The top 5 tech trends defining the near future of payments
When it comes to technologically intensive industries such as payments, looking into the future helps frame today’s priorities. Even so, sometimes we get so distracted by shiny objects that we forget to consider the most impactful near-term trends.
Out of the many trends we obsess over, here are our top five tech trends defining the near future of payments.
1. Artificial intelligence, especially machine learning
Artificial intelligence is a broad term for intelligent technologies that perform cognitive tasks. One permutation of AI is machine learning, which analyzes a steady stream of new data inputs to evolve its outputs over time.
Payments is an ideal area for machine learning, as new data around fraud trends can monitor threats in real-time. This dramatically improves the time it takes to flag potential fraud, preventing transactions from being posted in the first place.
As fraud continues to be a massive problem for merchants, these type of applications will grow in importance. Especially as costs go down as adoption goes up, we expect to see a gradual leveling out of overall fraud as a percentage of payments processed.
The best is yet to come for artificial intelligence. Companies are still searching for ways to test and deploy new solutions, so we predict see more innovations on the horizon.
2. Bots and conversational payments
Facilitated by the drop in the cost of artificial intelligence technologies, including Natural Language Processing that helps machines understand human conversational context, the rise of bots is transforming payments.
For fraud reduction, automated bots can identify suspicious transactions and flag them immediately with the consumer. For account management, intelligent bots can eliminate the need for a call into customer service. For digital payments, bots can facilitate real-time, frictionless “conversational payments” via chat:
“Customers now have the ability to quickly ask questions, obtain information, narrow searches, and complete purchases by interacting with a chatbot programmed to connect in a personal way with consumers. The implications for payments reach even further.”
Dynamic offers are also a key benefit to bots in business. Automated bots process large amounts of data to serve up relevant offers to users in the right context.
When considering real-time user behavior, for example as part of a conversation between consumer and chatbot, this dynamic approach can lead to higher customer satisfaction through more effective personalization.
3. Installment payments
A dominant trend in consumer payment behavior is paying in installments. Driven in part by the popularity of installment payments in countries like Brazil, installments are becoming more popular in major markets like the United States.
This trend has wide-reaching implications for merchants, as they must integrate the technology needed to split purchases and track payment progress. Complexity only grows when big-ticket purchases, such as vacation rentals, are split among groups who want to pay individual portions over time.
In addition to reducing hurdles to purchase, this trend has another benefit to merchants: by breaking up purchases into smaller installments, consumers perceive greater affordability across a variety of transaction sizes. Embracing installments could mean incremental increases in average basket size.
4. Partnerships (and consolidation?)
When it comes to payments, global conglomerates are in a mad scramble for market share. The “Pays,” as the leading digital payment brands are collectively known, want their eponymous payment methods to become habitual with consumers.
Despite these intentions, these walled gardens are far from becoming habits. In some regions, like the U.S, consumer confusion has slowed adoption. There are too many digital payment methods to choose from, slowing the creation of habits around specific payment methods.
China, on the other hand, is dominated by a select few. One of which, WeChat Pay, has close to twice the users than the population of the entire European Union. That’s 980 million people who have a WeChat Pay e-wallet!
Partnerships across walled gardens are inevitable. While not entirely clear how and where, consolidation could also help reduce confusion and accelerate digital payment growth. Something will have to give if brands want to see consumers purchase more through their e-wallets.
5. China goes global
Speaking of China, it’s time to prepare for its global ambitions. Chinese tourists are traveling the world in record numbers, with 130 million outbound travelers in 2017. Alongside their spending, these travelers are also packing their payment preferences. So much so that destinations are beginning to accept popular Chinese digital wallets: In early 2018, Finland announced an initiative supporting adoption of AliPay across the country.
The Chinese National Tourism Association estimates that at least 200 million Chinese will travel abroad by 2020. This demographic is accustomed to e-commerce, hailing from a country that accounts for 40% of global e-commerce sales, spends $200 billion on their mobile phones, and uses alternative payment methods to purchase $650 billion worth of goods.
An exciting time ahead
There’s never been a more promising time for digital payments. The lines have blurred between digital and traditional payments. It’s now about a holistic payment strategy that supports business objectives across a nuanced and often-fractured global marketplace.