Digital Payments x Business Lending as a Service = SMB Winning

Much has changed about how we make and receive payments in just the last couple of years. Digital payment methods are evolving rapidly, becoming increasingly fast, convenient, versatile, accessible, cost-effective, and secure. More sophisticated payment systems are continually phasing out traditional cash-based options.

Additionally, cashless payment is now a staple in modern financial transactions. According to McKinsey’s 2022 Digital Payments Consumer Survey, nearly 90% of Americans use at least one form of digital payment, with 62% having multiple digital wallets.

If you are looking for a digital payment solution for your business, you must be wary of your customers’ preferences and the latest innovations in funds transfer. Otherwise, you may choose a system that’s obsolete by today’s tech standards or market expectations.

Here are six cashless payment trends and innovations you should consider before implementing a digital payment system on your business app, commercial website, or checkout counter:

Contactless payments

As the name suggests, contactless payment systems request and accept payments without requiring any physical exchange or contact. The payer doesn’t need to hand over a card or even touch the payment terminal.

This mode of payment comes in three main variations:? contactless cards, mobile transfers, and QR code payments. Contactless cards are regular debit or credit cards equipped with near-field communications (NFC) technology. NFC-enabled cards have a “tap to pay” function that triggers a transaction when the card comes close to the payment terminal. The same technology is incorporated into smartphones, tablets, and wearable gadgets to enable contactless mobile transactions.

Payment by code uses a smartphone’s camera to scan a QR code, which then opens a payment webpage or app on the phone.

Contactless payments are incredibly secure, not to mention sanitary. Smart contactless cards and devices have several security options, including one-time password (OTP) and user ID verification. Also, the data within the device or card is heavily encrypted and volatile, making duplication impossible.

Mobile payments

Mobile payments are made using portable devices such as cell phones, smartwatches, and tablets. This convenient payment method is quickly winning over consumers in the post-pandemic world. Nearly half of US smartphone users make contactless payments using their phones, and that figure is only growing.

This mode of payment works in several different ways, giving users several payment options on the same device. Generally, there are three widely-used types of mobile payments in the US, they are:

• Mobile wallets – Mobile wallets are essentially apps, such as Google Pay and Apple Pay, that link to the user’s bank account or credit card. They use APIs and pre-programmed consents to make one-click payments.
• Mobile-point-of-sale (mPOS) – The seller uses their phone or tablet as a handheld payment terminal. Apps such as Square, Lightspeed, and Shopify POS can turn any smart device into a mobile checkout counter that accepts various digital payments. These are quite popular among brick-and-mortar retailers.
• In-app payments – Apps such as Cash App, Venmo, and Zelle enable smartphone users to make instant peer-to-peer fund transfers to friends, family, or merchants.

Most mobile transfer systems employ some form of contactless technology to interface the phone with the payment terminal. Smart speaker payments executed using voice assistants such as Apple’s HomePod, Google Nest, or Alexa also count as mobile payments.

Crypto payments and distributed ledgers

Crypto is the next big thing in digital payments. About a third of US SMBs accept various cryptocurrencies as payment for goods and services. Furthermore, according to a Deloitte survey, more than 85% of US companies are gearing up to enable crypto payments.

A decentralized payment system powered by blockchain technology is a very enticing concept in the fintech world. In fact, blockchain technology has already claimed a large share of consumer and B2B financial markets, especially in international transactions. Juniper Research forecasts blockchain-based cross-border B2B transaction value to reach $4.4 trillion by 2024.

The beauty of crypto and blockchain-based payments is that they transcend international/regional borders. They are also irreversible, secure, fast, reliable, and low-cost.

Peer-to-peer payments

Peer-to-peer (P2P) transfers have been around for a while now, but they are becoming more and more acceptable as a mode of payment. A recent survey by the Electronic Transactions Association (ETA) and The Strawhecker Group (TSG) found that 82% of US small businesses support at least one digital P2P payment method, and 92% are happy with the experience.

P2P payment systems allow two parties with separate bank accounts or digital wallets to transact instantaneously. They do so through third-party websites and mobile apps, such as PayPal, Alipay, and Wise, equipped with APIs that connect directly to supported bank accounts.

Biometrics verification

Biometrics verification adds an extra security layer when approving payments. It fills in the “something you are” part of multifactor authentication.

Biometrics is not new in financial security. But the technology has advanced a long way over the last few years. Most notably, many modern smartphones and wearable devices now have built-in fingerprint scanners, facial and voice recognition technology, and user proximity sensors. This means that biometrics verification in digital payments has largely shifted from the payment terminal to the payer’s device.

Putting biometrics security in the user’s hands builds confidence in remote and mobile payments. According to Juniper Research, an estimated $332 billion worth of remote mobile payments were authenticated using biometrics in 2022, and that figure could reach $1.2 trillion by 2027.

Embedded payments

Embedded payment systems move the burden of making transfers from the consumer to the merchant. These are payment solutions built into the merchant’s offering.

Embedded payments work via open APIs that integrate with an upstream payment processing service within an app or website. This enables the merchant to oversee and even automate the entire payment process, allowing the customer to focus on what they’re buying rather than the payment transactions. Nowadays, embedded systems are a standard payment strategy among big brands, including Starbucks, Amazon, and Uber.

Usually, embedding payments within a company’s offerings is the first step toward providing a more comprehensive range of financial services, including lending, customer financing, insurance, and investments. This is known as embedded finance. A popular example of embedded finance is the “buy now, pay later” service, where customers purchase goods and services on short-term credit. B2B firms can also offer SMB funding solutions, such as loans, lines of credit, and asset financing, to their customers through embedded finance.

Getting started with embedded finance

Embedded finance is more than just a payment method, it opens your business to a new world of financial opportunities. Loanspark can help you seize those opportunities. We have the expertise, muscle, and tools to turn your business into an embedded lender in as little as 7 days. Providing funding solutions to your customers earns you extra income, boosts your value proposition, and builds customer loyalty. It makes you a financial hero within your business community. You can reap all these benefits and much more by partnering with Loanspark.

Contact us today to start your embedded finance venture.