Unveiling the Future of Payments: Key Insights from Money2020

The advancement of technology alone does not guarantee a seamless customer experience in payments. Instead, it is the adoption of a customer-centric approach that truly drives success. In today's rapidly evolving landscape, where the physical and digital worlds are merging, industry leaders strive to create the perfect 'phygital' journey—a journey that captivates customers and fosters long-term loyalty. However, achieving this requires more than just finding the right strategic fit; various other factors must be considered.

This article covers 6 points:

1. Identity is the fundamental pass for a customer to go anywhere.
2. The future of retails is constantly reshaping one’s payment experience beyond the advanced payment means.
3. Banks need to face and adapt to the ever-changing payment landscape and associated risks.
4. Data is the new oil, but how to use it is a big question.
5. Age is not the reason for one to be left behind.
6. Culture, culture, culture, let culture speaks for itself.

1.?????Identity is the fundamental pass for a customer to go anywhere.

Identity is not only critical for the unbanked but also for those already navigating the banking sector. It is a fundamental component for engaging in both the physical and digital worlds. Identity is crucial for protecting one's financial literacy and rights, but it is also a piece of information that is constantly evolving in response to changes affecting individuals or groups. However, technological advancement presents a double-edged sword - it enables better protection but also introduces greater risks.

At Money2020, multiple panels highlighted the illegal trading of identities, which poses significant challenges for both financial institutions and end-users and directly contributes to fraud and other adverse events.

While it's crucial to offer secure and seamless payment experiences for customers, striking the right balance can be delicate. In light of increasing concerns and demands around identity, solutions related to authentication, such as KYC, KYB, and biometric authentication, will continue to take center stage in the discussion in payments and banking.

The concept of identity extends beyond physical ID cards. For example, Digital Identity like the e-Passport issued by governments empowers individuals in countries like India. From paying taxes and receiving social benefits to buying a cup of coffee or scheduling a hospital appointment, digital actions often mirror physical activities. Mobile-based identity is another example, particularly in Africa, where messaging platform accounts serve as identifiers for daily financial transactions. Identity can also be built on mobile protocols, like Google Smart Lock or Apple ID, and blockchain technology enables self-identification for specific activities.

Nevertheless, protecting and maintaining ownership of one's identity in our rapidly evolving world remains a significant challenge. While financial institutions might consider collecting more customer metadata and using behavioral science or AI to better identify unauthorized activities, it's equally important to educate the population on these issues. The constant enhancement of the IT infrastructure of the banks is only part of the equation to tackle fraud-related issues, education should go together. Through better education in regard to identity protection and authorization, people will be better equipped for everyday challenges. Using India as an example, the country makes 1.1 billion people and more to be digitally enabled, going from everyday payments to healthcare benefits and unemployment supports… Most governments are now aware of the importance to enable all citizens to be digitally inclusive, and digital identities for all are fundamental to achieving this.?

2.?????The future of retails is constantly reshaping one’s payment experience beyond the advanced payment means.

In today's rapidly evolving world, the future of retail is constantly being reshaped by advancements in technology, particularly when it comes to payment experiences. While the means of payment have undoubtedly transformed over the years, the real revolution lies in the integration of digital identity authentication. This innovative approach not only ensures seamless transactions but also enhances the overall retail journey for citizens and consumers.

One compelling example of digital identity authentication in action can be observed in China, where the widespread use of WeChat has transformed the payment landscape. Cash transactions have become increasingly rare, with WeChat and AliPay dominating the market. YSL, a renowned beauty company, leveraged this trend to create an engaging campaign. Customers were given the opportunity to personalize their own lipstick by having their names engraved on the product. Upon entering the store, a Mobile Beacon with facial recognition capabilities detected their presence. Using this technology, customers could effortlessly collect their personalized lipstick and proceed to checkout. This seamless integration of digital identity authentication not only streamlined the payment process but also added a sense of exclusivity and personalization for the customers.

This example highlights the growing demand among consumers for effortless experiences. Whether it be through walk-out technology, personalized loyalty programs, or QR code payments, consumers crave simplicity and convenience. With the advent of artificial intelligence (AI), the possibilities for delivering personalized experiences have expanded even further. AI enables retailers to create tailored experiences and foster a sense of discovery without making customers feel like they are being marketed to. By leveraging data and digital authentication, retailers can generate loyalty, minimize friction, and truly enhance the overall retail journey.

The key to successfully reshaping retail experiences lies in understanding consumer expectations and leveraging technology to meet those needs. As consumers increasingly seek seamless and personalized interactions, retailers must adapt their strategies accordingly. Digital identity authentication provides a powerful tool for meeting these evolving demands and ensuring that payment experiences become an integral part of the overall retail journey.

3.?????Banks need to face and adapt to the ever-changing payment landscape and potential risks.

In the ever-changing world of finance, banks face an ongoing battle to adapt to the rapidly evolving payment landscape. As new technologies emerge and consumer preferences shift, financial institutions must proactively address challenges and risks to protect their customers and maintain their reputations. From fraud and data leakage to unauthorized transactions, banks must stay ahead of these pitfalls.

During a recent Money2020 panel discussion, the importance of adapting to the changing payment landscape was emphasized. One speaker shared a personal experience related to identity verification in a hotel that had suffered a major data breach. Guests were asked to scan their passports, raising concerns about data security. This highlighted the need for more secure and convenient alternatives, such as QR code-based identity experiences, underscoring the growing significance of digital identity solutions in the financial sector.

Mistakes in incorporating digital identity were also addressed during the panel. Relying solely on entity resolution tools, which confirm personal information accuracy without addressing information authenticity, can have severe consequences. In cases of suspected money laundering, filing a Suspicious Activity Report (SAR) under a victim's name instead of the actual perpetrator hampers law enforcement efforts and perpetuates incorrect information. The gravity of the issue was underscored by the acknowledgment of identity irregularities in 3 million SARs by the deputy director of FinCEN.

Amidst the vast amount of available data and its complexity, organizations face the challenge of securing their digital infrastructure. To prioritize actions, banks must consider practicality and common sense. Leveraging existing data to understand consumer behavior and creating personalized interactions that enhance customers' identities emerged as an essential strategy. Tokenizing and securely storing data instead of carrying excessive Personally Identifiable Information (PII) can minimize risks. Striking a balance between security and frictionless experiences is crucial, tailoring identity verification levels to transaction types. Collaboration with specialized companies and proactive monitoring enables swift detection and response to suspicious activities, mitigating potential damages.

Banks must navigate the challenges of the changing payment landscape while safeguarding customers and embracing digital identity solutions. By prioritizing practicality, leveraging data, and finding the right balance between security and user experience, financial institutions can stay ahead in this dynamic landscape. Proactive monitoring and collaboration further strengthen their ability to detect and address fraudulent activities promptly, ensuring a secure and seamless payment experience for all.

4.?????Data is the new oil, but how to use it is a big question.

Data has emerged as the new oil, holding tremendous potential for the banking industry. Banks can unlock this potential by leveraging data to provide more tailored payment services and experiences to their customers. By analyzing transaction data and customer preferences, banks can personalize their offerings, enhancing customer satisfaction and fostering long-term loyalty. Furthermore, the power of data-driven fraud prevention cannot be understated. With the help of AI and machine learning, banks can analyze vast amounts of data in real-time to detect patterns and anomalies indicative of fraudulent activities, protecting customer assets and mitigating financial losses.

Implementing digitalization and harnessing the full potential of data pose challenges for banks. Legacy infrastructure and systems often hinder seamless integration of new technologies and utilization of data. Overcoming these obstacles requires strategic planning, infrastructure modernization, and a strong focus on data governance and security measures. Banks must strike a balance between embracing digital transformation and mitigating risks associated with data breaches and unauthorized access. Building a robust digital identity is equally important. By implementing robust authentication measures and encryption protocols, banks can instill trust and differentiate themselves in the digital landscape, attracting tech-savvy customers and positioning themselves as trusted digital partners.

Data is a valuable asset that can transform the banking industry. Its utilization empowers banks to offer tailored payment services, gain deeper customer insights, and predict and prevent fraud. However, realizing the potential of data requires a proactive approach to digitalization, modernization of infrastructure, and a strong focus on data governance and security. By embracing these challenges and building a robust digital identity, banks can tap into the power of data, delivering personalized experiences, safeguarding customer interests, and staying ahead in the rapidly evolving digital landscape.

5.?????Age is not the reason for one to be left behind, the younger or the older one.

The evolution of payment methods and technologies must consider the specific demands and challenges faced by different age groups to ensure inclusivity and accessibility for all. Addressing age-related considerations is crucial, as varying levels of technological familiarity and preferences can significantly impact payment experiences. By tailoring payment solutions to meet the needs of different age groups, companies can create a more inclusive payment landscape.

Younger generations, such as millennials and Gen Z, are known for their embrace of technology and digital lifestyles. To cater to this tech-savvy demographic, companies should focus on leveraging digital wallets and mobile banking applications. Providing seamless integration with popular platforms and incorporating features like peer-to-peer payments and expense tracking can enhance the payment experience for these digital natives. Moreover, emphasizing user education and support is vital to address any challenges they may encounter, ensuring a smooth transition to digital payment methods.

However, it is equally important not to neglect older generations who may face different barriers and preferences. Many seniors are less familiar with digital technologies and may have a higher preference for traditional payment methods. Companies should provide options for physical cards and traditional payment channels while gradually introducing user-friendly digital solutions. Offering accessible customer support and clear instructions can help bridge the technology gap and alleviate concerns for older customers, enabling them to participate in digital payment experiences at their own pace.

To ensure inclusivity across age groups, it is essential to engage with accessibility experts and incorporate their insights into payment solutions. By considering factors such as font size, user interfaces, and compatibility with assistive technologies, companies can create user-friendly experiences for individuals with visual impairments or other accessibility needs. Collaborating with experts in the field can ensure that the payment landscape caters to diverse age-related requirements and creates equal opportunities for all.

6.?????Culture, culture, culture, let culture speaks for itself.

In the realm of payment means and experiences, local culture plays a significant role in shaping consumer preferences and behaviors. The panel discussion highlighted the diverse levels of comfort and distinct cultural nuances that influence how individuals perceive and engage with various payment methods. Recognizing and catering to these cultural differences is crucial for companies seeking to provide inclusive and personalized payment experiences.

Every consumer has their own unique level of comfort when it comes to payment methods, influenced by factors such as cultural background, generational gaps, and personal preferences. The panelists acknowledged the impact of cultural differences on payment practices. For example, in Europe, it is common for individuals to keep their credit cards in their possession at all times when making payments, ensuring maximum control and security. In contrast, in America, it is more customary to hand over the credit card to the server and keep a tab open. These contrasting practices reflect cultural norms and expectations regarding payment transactions.

The panel discussion further highlighted a fascinating example from China, where local culture influenced the use of facial recognition technology in public toilets. To address the issue of excessive toilet paper usage, facial recognition technology was employed to regulate access. Each person entering the restroom would receive a limited amount of toilet paper. While this approach may be deemed acceptable and effective in China, it may not resonate similarly with consumers in other countries. This example underscores how cultural norms and individual comfort levels shape the acceptability of specific payment experiences.

It is essential for companies to recognize and adapt to these cultural variations to provide payment options that align with consumer expectations. Offering different choices and accommodating diverse comfort levels ensures that consumers feel protected against fraud while enjoying convenience. For instance, some consumers may appreciate the convenience of using facial recognition technology for purchasing products or accessing venues, while others may prefer alternative methods. By offering a range of payment options, companies can cater to the diverse needs and preferences of their customer base.

Ultimately, understanding and respecting local cultural nuances is vital for crafting payment experiences that resonate with consumers. By considering cultural factors and offering flexible options, companies can build trust, enhance customer satisfaction, and ensure that payment experiences align with the comfort levels and expectations of their target markets.

Thank you Money20/20 for sponsoring me the ticket as an "Embedded Future" participant.

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