Payments has continuously evolved from physical currency through mobile-based payments and further improving the experience with contactless payments through technologies like NFC.
The next stage of the payment evolution has already started, with payments from social media messenger applications, smart watches, voice-enabled devices (e.g., Amazon’s Alexa and Apple’s Siri), and Internet-connected home appliances.
Indeed, we are evolving to the age of ubiquitous payments – where consumers can pay through any Internet-connected device present anywhere. These devices are programmable to automate several transactions, and help create an ecosystem of value-add services. And as payments technology evolves, digital currency may almost replace physical currency, becoming the most preferred mode of payment.
The fundamental tenets of a superior payment experience are invisibility and completely integration into the consumer’s buying process.
Let us take a look at the components of the ubiquitous payment ecosystem:
- Payments infrastructure: The payments infrastructure is the backbone. It includes the entire payments network, including the issuers, acquirers, processors, inter-bank network, card manufacturers, and providers.
- Internet-connected devices: One of the keys to improving the payments experience is making it frictionless. The consumer should only have to focus on buying the product or service, and the actual payment should simply be a background task. Internet- connected devices – including mobile phones, smart home appliances, smart watches, smart utility meters, and connected vehicles – are being built with payment capabilities.
- Cloud: Infrastructure scalability, predictability, and agility are top drivers for making ubiquitous payments a reality. The Cloud provides the critical infrastructure necessary to enable storage and processing of data arriving from various Internet-connected devices.
- APIs: Application Programming Interfaces (APIs) are the key to unlocking the financial services digital ecosystem. They are a set of tools that expose the payments capabilities of underlying financial institutions to a broader ecosystem of providers.
- AI, ML, and analytics: The payments process can be made more efficient, smarter, and automated by leveraging digital technologies such as artificial intelligence, machine learning, and analytics. For example, bots used for payments on Facebook Messenger enable several value-added services created around the payments ecosystem.
- Identity management: The ability to make secure payments through any desired device, regardless of location, requires a digital identity and authorization process.
As we move toward ubiquitous payments, banks, payments firms, and other enterprises will need to evolve their strategy to address all the above components in a holistic manner. Industry standards will need to evolve to ensure secured payments between devices, as will regulations, such as the Payments Services Directive 2 (PSD2), which is an example of an encouraging step in this direction.
Make no mistake about it…changes in customer payment behavior to align with new payment methods, and the pervasiveness of technology, will drive the industry to the stage of ubiquitous payments.
What has your experience been with the evolution of the payments ecosystem?