payments is used in the bus and tube stations. In Japan this technology is used to provide information about the identity cards.
UK finance represent a cluster of financial institutions and banks and it has predicted that around 36% of total payments will be made through NFC powered contactless cards by the year 2027.
Dominance of mobile wallets
According to a report by RetailDive, around 2.1 billion customers are using mobile wallets in 2019. And this number is bound to increase in 2020. A mobile wallet solution is nothing but a mobile application that tries to mimic an actual physical wallet. With the help of a mobile wallet, you can send money to other users, receive money from other users, and store money inside the wallet. Not only that, with the help of a mobile wallet, a user can also pay utility bills, buy tickets, get rewards, and many more.
As per Appventurez, mobile wallet transaction volume will grow at 274.4 billion (approx.). That is why many big companies such as Apple, Google, and Samsung have started providing mobile wallets to encash this transact. However, all those wallets are brand and company specific. In coming years, more companies will try to create their own brand-specific wallet.
Companies can easily assess the customer’s usage with the help of a mobile wallet. There are several players that are involved in a mobile wallet. For example, a mobile wallet is developed by one company let’s say Google. Then the loyalty cards and credit cards are created by some other company. There are also many merchants which uses the same Google wallet.
In simple words, a mobile wallet consists of various components that work together to render easy, quick, and cashless payment services.
Digital payments are future. In coming years we will see payment methods transitioning from physical cash to the digital payment methods. Before the transition concludes, many new trends will appear and disappear. These trends will play a vital role in shaping our future payment methods. Many of the mentioned trends will also play a major role in that process. But only time will tell how it will all undergo.