In the last few years, we’ve seen dramatic shifts in the banking industry. Consumers now expect their banks to let them pay bills and make other important transactions from the comfort of their homes. Rapid digitization has also infiltrated business-to-business (B2B), business-to-consumer (B2C), and peer-to-peer (P2P) transactions at a higher rate during the pandemic.
Given the above, it’s clear that cashless payments won’t be fading away anytime soon. As such, financial institutions must invest in refining digital experiences to meet evolving demands for fast, convenient, and secure transactions. With this, let’s look at some of the cutting-edge technologies that are poised to make big waves in digital banking and transform the concept of payments as we know it.
Contactless Capabilities
Smartphones make up a large part of our modern lives, and technologies that allow contactless mobile-based payments are something that banks and fintechs should eagerly observe. The mobile-point-of-sale (mPOS) concept continues to outshine in-store and brick-and-mortar transactions, with Global Market Insights predicting mPOS to have a compound annual growth rate (CAGR) of approximately 19 percent from 2020 to 2026.
A modern digital payments solution must enable customers to securely transact with sellers in high-activity environments such as concerts, food parks, and trade shows. This is because digital transactions—especially in public spaces—expose customers to a certain level of risk, especially if they’re dealing with tedious and inflexible payment procedures.
Fortunately, near-field communication (NFC) technology has the potential to make contactless payments as seamless as possible. Paired with EMV capabilities, NFC could significantly upgrade the seamlessness and security of contactless payment methods. Many countries already use NFC for public transport payments, and UK financial researchers expect NFC-powered cards to account for 36 percent of payments by 2027.
Another trend to monitor is the use of smart-speaker technology. Most smartphone users are already accustomed to voice assistants that can process spoken commands for weather updates, web searches, and grocery lists. With automation on the rise, we could soon see the possibility of executing voice-driven financial transactions.
AI and Machine Learning for Security
Digital banking tools must be swift in completing transactions and detecting suspicious activity. Thanks to artificial intelligence (AI) and machine learning (ML), financial institutions can now detect security threats in just seconds. The abundance of data available today can sufficiently train algorithms to instantly filter out potential breaches, preventing fraudulent transactions and other forms of theft. An example of AI and ML-driven security is when a financial institution sends a customer text messages and alerts to confirm the legitimacy of a recent transaction.
Biometric authentication is another area where AI and ML shine. Banks are now adopting additional security precautions, such as facial recognition and fingerprint scanning, to prevent cases of fraud and identity theft. The accuracy, security, and efficiency of biometric-based authentication procedures can significantly boost customers’ user experiences as well as build their trust and loyalty in their bank of choice.
The Rise of Mobile Wallets and “Super Apps”
Mobile wallets or e-wallets are commonly considered a safer and more convenient way to make payments, especially in online transactions. As e-wallets increase in popularity, so, too, do their features evolve beyond the mere storage of funds. In fact, many mobile wallets today allow users to pay bills, buy tickets, and conduct other financial activities through a single application.
The ubiquity of mobile wallets has given rise to super apps, which are all-in-one platforms built with a unified interface for making payments and other everyday transactions. Super apps usually integrate with third-party payment channels, including platforms designed to support cross-border payments. These apps operate under a centralized system that gives users access to various financial tools, some of which can generate analytics-driven insights to improve customer experience.
There are also super apps with features specifically designed for handling cryptocurrencies and taking advantage of blockchain technology. With more key players allowing crypto in online and offline transactions, it makes sense to have tools that allow crypto enthusiasts to monitor the market, initiate transactions, and trade with ease.
Social Payments
Similar to super-apps and e-wallets, Digital Social Payment (DSP) platforms allow people to transact without exchanging bank details or using cash. DSPs are shaking up the P2P and customer-to-business (C2B) landscape in that they combine the interactivity of social media with the core purpose of a financial platform. DSP platforms often integrate with social media profiles to let users easily transact with other users or solicit funds from their social networks.
Despite its convenience, DSPs also bring matters such as data privacy and account security into question. With increasingly complex methods of identity theft, DSPs must comply with regulatory standards and apply the latest security and authentication capabilities to protect users’ transactions.
The Technological Facelift of Banking
Digitized payment methods are currently growing in popularity, and it’s exciting to see what else these technological advancements can bring to the table. But even as banking capabilities become more sophisticated, these trends and technologies require careful assessment before implementation. Stakeholders must avoid the tendency to build technologies on top of each other for the sake of chasing trends.
Ultimately, key players must remember that new tech shouldn’t turn into a hindrance for customers. Rather, said tech should enable consumers to swiftly accomplish their desired goals and manage their finances responsibly.
