The last 20 years have seen an incredible change in the payments space. Cash, which was good enough for everyone for thousands of years is being slowly, but surely, replaced by payment mechanisms that are driven by convenience and enabled by technology. Even credit and debit cards no longer deliver the level of convenience demanded in the omnichannel age. The 16-digit card number, validation date and code take far too long to type on a keyboard – let alone on a smartphone.
Along with new payment, opportunities come big challenges and omnichannel functionality is arguably at the top of the list. At a time when merchants implement new strategies to provide a standardised user experience, the payment industry still lacks a suitable choice of omnichannel payment methods.
Cards are effective across channels and they are global, but they lack the convenience factor needed for quick online and mobile payments. Solutions like PayPal have also failed to provide omnichannel capabilities. In fact, only a few payment methods can really cover all sales channels and provide a positive consumer experience.
The second biggest challenge comes from the diversity of global payments. Retailers have to implement different payment methods in almost every country in which they operate. They receive money and financial data from ten or even twenty financial partners so, unless they use a standardised settlement file that can incorporate all of this information into one single format, they will be spending unnecessary time on payment reconciliation.
The last, but by no means least, big challenge is from security and fraud. Many of today’s large data breaches demonstrate the vulnerability of current retail IT infrastructure. Omnichannel solutions require connectivity and interoperability but connected commerce needs better security and encryption. Trust is such a big element in how payment methods evolve, and every data breach and every stolen card is another blow to consumer trust.
The answer to these issues lies in a combination of security, convenience and innovation, which is why mobile wallets and solutions like Apple Pay and Google Pay are becoming so popular. Not only do they play to the ubiquity of smartphones, they are also easy to use and secure too. If retailers are looking to appeal to the younger generation of consumers, the ability to pay using a smartphone will win every time.
The major manufacturers clearly understand this. In September Apple introduced a new enhancement that allows any external or IoT device to trigger an Apple Pay payment by simply reacting to the signal of an NFC tag. Online this means that not only will payment be automatic, but it will trigger the order to be sent at the same time. This works as well for ordering a printer cartridge by scanning the tag signal from the printer with a smartphone, as it does re-ordering washing powder via NFC for the washing machine.
Another solution appearing on the horizon, which is set to meet all of the challenges head-on, is biometric authentication. Apple Pay and Samsung Pay are already integrating fingerprint recognition into payment transactions, and this, along with eye and voice recognition, will always provide better security than usernames with complex passwords. The ability to place a finger on a sensor, an eye to a camera or to speak a few words is convenient and most importantly, it can be applied across multiple channels in multiple locations.
Consumers are carrying out voice-activated online shopping using devices like Alexa, and, given that new rules have been brought in to protect consumers, this means that the system cannot be abused or confused by the wrong voice. Facial recognition and eye scanning solutions are also likely to become a key part of the automated payment experience. MasterCard has said that it will make biometric identification available to its customers next year, either through fingerprints or facial transactions, not just for in-person payments but also for remote transactions. If any retailer doubts the likely take-up of this amongst consumers, MasterCard together with the University of Oxford carried out research which found that 93% of consumers prefers using biometrics to traditional passwords or pins.
Which brings us to the question of technology. Many retailers are immersed in their eCommerce and omnichannel transformation projects, which could make it difficult to establish the infrastructure to store biometric characteristics securely and ensure they are complying with data protection rules. Connections will need to be made between hardware manufacturers and payment service providers to start the process so that smartphones, tablets or VR glasses can save a highly encrypted copy of the customer’s fingerprint, iris or voice pattern onto the device.
Looking ahead, we can be sure that the payments landscape will change. Only methods that support silent, smooth, automatic processes with a global reach will have a future. We don’t need new brands with new payment solutions. Instead, the established payment brands that consumers trust will simply evolve. Handing over delicate processes to our smart devices necessitates a big change in consumer behaviour, particularly amongst older generations. New payment brands with no history or trust established will deter consumers from embracing new technology.
This opens the gates to allow established providers to move towards biometrics if they are able to incorporate the necessary IT infrastructure. All the indications are that we will see usernames and passwords replaced with biometric authentication like fingerprints, face and voice recognition. Biometrics technology is evolving all the time. It’s becoming faster, more secure and reliable.
As consumers, we will welcome innovations that do away with typing complex passwords on small touchscreens and, usefully, we can’t forget a fingerprint. This is compelling for today’s omnichannel shopper. Given that retailers strive, above all else, to meet customers’ expectations, we can confidently expect payment schemes that enable biometric authentication to become widely available and successful before very long, meeting all of the major challenges that we face today.
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