It’s something of an understatement to say that 2020 has been a challenge for many sectors, with businesses and consumers discovering new ways of living, working, socializing and operating. As part of the new normal of physical distancing, and in just a few months, COVID-19 has changed the world as profoundly as any war or environmental disaster.
So whenever “normal life” resumes it won’t be the “normal” we remember – and that includes the way we pay for goods and services. In this piece Jukka Yliuntinen, Head of Digital Solutions at Giesecke+Devrient (G+D), gives his view on the future of Digital Payments.
Since the outbreak of the pandemic, governments have introduced social distancing measures that favor the use of digital payments and mobile wallets. Millions of people who have never used a mobile payment app before are now doing so. Meanwhile, a tsunami of new customers has flooded onto e-commerce sites.
A report recently published by McKinsey states that the growth of online commerce has accelerated and will continue to do so, especially as markets, such as those in Southern Europe, close the gap with more advanced Northern European or Anglo-Saxon economies and China. Some smaller retailers forced to close in the crisis may not reopen physically but seek a digital future instead. The rapid build-out of omnichannel capabilities – which will bridge payments in any environment, physical or digital – will become an essential requirement for all payment players in most geographies.
On the e-commerce side, we should see greater adoption of the kind of “one-click” payment solutions pioneered by Amazon. For example, American Express, Discover, Mastercard and Visa Implement recently launched a “Click to Pay” solution for US merchants, which allows consumers to make purchases without having to create or log in to an account.
When customers make in-store purchases, health and safety concerns mean more of them are using contactless technologies, which allow them to avoid touching a keypad or terminal screen. Maximum spending limits have been raised in many countries, which means customers can do bigger shops or buy higher value items without having to resort to PIN authentication.
Furthermore, customers that pay with their smartphone or wearable device can authorize purchases that exceed security limits from within their mobile payment app rather than on the merchant’s keypad – an appealing prospect in these social-distancing times.
Although mobile payment apps are popular in China and other Southeast Asian countries (just under half of in-store purchases in China are now made with one), European and US consumers have proved somewhat reluctant to use their mobile devices for payment – something that may change as more customers seek to alternatives to physical payment methods due to COVID-19. In fact, Dan Schulman, CEO of PayPal, recently stated that there has been a “tremendous surge” in demand for his company’s digital payment services – including its US-based Venmo digital payment app.
“Based on the industry intel we get at the moment, we see great opportunities in Banks capitalizing on this trend”, says Jukka. “With our Convego CloudPay Hub we facilitate the easy implementation, management and integration of devices agnostic digital payment solutions.” Jukka continues, “But the Banks will need to move fast though, as Big Tech already has a head start in this space.”
These firms are in a strong position because they get to say how their devices and services are designed to make and protect a payment. They can impact the user experience much better than anyone else.
Jukka continues, “Adding that they also have access to a vast amount of data on their customers’ devices, preferences and spending habits, giving them further opportunity to deliver finely-tuned customer experiences.”
Of course, regardless platform or vendor, all these payment solutions will need to demonstrate they are secure and reliable to win over consumers in a post-COVID-19 world.
At the same time, they also need to be as frictionless as possible to deliver the kind of speed and convenience that consumers now expect. So how can businesses strike the right balance?
“Well, firstly it’s worth saying that frictionless and secure aren’t mutually exclusive terms. With the right technologies in place, retailers, banks and other firms that receive or provide payments can protect people (and themselves) from fraud while offering their customers a quick and efficient payment journey.”
This kind of secured frictionless payment tap into the fact that customer experience is one of the key differentiators when it comes to payments innovation.
“Invisible payments, which completely remove the need for the consumer to initiate or authorize a payment, are arguably the endpoint of many of these payment trends”,
says Jukka. “Amazon Go stores, for instance, allow customers to walk in, choose their items, and walk out again without ever having to physically make a payment. It’s all down to beacons and computer vision that detect when items are removed from the shelves; when the customer exits the store, the items are automatically charged to their Amazon account.”
Invisible payments might be scaring by the sound and creates skepticism over consumer adoption. But it’s certainly true that many people are currently trying new forms of digital payment, which they may well continue to use once the crisis is over. Indeed, despite the current financial uncertainty, the McKinsey report notes that “the [payment] industry’s stability will play an invaluable role in rebooting the global economy, and the potential for innovation can support functioning economies as a “new normal” emerges.” So after years of promise the payments industry may finally be on the fast-track to the future of digital payments.
“Here G+D is working proactively with the industry to set standards and secure transparency in the entire payment value chain, so that payments not only are secure, they are securing the customer too”, says Jukka. “To round it up, we are offering options and enabling new ways to pay.
About Jukka Yliuntinen
Jukka Yliuntinen, Head of Digital Solutions at Giesecke+Devrient, is well versed in identifying and delivering high performing, innovative, and business generating payment solutions for the industry, leveraging on his over 20 years’ experience in payment and identity technologies.
Jukka is also driving industry initiatives within the Mobey Forum, where he is co-chairing their Digital Identity Expert Group. And as an expert in his field, he is continuously contributing to papers as well as giving keynotes on numerous conferences world-wide on digital payment and identification topics.
G+D technology is unconsciously used by billions of people every day! With more than 700 global Banks putting their trust in G+D and our offerings, we enable secure and convenient transactions for everyday usage. https://mobile-security.gi-de.com/futurebanking Our safe payments technology, elegantly combined with smooth customer experiences throughout the whole customer journey, secures the daily life use of financial services. And also creates customer obsession for our clients!