Ahead of taking part at the NextGen Nordics conference, our Fintech Marketing Lead, Michael Jaiyeola, looks at some of the main drivers of change to the way payments work and to the broader payments ecosystem using our knowledge of the fintech industry and our experiences working on some of the most performant fintech systems in the world such as Vocalink’s Instant Payments Solution (IPS).
If you are involved in the payments industry in the Nordics region of Europe, make sure to catch up with our Nordics Managing Director, Erik Schön, who will be taking part in a panel discussion at NextGen Nordics taking place in Stockholm, Sweden, on 27 April.
A new cashless world
Consumers' shift to digital channels is driving demand for seamless fulfilment and instant gratification. A recent Capgemini World Payments Report survey found an increase from 24% to 46% in respondents who had e-commerce accounting for more than half of their monthly spending when comparing before the pandemic to now.
With 91% of the global population expected to own a smartphone by 2026, according to Statista[1], these customers are unlikely to return to the way things were done before, having experienced the efficiencies offered by digital payments,
Nayapay, one of our clients in the South Asian market using our MongooseIM chat engine, is an example of a new player in the payments space seizing the opportunity to disrupt local markets. Their chat-based payments app targets the unbanked in Pakistan and is built around fusing the penetration of smartphone usage and people's willingness to integrate transactions into their daily social, digital activities.
The demand for faster payments
Demand for instant transactions is driving change in cross-border payments, international remittances and e-commerce. Previously, mirroring the instantaneousness of a cash transaction via electronic means had been an ongoing technical challenge. Now, the introduction of real-time clearing and settlement facilities in many markets makes processing payments almost instantly possible.
Frustration with the latency and cost of the traditional banking model has led to the emergence of alternative options. Innovative solutions such as the P27 initiative in the Nordic region show how fintech can blend with conventional systems to provide better payments infrastructure for all. P27, named from the 27 million citizens in the Nordic region, aims to integrate the payments of four countries and currencies into a single immediate payment system, again using the Vocalink IPS.
Embedded payments
Embedded finance is changing the way payments are made where financial products are added to the transactional flow in non-financial platforms. With consumers demanding ever more convenient, frictionless ways to make payments using various devices from wallets to wearables, embedded or contextual payment options add convenience and speed to the payments process.
On the merchant side of things, embedded finance helps them to better understand the best payment terms to offer customers, provide seamless checkout, request payment, and offer financing such as buy now pay later (BNPL), all within a single customer experience.
Making use of payments data
The diverse range of digital touchpoints involved in a cashless payments ecosystem provides vast amounts of data. This is of significant value to banks and fintechs to grow client relationships based on analytics and insights. Companies that can unlock the true value of payment activity data by leveraging powerful AI and ML tools can offer more efficient, tailored products and a more secure, protected environment in which to operate.
Preventing financial crime
All of these converging trends present a clear dilemma in modern payments – customers are demanding easier in real-time transactions actioned on any connected device, while regulators are concerned about increased exposure to fraud. Payments companies, therefore, need to strike the right balance delivering new user-friendly processes that are also highly secure and compliant.
Rapidly increased e-commerce provides an opening for fraudsters. The use of AI and ML allows payment companies to detect fraud earlier by learning the financial habits of clients so that unusual behaviour is highlighted. Fraud prevention security measures, like voice-activated transactions, biometric authentication, and smart assistant payment verification, all have a part to play in securing the future of digital payments.
Erlang Solutions payments expertise
Many of the trends covered in this article may be set to converge in the emerging metaverse space, but the shape of that is some way from being determined. What will money look like in the metaverse? How will existing cross border payment rails integrate with a borderless, global ecosystem?
To discuss the answer to these questions and the P27 response to the metaverse, you can join us at NextGen Nordics taking place in Stockholm, Sweden, on 27 April, where our Nordics Managing Director, Erik Schön, will be taking part in a panel discussion on the topic.
We help create digital and mobile payment solutions that facilitate e-commerce, payments processing and backend services that enhance the customer experience and protect customer data. We work with clients who provide services in DeFi, cryptocurrency, blockchain, GameFi, clearing and settlements, embedded finance, real-time payments, payment gateways and more.
Our solutions use battle-tested technologies delivered by domain experts for secure, compliant and resilient solutions.
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