Emerging trends in Payments: Opportunity for new technology

From giving away cash to swiping cards on our mobile phones, the way we do

payments has seen significant change over time. Every wave of change has

necessitated huge technological improvements and at times technology itself has

brought about new waves of change in payment process. Currently we can see few

trends emerging in payments industry that throw huge opportunities for new

technology and pave way for innovative solutions.

Outsourcing by Acquirers

Traditionally issuers and acquirers have been banks that handle all the functions

from consumer/merchant acquisition to settlement of payments. But with increase

in number of card holders/sellers and a huge increase in number of card

transactions, banks are finding it beneficial to outsource most of the activities that

involve acquiring customers/merchants and setting up hardware/software

infrastructure for information exchange.

This has led to entry of many non-bank players into the payment ecosystem. As

Payment process involves high speed data processing and enhanced data security

levels all new entrants need efficient and robust technology solutions to automate

their process.

EMV

Payments industry has always been haunted by frauds and data theft. A good

answer to such problems is “chip based technology” which has numerous

advantages over magnetic stripes. Chips can be highly secure as these can generate

dynamic data thus making real time authorization possible for each transaction.

Instead of having a static personal identification number (PIN) cardholders can use

a different PIN for each transaction.

Currently such payments are governed by standards and specifications of

EuropayMastercardVisa (EMV). Card terminals at merchant site would need

drastic modifications in equipments and software to become EMV ready, thus an

opportunity for new technology.

New Payment modes

Payment industry is seeing huge changes in the way consumers make payments.

Portable card readers, NFC enabled mobiles, mobile wallets, contactless cards and

many such innovations make it necessary for merchants and information

processors to upgrade their systems to facilitate such payments. At the same time

the systems need to stay compliant to all security standards.

Cloud services

With increase in card transactions and entry of smaller merchants, cloud payment

services like cloud billing, invoicing and data processing services are seeing

increase in demand. Cloud can make the life easier for smaller merchants and

processors as the burden of buying infrastructure and technology is thrown off

their shoulders. This would lead many companies to come up with secure

technologies to provide payment services on cloud.

Payments analytics

Payment is rapidly turning into a very complex process involving numerous modes

of payments, multiple intermediaries and significantly high volumes. Increase in

complexity and volume has pushed up demand for analytics services.

Third party business intelligence (BI) and analytics tools such as Business Objects

and Cognos have high reporting capabilities but fall behind when it comes to ease

with which they can be integrated into complex payment processes. Thus there is a

need for analytical tools that handle specific issues of payment like automatic fraud

detection and auto-identification of reasons for holdback and chargeback.

We feel that all such trends are going to open up a plethora of opportunities for

technology companies. Exciting days ahead for payments.

Written by:

Kranti Kumar

Business Development Manager

www.paxcel.net