The payments industry has gone through some pretty rapid changes over the last 10 years or so, but just where will we be a decade from now?
Analyzing recent trends and estimating where these can take us is part of the process, but can only take you so far. If the last 10 years has taught us anything, it’s that disruptive technologies can shift the course of events in a way few would expect.
Cash demand will hold firm despite all
Recent trends will continue to play out in the cash space. Cash will continue to feel a slight squeeze in developed markets, but play a stronger role elsewhere.
“Cash might diminish in use in some regions (Western Europe for example), but will elsewhere continue to be used for cultural reasons,” says the World Payments Report 2014 from Capgemini and Royal Bank of Scotland.
Nevertheless, electronic payments will also increase as more consumers are exposed to services such as payment cards and mobile money. Closed loop payment instruments such as prepaid cards will become more popular.
Everything will be real time
The faster payments concept has now been deployed in a handful of countries but the biggest demand is from consumers and businesses.
Regulatory pressure in most countries will push the banks to establish real time payment transfer systems that will then become embedded in new services offered by banks and other players. International trading links and competition from cryptocurrencies will then drive cross border real-time payment systems.
Cryptocurrencies will stick around — in some form
Cryptocurrencies such as Bitcoin have an uncertain future. While enthusiasts hail these as the future of money, others remain to be convinced. Untangling the web of complexity around them will be crucial for their success.
By 2024 we see them triumphing as a means of exchange — as a payment method. But as a store of value it’s hard to see any stability lasting.
“These currencies could change the way traditional payments are made, however the real (as opposed to virtual) value part of the transaction will reside with a PSP [payment service provider],” said the WPR 2014.
Two factors they provide that people will still want in 10 years are anonymity and the ability to transfer funds in real time globally, across borders. Cryptocurrency technology will enable a plethora of local currencies to be developed.
Biometric authentication will end the PIN
Biometric authentication could be the single biggest change we see over the next 10 years as the PIN slowly gives way to fingerprint, heartbeat, iris and facial recognition technologies.
Banks will migrate ATMs to biometric authentication, while retailers won’t even have to invest in more advanced POS technology, as smartphones will enable biometric-authenticated transactions in store.
Gartner says that as early as 2016, biometric sensors will be featured in 40 percent of smartphones shipped to end-users. Meanwhile, Visa and MasterCard plan to ditch their online passcode systems Verified by Visa and MasterCard SecureCode in favor of biometric technology next year.
By 2024, all online transactions will be verified through a biometric method.
Wearables will become seamless
Clunky and a bit too obvious in 2014, in the next 10 years wearable payment technology will become embedded in our daily lives as devices become easier and more attractive to wear.
Gartner predicts that by 2017, 30 percent of smart wearables will be completely unobtrusive to the eye.
“Smart contact lenses are one type in development, said Annette Zimmermann, research director at the firm. “Another interesting wearable that is emerging is smart jewelery. Obtrusive wearables already on the market, like smart glasses, are likely to develop new designs that disguise their technological components completely.”
Data convergence will create a single entry point
Currently, customer data is spread across multiple layers — financial institutions, card providers, retailers, utility providers, Internet companies, governments and so on.
We have different accounts and logins for every part of our lives. In 10 years’ time, we could see the convergence of data into a single place, and a single point of entry to it all.
Central to this will be the use of biometrics to ensure security while not offering the same levels of convenience. Indeed it will be the disruptive force of biometrics that will lead this change, as separate PINs or passcodes will become redundant.
Checks will be out as seamless payments become the norm
We don’t see much future in checks. Imaging technology is a final throw of the dice, but ultimately one that will be short lived.
By 2024 most mature markets will have ditched checks in favor of more seamless peer-to-peer channels like Paym in the U.K., or new social media systems like those apparently being considered by Facebook.
Wearable devices already allow people simply to deliver a voice command to send money. In 10 years, whether it’s through your phone number, social media account or even just your bank details, it will be a simple tap of the smart screen or voice command to your smart watch to send money instantly.