The Rise of Payment Gateways

The cashless payment system is growing exponentially with the development of payment methods, increasing use of e-commerce, improved broadband and the emergence of new technologies. Could the increasing frequency of cyber-attacks and spam hinder the growth of the online payment market, or will it continue to grow at a rapid pace?

The global digital payments industry is expected to reach the $6.6 trillion mark in 2021, seeing a jump of around 40% in two years. Cashless payment methods are rapidly evolving with revolutionary innovations such as mobile wallets, peer-to-peer (P2P) mobile payments, real-time payments and cryptocurrencies. In the growing digital age, many payment technology companies are collaborating with traditional financial institutions to meet the latest consumer and merchant preferences. Due to improved broadband connectivity, increasing mobile commerce, the emergence of new technologies such as virtual reality, artificial intelligence and rapid digitization, billions of people have begun to accept contactless payments in both developed and developing countries. Additionally, growing e-commerce businesses, digital remittances, digital business payments and mobile B2B payments are strengthening the cashless transaction ecosystem.

Users of cashless transaction methods in different generations are widely adopting digital peer-to-peer (P2P) applications because they are more attractive and flexible to use. In-app payments or tap-and-go transactions take seconds at checkout and allow users to make payments anytime, anywhere. Tokenization, encryption, Secure Sockets Layer (SSL), etc., offer multiple ways to secure payments while enabling digital transactions. In addition, users do not need to enter information every time to complete the payment process. Thus, online payment gateways play a key role in economic growth, enabling commerce in the modern economy. With social distancing rules, digital payments have become a must for contactless transactions, not just an alternative to transactions to prevent the spread of the coronavirus.

Digital commerce empowers businesses

Electronic payment systems have become a key part of business as consumers’ propensity to shop online expands. With increasing internet penetration, increasing use of smartphones, and diverse e-transaction options, most consumers prefer online channels over traditional stores for shopping. Therefore, companies are moving online with an electronic payment solution to maximize their earnings. Automation of the electronic payment system eliminates the scope of errors and saves a significant amount of time and effort. High standards for detecting and preventing fraud in digital transaction systems and fraud detection based on artificial intelligence protect users from security breaches. By providing payment flexibility through credit/debit cards, mobile money, e-wallets, etc., businesses can expand their customer base. The electronic payment process improves customer satisfaction because customers do not have to count cash or deal with paperwork whenever they want to make a transaction.

Biometric authentication that improves security

Biometric authentication involves the recognition of biometric characteristics and structural characteristics to confirm the identification of an individual. The verification method may include fingerprint scanning, facial recognition, voice recognition, vein mapping, iris detection, and heart rate analysis. With the rise of identity theft and fraud, biometric authentication has become a reliable and secure alternative for conducting digital transactions. According to a recent survey, biometrically verified mobile commerce transactions are expected to account for a massive 57% of total biometric transactions by 2023. Biometric payment cards are also becoming popular as they support tap-and-go payments, allowing users to make faster digital payments. transactions. Digital payment technology provider, Worldline, has partnered with French FinTech, A3BC (Anything Anywhere Anytime Biometric Connection), to protect mobile phones from intrusion using a two-factor authentication process. The combined solution eliminates one-touch identification, preferring to recognize fingerprints through a hand image. MasterCard plans to roll out FinGo’s vein-scanning payment solution that makes it easier for users to authenticate transactions.

The dominance of mobile wallets

In 2019, mobile wallets overtook credit cards to become a widely accepted form of payment. Digital wallets offer users the flexibility to store multiple payment methods in one digital home and convert cash into electronic money needed for online or in-store purchases. Financial institutions have already started to embrace the digital wallet trend by offering virtual cards to business users. Virtual cards stored in digital wallets consist of details such as 16-digit card number, CVV code, expiry date and function like a physical plastic card. Currently, only 37% of merchants support mobile payment at the point of sale, but with increasing adoption, merchants are willing to invest in technologies that facilitate digital wallets. Virtual wallets can save money due to low processing costs as they limit the value and frequency of transactions. Artificial intelligence (AI) enhances the customer transactional experience with ChatBots, designed to execute and robotize essential exchanges according to the user’s interest. In addition, cryptographic electronic money-based wallets are being adopted by new companies to small and medium-sized organizations to store digital money. Smart voice technology has been contributing to the growth of smart voice wallets since Amazon pioneered the platform, now followed by Google and Apple.

The boom in e-commerce is accelerating the growth of the digital payments market

The growth of e-commerce at an exponential rate is creating shock waves, and the sonic boom is echoing in the FinTech sector. The growth of many e-commerce companies is driven by the type of financial services they provide. Digital transactions enable the buyer and seller to transact and remain loyal to the marketplace. The COVID-19 pandemic has added a different dimension to e-commerce innovation, introducing newer trends such as payment alternatives at cash registers (not digital wallets), virtual cards, QR codes and other contactless transactions. Additionally, the Buy Now Pay Later (BNPL) trend is dominating the e-commerce industry as it relieves the financial burden on the customer. BNPL includes a soft credit check, so consumers can buy what they need, keep inventory moving and pay overtime without affecting their credit score. BNPL provides businesses with much-needed liquidity and greater flexibility at the till.

The impact of the COVID-19 pandemic on the growth of the digital payments market

Digital payment systems have gone beyond peer-to-peer (P2P) transfers and bill payments. The COVID-19 pandemic has allowed digital payment systems to demonstrate their strengths, such as a strong understanding of hyper-local markets and the ability to establish strong local partnerships. Businesses and consumers are increasingly going “digital” to provide and purchase goods and services online. When the pandemic hit, people didn’t want to touch or exchange cash due to paranoia about contagion contaminating physical currencies. Several governments around the world have introduced digital financial transfers for COVID relief. Due to the lockdown measures, consumers have shifted to online platforms, catapulting the demand for digital payment systems. Now, digital platforms have become an essential component of people’s lives, and consumers are more likely to continue shopping online in the post-pandemic period. A dramatic change in consumer behavior is likely to further increase the demand for e-payment systems. Therefore, companies are focusing their attention on digital media to meet the new demands of customers and succeed in doing business in the changing market scenario. Organizations are reimagining customer journeys to reduce friction and provide new security features. Payments companies such as PayPal and Square Cash are staffing up around the world to better understand reshaping social norms and stabilize operations for the near future.

E-payment systems are the future

With increasing smartphone and internet penetration, consumers are becoming tech-savvy, presenting endless opportunities for digital payment markets. Post-pandemic digital payment systems are expected to continue to flourish for years to come. While cards remain the first choice for payments around the world, mobile wallets are rapidly gaining traction. Traditional cash flow is declining at bank branches and ATMs, showing a powerful shift towards a cashless society. Currently, China dominates global mobile wallet consumption, followed by South Korea. However, there are still many countries that are highly dependent on cash due to lack of trust towards financial institutions and lack of adequate broadband infrastructure, etc. In the near future, social network payments, biometric payments, voice-activated payments are likely. become mainstream in developing countries as well.

Cyber ​​security and privacy concerns with online payment solutions

Cybersecurity and privacy threats have become a worrisome concern due to the increasing incidence of online fraud. According to Mastercard research, one in four consumers experienced some kind of fraud in 2020, which increased the rate of cybercrime by 49%. In the first half of 2020, online fraud increased by 73.8% compared to 2019. However, adoption of new-age technologies such as multi-factor authentication, biometrics, 3D security, artificial intelligence and machine learning can help control fraudulent activities as such as identity theft, virus attacks, etc. The move to contactless cards, QR codes and tokenization can also help reduce the risks associated with digital payment solutions. In addition, sensitizing end-users for the safe use of e-payment solutions through strengthening efforts to build financial literacy can help prevent fraud. The emergence of mobile commerce and the evolution of e-payment platforms supported by robust security solutions can help achieve the goal of a truly cashless economy.