Progress in payments includes accelerating seismic shifts to digital transactions and generating unbounded opportunities for innovation.
Many companies have now transformed into offering digital payment methods with the aim to provide safer, frictionless, and faster transactions with lower fees. Digital payments are thriving. In a climate where cash has ceased to be king, innovation in payments is imperative.
Consumers today demand payment procedures that are developed around their needs and preferences, as the banking and financial industry continues to evolve. This also means that security is paramount.
Transactions that are facilitated through digital, online, or other electronic media are referred to as digital payments. This covers a wide range of methods, such as mobile wallets, internet banking transfers, and digital payment apps. From a consumer’s perspective, this means any payment transaction that doesn’t require a physical payment card.
Digital Payment Growth and Innovation
As payment innovations multiply, digital payment transactions are surging in emerging markets as intensified competition continues. Banks, fintechs, and other businesses strive to develop their strategies in order to compete for market share. Fast-growing, competitive digital payment models have gained momentum as the shift from cash to contactless payments intensifies.
Banks and digital wallets are developing a range of partnerships to get access to capabilities, improve their value proposition, and broaden their geographic reach.
APIs have made it possible to develop partnerships and improve services, particularly faster payments, and have also made it easier to unbundle services. They have become the standard for data sharing in open banking applications. Such applications allow third-party access to consumers’ bank data (with the consumers’ consent) and are becoming a fundamental component of digital disruption.
Digital disruption is driven by factors both on the supply side, primarily technical advancements, and on the demand side, along with shifting customer service expectations.
The Future of Money is Digital - Digital Payment Trends
As digital payments become incorporated into our daily lives, we take a look into some of these key market trends and types of digital payments.
Contactless payments are faster and more secure than PIN technology, allowing the customer to hold their mobile across the reader, and transfer encrypted data to the point-of-sale device instantaneously. This is made possible with Near-field communication (NFC) technology and has been used for many years - payments for public transport in cities such as London or New York being a prime example.
Digital wallets (or electronic wallets) are financial applications that run on mobile devices. Online payment tools are usually in the form of an app. The wallet securely stores virtual versions of debit and credit cards and as mobile payments are heavily encrypted and tokenized, this means that none of the card details or account numbers are stored within the wallet.
Peer 2 Peer (P2P) mobile payments
P2P payments are transactions between two parties with separate bank accounts. By enabling users to transfer money to another person's bank account via a third-party website or mobile app, a P2P service mediates these transactions.
QR code payments
Quick Response Code, known as a QR Code, is a two-dimensional code that can be read by a smartphone camera. The idea behind using QR codes for payment is straightforward: the customer will generate a QR code using their mobile device that contains some of the payment card information of the cardholder. The merchant will scan this code at the point of interaction and process the data online.
Card-not-Present (CNP) transactions
When a purchase is made remotely, a Card Not Present transaction takes place, allowing the customer to quickly complete the purchasing process. This implies that as soon as payment clears, goods will be shipped and delivered.
Are Digital Payments Secure? A Changing Market Means Evolving Requirements
Security, speed and convenience are just a few of the many advantages afforded by the online world that have led most people to choose to pay digitally.
While there is a strong financial incentive for businesses to accept digital payments, it is essential that they are aware of the main security issues and implement the necessary processes to reduce the risk to both themselves and their customers. This could enable them to benefit from digital payments while preserving the sustainability of their client relationships over time.
Many malicious actors have determined that payment innovation has represented a very profitable opportunity to compromise unprepared online organizations and exfiltrate consumer data for financial benefit. This has resulted in a surge in the number of attacks in recent years.
All stakeholders within this industry have new and ongoing security requirements to consider. Given the severe consequences of security breaches, it’s critical to build on reliable and proven cryptographic cybersecurity solutions.
In our Digital Payments white paper, we provide further insight on key digital payment trends and how Utimaco’s Atalla AT1000 and Cryptosec Banking HSM provides a reliable trust anchor for the purpose of providing trusted digital end-to-end payment processes
Click here to find out more about Utimaco’s payment HSMs and how they can help you strengthen your security posture.
About the author
Dawn Illing is a product development manager with over 25 years of product management experience in the banking, insurance and cyber security industries. By working internationally across EMEA, this has inspired her interest in cross-border digital identity and cyber security, including the interoperable requirements that necessitate successful delivery of digital product and market solutions.