Fintech is the latest disruptor to do what all other disruptors do: turn an industry upside down and force a new experience on businesses, banks, and individuals alike. (Image Source: diginomica.com)
Mobile point-of-sale devices were disruptive when they first debuted, providing merchants with a laid-back way to accept card payments, and have since become a necessity given that consumers expect to pay with credit or debit cards for anything – from groceries to electricity. In fact, ABI Research anticipates that there will be 51 million mPOS devices by 2019, which will make up 46% of all POS systems.
Mobile manufacturers have already moved forward, though, and started developing mobile payment solutions which they will roll-out across all handsets. People can already make mPayments through an app virtually or through SIM cards to make NFC payments. These SIM cards are superior and secure, armed with the fastest and steadiest mobile Internet to ensure a unified connection with NFC-powered payment termini.
The future of mobile transactions, therefore, lies in a uniform mobile payment process, resulting in more people leaving their wallets behind and paying for almost every purchase with their mobile devices. According to Business Insider and research undertaken by Visa, mobile payment volume is expected to rise by 80% between 2015-2020, with both merchants and customers confidently transacting through handsets, whether through NFC-enabled termini and phones or via an app or a scanner at a store.
Collaboration is becoming the new normal
Clearly, the models are changing and businesses and banks need to adapt to a new regulatory environment that reacts to both customer needs and the necessity of learning how to play with non-traditional partners.
Most banks recognise their need for Fintegration, the integration of FinTech players into the existing banking and financial system, and most Fintech companies are aware that collaboration is key, not only to accessing a wider pool of customers, but also to comply with the coming payment regulations which will make exchanges between the two parties necessary.
The most concrete example of this collaboration can be summarised by three letters: API (Application Programming Interface). This technological protocol enables communication between different information systems, and is what allows banks to provide their customers those services that are innovated and offered by Fintechs.
Simply put, APIs are a part of the technologies that drive new ways to interact with customers, create efficiency, greater speed, and more traceability. For instance, instant payments must clear immediately or close to immediately, irrelevant of the payment instrument used and the arrangements associated with clearing and settlement. For payment markets to make “instant” exactly that, and offer compelling customer experiences like this, they must access open APIs – a service provided by banks.
Dealing with fraud
It’s no secret that the payment industry is heading towards ubiquitous, real-time payments, through real-time interoperability of payment-clearing platforms. In the process of venturing into innovative, disruptive territory, however, we are also creating space for different kinds of criminal activity for our customers. It is therefore paramount that our strategy incorporates identifying where each party is vulnerable to fraud.
The means to tackling this new kind of fraud lies in the same technology that we will use to help customers make mobile, virtual payments. Consider machine-learning, for instance. This process of telling a computer how to resolve a problem or what to do under certain conditions is used for interactions, like those simulated chatbots that handle customer service inquiries. This process can also be used to alleviate fraud.
The time will come when we will use machine-learning to detect any suspicious activity by using historical and live data to create patterns for customers’ behaviour, as well as advanced algorithms to make accurate predictions, evaluate every transaction for fraud, take the appropriate action if fraud has occurred, and prevent any fraud attempts.
In certain parts of Africa, there has already been a shift from traditional payments paradigm to that of a highly innovative, fully tokenised system to prevent fraudulent activity.
Essentially, tokenisation reduces the amount of sensitive data stored on mobile devices and transmitted over networks during payment, and secures any kind of digital transaction. This technology substitutes a payment card’s details, like the card number and expiration date, with a unique value that applies to a single transaction only. This token is of no value to fraudsters because they cannot use it again.
The future is bold
Amazon recently announced Amazon Go, a store where shoppers don’t need to pay, or at least, they don’t need to stop at the register and consciously pay. They can simply pick up what they want and walk out, without rifling through their wallet, waiting, or counting change. Moreover, ApplePay is already using biometric scanning technology so that customers can use their fingerprints to unlock their phones and accept purchases.
Developments like these means that it could be as simple as using a fingerprint scanner at the cash register to verify, process, and accept transactions — without needing any type of wearable technology. While using your finger to process a payment might represent the ultimate in “digital” transactions, it’s only the start. Pretty soon, we could start to see the use of iris scans, voice-recognition, and even DNA verification.
That’s just a taste of what the future holds.
By Sonia Vaessler