The pandemic has temporarily shifted the payments industry into an almost exclusively digital space, which saw some consumers and merchants adopt online transactions for the first time. As attention now turns to what comes next, we’ve rounded up some of the key trends ahead that could be ahead in the world of payments.
Navigating a difficult economy
Job losses as well as a lack of consumer and industry confidence means that the volume of transactions could remain at a comparatively lower level for some time. This, of course, depends on the nature of the recovery - whether it’s a swift “V” shape or longer “U” curve. For the UK, early warning signs are pessimistic as figures published by UK Finance suggest that over one million payment deferrals for credit cards and personal loans have been issued over the course of the crisis.
The pandemic has seen several scams and fraudulent activity in the form of impersonating government officials and health professionals asking for consumers to handover valuable data. Add to this a greater number of older consumers adopting digital transactions for the first time and we can see a pressing need for merchants and banks to develop more stringent fraud protection.
As the number of digital payments continues to rise the financial industry will need to ensure the safety of their customers and introduce new methods of fraud prevention with artificial intelligence becoming a potential avenue for banks and merchants to explore.
Growth of fintech and digital innovation
Following the PSD2 payments directive from the European Union, Europe’s financial industry has opened up for greater cooperation between traditional financial institutions and exciting challenger banks. As a result, the scope for fintech involvement in the market is growing, and is likely to play a significant role in the post-pandemic economy. Over the course of the crisis, almost all industries have had to incorporate technology into their business models. Fundamentally, the way in which many of us pay for goods and services has changed, and fintech solutions and companies are beginning to offer innovative tools to simplify the payment process.
This could take shape in the form of creating platforms and methods that increase the speed, ease and security of payments. With hygiene concerns expected to continue throughout 2020 and into 2021, contactless technology will remain one of the most popular payment methods.
Fluctuating currency markets
The knock-on effect of the pandemic on the currency market could mean that we see several periods of volatility across the world. As individual countries and trading blocs announce their recovery packages, currencies are likely to rise and fall in response. The Euro has recently leaped ahead of other currencies after the announcement of a landmark European recovery deal worth €750bn. As further deals are announced, currency movements may be unpredictable meaning that consumers will be looking for a sense of familiarity and convenience when paying for goods and services abroad.
Cross border payment providers will already be preparing for lower levels of transactions due to the reluctance of many people to travel. For cardholders that are going abroad, taking steps to make them feel confident and reassured when making payments will be vital if there is uncertainty around fluctuating currencies. Helping customers to understand the payment options available to them – via dynamic currency conversion or without dynamic currency conversion – and providing the explanation around both options will allow them to make an informed choice on the method that works for them, and encourage the completion of the transaction.