4 Dynamics Shaping the Future of Payments
4 Dynamics Shaping the Future of Payments
Justin Henry, Executive Director, KMMRCE Pay?
The way we pay is changing fast as we move towards a cashless ecosystem where digital technology gives individuals total flexibility with their money. Some of the biggest influencing factors include:
1.????Blockchain
Blockchain is proving a major disruptive force in finance, and the impact of distributed ledger technology (DLT) goes far beyond cryptocurrency. Because an open, decentralised database underpins blockchain, intermediaries such as banks are no longer required to validate transactions or oversee contracts. This creates an interconnected global financial ecosystem with the power to facilitate everything from faster, cheaper, more transparent payments and easier fundraising to fractional ownership and identity security. Its usages can also be applied in other areas, like the safe transfer of medical records, royalty tracking, and recording electoral votes.
2.????Account to Account payments (A2A)
In one sense, A2A payments are nothing new. We’re familiar with transferring money straight from our account to someone else’s or setting up direct debits to pay a recurring bill. But historically, A2A payments have been mainly linked to bank accounts and it takes time for money to arrive from point A to point B. As open banking has evolved, real-time transfers are in demand, plus customers want easier ways to pay at the point of purchase without plastic cards or pin codes. At a time when experience is king, A2A gives individuals a seamless way to spend. From a merchant perspective, it also offers tremendous benefits like reducing the cost of card acquiring, minimising fraud, and receiving funds within seconds.
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3.????Central bank digital currencies (CBDCs)
As financial institutions become more comfortable with digital assets, we’ve seen a growing number of countries introduce CBDCs. CBDCs are a digital form of a country’s fiat currency, regulated and issued by the central bank, which means they don’t protect anonymity like crypto. As well as offering convenience, stability, and security, government-backed digital currency has a huge part to play in promoting financial inclusion. In a world where over 1.7 billion adults lack access to basic banking services, CBDCs let the central bank transfer digital currency to people without a bank account through their mobile phones.
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4.????Crypto payments
Since Bitcoin was introduced, the reaction to unbacked cryptocurrency has been mixed, mainly revolving around its role as an asset class. But where crypto can really change things for mainstream users is when it becomes a viable payment method. The international payment infrastructure is highly complex containing multiple systems, intermediaries and agreements. Decentralised finance cuts through all of these barriers and generates growing opportunities for real-time payments and instant access to liquidity for a broader audience of small businesses and individuals.
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