It used to be that cash was king, but now it must share the throne with the rise of non-traditional payment systems. Technology innovation has taken off in 2018, thrusting digital payments such as mobile and non-bank payment cards into the spotlight.
The digital payment revolution emerged thanks to tech innovation across the internet of things, Bluetooth and Wi-Fi in the early days and continues today across the “blockchain, radio-frequency identification (RFID), near frequency communication (NFC) and quick recognition (QR) codes” as mobile and contactless payments take hold, Entrepreneur.com noted.
It’s a phenomenon that reaches from the United States to EU countries to India and beyond, as cash continues to lose market share to modern payment methods.
With non-traditional payment systems poised to gain wider mainstream adoption in 2019, here’s a look at some of the top features driving this trend.
One of the key benefits of digital payments such as mobile payments is speed, both for the business and the customer. Non-cash payments at the point of sale lead to faster transactions and fewer lost sales from consumers who don’t have time to wait.
Technology like biometrics is making its way into the payments space, making it possible for consumers to pay with a fingerprint or eye-scan, for example. It removes the need for publicly typing in passwords and moves the line along faster. Even payment giant Mastercard is poised to launch facial recognition and fingerprint technology tied to its cards in the second quarter of 2019.
Digital payments introduce a host of benefits, not the least of which is security. As fintech companies continue to innovate with new payment products, software companies are developing security including fraud protection to safeguard these methods. Businesses no longer have to worry about keeping lots of cash on hand, which reduces the risk of theft. The same holds true for consumers who no longer need to count their physical money and can perform their daily transactions with a mobile device, bank card, e-wallet and more.
More than half of UK consumers do their shopping online, and more than one-quarter of these payments are completed on a mobile device or tablet. Non-cash payment methods are becoming more pervasive around the world including in the EU.
As a prime example, consider Finnish company ePassi, which in addition to Finland operates in Sweden, Estonia and Spain. ePassi is participating in a deal involving China-based payments giant Alipay and Norway’s Vipps. As a result of the partnership, travelers will be able to use Vipps mobile payments outside of Norway while China tourists to Norway can make mobile payments with the platform. It supports a growing trend of “payments across borders” in which retailers can support global customers.
With the rise of any new technology comes risk, and the payments market is no exception. especially considering that the personal details of consumers are at stake. While security is considered a benefit of non-classic payment systems, it’s also chief among the risks.
The rapid pace of tech innovation in payments could create security vulnerabilities that were not known previously, which makes it more difficult for developers and security experts to detect. Payment providers and end-users could face cyberattacks if certain security standards and measures aren’t taken, such as biometrics and two-factor authentication, for example.
Meanwhile, the EU is doing its best to keep up and is introducing legislation that is designed to protect consumers against “non-cash payment fraud and counterfeiting” with a focus on “cards, electronic wallets, mobile payments and virtual currencies,” according to reports.
Disruptions to Service
If it can happen to Visa or Mastercard, which process tens of thousands of transactions per second, disruptions to service can happen to an emerging payments provider. One example is RTGS, which in 2014 experienced a systemwide outage that prevented customers from making payments with their service all day. At the very least, it was an inconvenience and in a worst-case scenario it caused problems for real estate transactions and merchants. It’s a reminder to have a backup method such as cash for those times when technology may fail.
The pros for non-cash payments have proven to be more compelling than the drawbacks, suggesting that the shift toward digital payments is here to stay.