What does the future hold in store for payment technologies?

Payment technologies define the way we pay for, and receive, goods and services. As new ideals of speed, convenience, affordability and connectivity become possible with the inevitable march of technological endeavour, so too new payment technologies will enter our lives.

So, how will the future of commerce be shaped by the payment technologies of tomorrow? “The future of payments is unfolding in ways that were once considered unimaginable,” explains Paul Staples, Head of Embedded Banking at ClearBank. 

“Technological advancements, shifting consumer preferences, and evolving regulatory landscapes are fundamentally reshaping the way we conduct financial transactions across any business, person, or indeed machine.”

Payment speed is not the only consideration

Staples continues: “Innovation in the space for the past 20 years has been about speed, in both domestic and cross-border payments, but we’re now bumping into diminishing marginal returns when looking only at speed as the innovation driver. Payment speed remains a critical consideration, but we believe payment safety stands out as a crucial concern in the payment landscape of the future.

“The modern payment ecosystem is a dynamic space characterised by an array of options, from mobile wallets and digital currencies to contactless payments and biometric authentication. The need for speed has been a prevailing narrative. Consumers and businesses have come to expect rapid, convenient transactions that reflect the pace of our interconnected, digital world. It’s a hygiene factor.

“However, the future of payments will pivot on the principle of safety. In an era marked by increasingly sophisticated cyber threats and data breaches, security is of paramount importance. Consumers want financial information protection and to know their transactions are safeguarded against unauthorised access.

“While speed is essential, it should not come at the expense of payment security. A payment system that is both speedy and secure is the perfect solution. Technology must rise to the challenge of providing a balance between these two crucial aspects of the payment experience, but these are often treated independently.”

Peter Wood is a seasoned tech founder and current CTO at Spectrum Search, who looks at the current situation through the lens of having spent over a decade in the tech industry. He predicts: “In a rapidly evolving digital landscape, payment technologies are undergoing an irreversible transformation. The quest for seamless, secure, and instantaneous transactions is pushing the boundaries of what is achievable.”

Three main drivers behind future of paytech

He adds: “The future of payment technologies is ostensibly anchored on three pivotal axes: cryptocurrency, artificial intelligence (AI), and blockchain.

“Cryptocurrencies, spearheaded by bitcoin, are progressively being recognised as a legitimate alternative to traditional currencies,” Wood says. 

“The irrefutable allure of cryptocurrencies lies in their decentralisation, which extricates transactions from the clutches of traditional banking systems, thereby mitigating fees and augmenting transaction speed. However, the mass adoption of cryptocurrencies is fettered by regulatory scrutiny and a lack of understanding amongst the general populace.

“On a parallel trajectory, the blockchain – the underpinning technology of cryptocurrencies – is showing promise in enhancing payment systems by fostering transparency and reducing fraud. By creating an immutable ledger of transactions, blockchain curtails the propensity for financial misdemeanours and accelerates the verification process, which is imperative in a world where the velocity of transactions is escalating exponentially.

“AI and machine learning (ML) are the linchpins in the evolution of payment technologies. My tenure as a visionary at Spectrum Search, an AI and ML-led recruitment agency, and the pivotal role I play at the Outlier Ventures accelerator, have reinforced my belief in the transformative power of AI in payment systems. AI can streamline the payment process by predicting consumer behaviour, detecting fraud, and automating routine tasks, thereby ameliorating the user experience and bolstering security.”

Indeed, the prevalence within financial services of these three technologies – once the stuff of sci-fi-induced fever dreams but now the hottest topics in boardrooms around the world – is a testament to how the industry has embraced cutting-edge technology. Of course, they all have their detractors. However, business leaders throughout the financial world are embracing change and deploying the technology that is powering it.

It is helping to tackle long-standing issues within the industry, as well. According to research from American Express, nearly a third of businesses (29%) have seen an uptick in payments fraud over the last year. They are responding. Nearly half (45%) of those companies have introduced new security and anti-fraud measures, while a third (34%) have taken steps to bolster their existing payments security capability. These firms are spending an average of 7% of their annual turnover on fraud protection.

It’s not just fraud, either, although this is a clearly advantageous use-case. Over the past two years, seven in 10 (69%) businesses have adopted or considered adopting automation with a view to saving time, minimising errors, and reducing expenditure.

“Secure and seamless payments are more important than ever for businesses so it’s not surprising to see firms investing in this area and seeking out partners who can support them in this area, particularly as more B2B spending digitises,” explains Stacey Sterbenz, Vice President & General Manager for UK Commercial at American Express.

What does the future of paytech look like?

“Looking forward to the payment landscape 20 years from now, several trends and developments are poised to shape the future of payment technology,” continues ClearBank’s Paul Staples.

“We can expect biometric authentication methods such as facial recognition and fingerprint scans to become even more prevalent and directly part of the payment journey. As quantum computing advances, encryption methods will need to evolve to ensure the security of payments. Encryption and tokenisation will align to protect user information.

“As we move into a more interconnected world, payments will become seamlessly integrated into the Internet of Things (IoT), such as cars, appliances, and wearables that will make transactions part of our daily lives – with invisible payments, the challenge will be how we monitor, control and manage these as they all come back to a business or individual.

“Sustainability and environmental considerations will also play a key role. Payment technologies will incorporate more eco-friendly solutions to minimise the carbon footprint of financial transactions.

“In conclusion, the future of payments will be marked by a delicate balance between speed and safety. While speed is a valuable feature, ensuring the utmost security of payments is of paramount importance. A future characterised by biometric authentication, quantum-resistant encryption and ESG will redefine the payment landscape. 

“In this brave new world, payments will be both fast and secure, enhancing our daily lives while protecting our financial wellbeing. As we move forward, the focus on safety will be the cornerstone on which future payment technologies will be built.”