Today’s global economy relies heavily on the transfer of money. Issuers, networks, payment processors, and merchant acquirers are all making significant investments in retooling their payment systems to take advantage of recent technological advancements (such as Oracle Flexcube) and better meet the needs of their customers and industry niches. Here, we’ll take a look at some of the most recent developments in payments technology, as well as four new technologies that have the potential to set off an innovation boom.
Of course, payments technology is always being disrupted and improved upon. US consumers are increasingly adopting real-time payments, which are already prevalent in many countries. At the point of sale, lenders are rethinking the lending experience by offering buy-now-pay-later financing options and POS loans. Apple Pay, Google Pay, and QR codes are growing in popularity. Additionally, as digital commerce continues to account for a larger percentage of spending—a long-standing trend that has been hastened by the pandemic—cash is further displaced.
Established financial institutions and payment processors are responding to these shifts and difficulties by modernizing.
The following three aspects of their legacy payment systems:
- Deployment and infrastructure (e.g., data, switching, a system of record, tokenization)
- In the middleware world (e.g., routing, analytics, risk, authorization, instruments)
- Distribution point-of-sale solutions; customer experience/user interface; monetary well-being; etc.)
In each of these sectors, there is a significant transition taking place. Understanding today’s trends requires a quick look at the development of the payment infrastructure, which may be summarized as follows. Card systems’ dependency on proprietary, monolithic infrastructure made it near-impossible for small firms to join the market thirty years ago.
a ten-year-old start-up, processed more than $350 billion in payments per year by the early 2010s. Decentralization and cloud computing have made it possible for fintechs like Adyen, Stripe, and Square to disrupt the market with their on-demand capacity provisioning capabilities, thanks to advancements in open-source technology. “Financial functions as a service” and “container as a service” models are becoming commonplace. 1 Creating adaptable, fully automated systems is now simpler than ever.
If you’re using open-source technology,
you’ll find it simpler to apply deep learning to numerous processes like improving stand-ins and authorization rates, lowering churn, and decreasing decreases.
A future state in which payment processes such as on-demand tokenization, routing, and stand-ins are defined as independent features and combined and expanded in a Lego-like approach to provide greater user and cardholder experiences is what we anticipate in the long run. Apple’s payment wheel is a modern example. Personalized end-to-end experiences, such as dynamic CVV, token switching, Flexcube implementation, and backward compatibility may all be enabled by PaaS as an added benefit.
In order to fuel the next generation of card and payment technology, cutting-edge technologies like blockchain, DAG, and AI have been rapidly adopted by these adaptable, modular, and automated systems. Consider how some of these technologies are reshaping payments and the traditional platform designs in the payments field.
Distributed ledger technology is making some sorts of payments more cost-effective, secure, and, in most commercial use cases, completely traceable than they were before possible. As an enabler of near-instant and transparent payments in the highly competitive cross-border payment arena, blockchain eliminates the need for complicated and opaque fee structures. It is exceedingly difficult to defraud systems that employ blockchain due to its distributed, consensus-based, real-time verification of transactions. It also allows for higher transaction throughput per second and quicker settlement compared to traditional card-based systems. While there are still technical and legal challenges to be overcome before a comprehensive blockchain adoption can take place, there is no denying its enormous promise.
Internet of Things (IoT):
The payments card sector is vulnerable to a wide range of disruptions due to increased connectivity, device penetration, and integrated payments. The necessity for physical cards and account numbers is being questioned because of the quantity of information that can be transferred across devices. Biometrics-based payments, for example, are being experimented with by corporations. Smartwatches and other devices may securely share information (such as device account numbers or DANs) with neighboring systems to process payments on demand, thanks to tokenization technology. Switching between numerous accounts in real-time is made possible through back-end token swapping.
Considering the bigger picture: Embedded IoT devices with blockchain might serve as decentralized credit card processing platforms in the future. Consumers may now use their digital ID to make payments, which has reduced the value of conventional cards.
Deep learning and AI:
Because of the widespread availability of data and neural networks, card issuers and payment service providers must use AI and deep learning to implement the next generation of fraud detection and anti-money laundering (AML) and deliver value through higher approval rates, fewer declined transactions, and proactive management of credit limits. Advertisers will be able to take advantage of new income streams and monetization options thanks to AI, such as on-demand and real-time analytics and efficient pricing and promotion assistance.
Banks may now use a reference account number and back-end token switching to connect the reference account to numerous PANs more easily, thanks to functional architecture. As a result, banks have the option of issuing a single account number that may be used for both credit and debit accounts or even for new currencies like digital money. It is possible to attach many credit and debit cards to one Curve card via a mobile app, such as Curve’s “smart” card. Before making a payment or even after the transaction, they may swap credit cards. When it comes to multi-function wallets, there is still a lot of work to be done, but some companies are promoting this technology as the next generation of digital wallets. Even though these changes are only beginning, they have the potential to have a tremendous impact. The disruptor issue may be met, and new goods and services can be launched more quickly by payments providers by fast adjusting and making continual investments to upgrade the architecture of current platforms.
Forward-thinking firms in the payments industry will undoubtedly recognize the promise in the technologies we explore here and are already considering the next wave of payments innovation in line with Oracle Flexcube universal banking. The creative endeavor, however, has to be supported by a strong technical basis.