Automation and payment transformation: 2022 and beyond

Back in 2019 - before the world shifted on its axis, digital payment solutions from chip and pin and online transactions, to ApplePay, were thriving. 

At that time, according to data released by the Federal Bank of San Francisco, US consumers used cash in 26% of their transactions, and this was down from 30% in 2017. The diminishing role of physical money was sedately winding itself down, allowing everyone to adjust accordingly. 

Then earlier this year, the same source released its most recent findings - and revealed that cash usage in 2020 had dropped dramatically to just 19%. Data suggests cash will drop further still, and could even go as low as 10% by the end of 2022.

Fear of spreading COVID-19 through the use of banknotes and increased online shopping has hit traditional currencies hard, and even though the world has now opened up, the numbers continue to tumble. 

As cold hard cash and pocket-jangling change becomes increasingly obsolete, financial technology companies are finding evermore ingenious ways to help us do business through digital payment solutions.

From voice recognition biometrics to blockchain technology and seamless Amazon store payments, automation is at the heart of this massive transformation.

A glimpse into the future of payments

But what will this fast-moving financial future look like, and who will benefit from the transition? 

According to a recent survey by Marqueta, the way we pay our bills and purchase all given items will look very different in a decade. Those debit and credit cards we love to carry will almost certainly become obsolete, while nifty, mobile payment apps will also disappear. The research found that: 

• The future iterations of ambient commerce include a mixture of facial recognition and AI-based decision making
• Payments may become increasingly invisible as we move to more “ambient” models of commerce – such as the recent emergence of till-less grocery stores. By 2030, this will evolve even further so there will be no cards or payments devices. Instead, a person’s biometric data would be captured by cameras, along with the item they are purchasing and sent directly to their bank. While (32%) of surveyed consumers find the idea of ambient commerce ‘creepy,’ experts believe given how quickly Uber and the like have been accepted as a norm, the convenience would soon win people over. 
• 51% of consumers surveyed saying they would consider using a contactless microchip implant to make payments
• 31% of 18–24-year-old respondents say they would be comfortable with AI making automated decisions on their behalf to choose the most ethical way to pay

Changes brought by automation

Automation of payments has become the logical solution to what would otherwise be a labour intensive and time consuming process. Martin Rehak, CEO of Resistant AI says manual processing simply isn’t a realistic option anymore, given the volume of transactions payment processors deal with today. This change, although accelerated by the pandemic, was inevitable. 

He explains, “Human oversight cannot guarantee consistent security against fraud or hacking at those scales. So there is no going back on automation. Done properly, automation can harden many parts of the payment process to improve security — but the caveat, here, is “properly”. 

Shannon Kreps, Vice President of product marketing, Medius, agrees. She says, “Automation enables manual and time-consuming tasks such as the accounts payable (AP) process to be managed far more quickly and accurately.” 

She also points out that the fundamental purpose of automation is to boost business productivity – for example in the case of AP automation, automating payments enables it to automate workflows, reducing chances of common errors such as incorrect PO numbers, line items not matching POs, missing VAT numbers and invoices that have been addressed to the wrong department, she says, “occur all too frequently.”

But it's not only about streamlining back office processes. Automation in the payment solutions space has also been massively instrumental in driving forward ecommerce and enabling multiple payment points. 

Julie Chariell, Senior Analyst, Fintech, Bloomberg Intelligence believes the proliferation of electronic payments has contributed to greater adoption of e-commerce, by enabling multiple types of payments beyond cash and check at the point store. “This, along with the introduction of NFC (near-field communications) technology, has enabled contactless payments at the point of sale, where smartphones or NFC-enabled cards can be held near a reader as a touchless way to pay. While this technology existed before the pandemic, but Covid-19 and the related desire to avoid touching anything, especially cash, drove rapid adoption.”

In essence, automation is at the heart of all the latest innovations in the paytech space that are driving the online transaction revolution. 

Payment technology drivers

Currently, there are three main technologies that drive automation in paytech. The first is the way companies acquire customers. Between KYC providers and specialist screening and geolocation technologies, fintechs can verify, process and conduct customer risk-assessments in real-time, leading to an onboarding time of under two minutes. 

Chariell explains that as part of this, AI and machine learning is key to the growth of automation in paytech. She says, “When applied to transaction monitoring and screening, it can handle requests at scale, and at pace, and is more efficient than other processes in significantly reducing error. 

“Finally, the method in which fintechs connect to payment systems has been underpinned by automation. Thanks to open banking, fintechs can plug-in-and-play with different APIs in one automated, secure process. Information is exchanged in real-time between different financial providers or intermediaries, enabling the user to enjoy a range of benefits including faster and more secure payments.”

Ron De Bos, Director Products Management – Payments for the global ecommerce enabler, Digital River, the global ecommerce enabler, agrees. He says, “AI in the payments industry can enhance customer service, by providing hyper-personalised credit scores and offers. It can also drive new forms of transactions – we are already seeing retail stores with no cashiers – shoppers can just grab and go.

De Bos also points out that AI is responsible for big advances in the areas of payment orchestration, billing optimisation (DCA, TOD submission of renewals optimisation), customer identification and authentication based on multiple data sources, fraud detection, payment optimisation, credit scoring, monitoring, and alerting.

A driver of digital currencies

But automated transactions and the development of the space are also set to change the financial markets as we know them. Cryptocurrency and Central Bank Digital Currency (CBDC) are being driven forward at an extraordinary rate because technology is enabling their usage in more and more marketplaces. Indeed, recently the Bank of England issues a warning that cryptocurrency could even lead to another large-scale financial crash that change damage the global economic financial system, simply because its accelerated usage shows not sign of slowing down, and its stability is negligible. 

De Bos says blockchain technology is the motivating factor behind the increased use of crypto - and even the social media giant Facebook is considering entering the digital currency market as a result of it. “The largest and most successful technology for making international payments possible is blockchain. The immutable and transparent nature of blockchain places it at the forefront of the payment industry trends. It's an excellent candidate for an international cashless currency. Even Facebook is planning to create a virtual currency.”

Chariell concurs, “Payments automation makes it easy to accept multiple types of payment mechanisms, from cards to digital wallets to bank accounts directly, and most recently, to crypto payments. Visa and Mastercard, the backbone of the automated payments network, are allowing cards to be used to buy crypto and access crypto accounts to make payments at any merchant accepting their cards.”

She adds, “Crypto providers such as Coinbase, have build crypto-wallets for investors to store and transact in their digital currencies, plus tools to help merchants accept crypto-payments.”

What will the future of payments look like?

As Amazon matches forward with its entirely contactless stores, the world of payments is already becoming unrecognisable when compared to just a decade ago. But what will it look like in the future? 

Kreps believes it will simply be much more efficient - but this will be driven by necessity rather than innovation for innovation’s sake. “I think [the paytech space] will be much better than today – with increasing trade across borders, especially when there are issues like today with supply chain, we’ll need to find ways to pay suppliers faster and electronically, with increased transparency.

“It will need to be quick to avoid issues in FX fluctuations and to stop suppliers worrying about long settlement times – this space is definitely changing and will allow us to expand where we trade quickly,”she says.

Other experts say there will be changes that transform it entirely - and that even automation itself will be outmoded by better technologies. Jason Ollivier, Head of Disruption for Contis, says, “Paytech will be unrecognisable, and the need for automation will be as antiquated as cheques are today. Processes will be so innately efficient that the idea of automation will be redundant.” Ollivier believes that blockchain and open finance movements will be mainstream and act as channels through which data analytics optimise the act and safety of transacting.

He says, “Something as painful as getting a mortgage will require me only to input the amount I want to borrow and the property (including the price) I am looking to buy. My identity will automatically be anonymised, relevant information about me will be automatically pulled (salary, years in job, relevant bank account details) and automatically posted for the mortgage providers to review and bid for my business, in similar way to internet advertisers bidding to put their content before an internet user based on the their browsing history. 

Ollivier adds, “What comes back to me as a customer is a summary of offers in a form that allows me to either press 'accept' or 'decline'. For me as the user, the process will be streamlined to such a degree that it becomes as simple as, ``this is what I want, and I accept.”

Automation case study

Rob Israch, GM Europe, at Tipalti, tells us about how automation has helped scale Hopin

“The event technology platform Hopin is one of Europe’s fastest growing start-ups. It launched in June 2019 and was valued at $7.75bn just two years later.  It has seen tremendous growth as it helps customers host immersive virtual, hybrid and in-person event experiences. 

For the company’s finance team, this meant needing to process a huge volume of international payments, initially in a time consuming, manual and complicated manner including manually selecting the correct currencies. Knowing it needed to automate in order to gain the visibility and overview needed to help sustain and scale the company’s growth, the team at Hopin worked with Tipalti to cut out manual intervention and future-proof processes. This meant being able to bring invoice processing back in house, while the multi-entity setup provides complete visibility across operations.”

Melissa Richards, Senior Accounts Payable Analyst at Hopin, explains, “Our workflow is quick and easy with all our payment processes in one central location - the days of juggling different systems and exporting files are long gone – we have no manual intervention. With automated accounts payable, we can continue to scale and not have to add more headcount to keep up.”