Trends that will mark digital payment methods in 2021: more security, less cash, and biometric systems.
The way we make payments has evolved quite dramatically over the past 20 years. There was a time when cold hard cash was the only way to buy goods and services. However, it is noteworthy that in those times, money was not as devalued as it is today.
One could attribute the popularization of eCommerce, fintech, or mobile payment technologies to the shift of payments from cash to digital. But there is a larger stimulus at play here, and that is of course the element of inflation.
How money became fiat
Up until 1971, the United States Dollar was backed by gold. While gold backing was good for maintaining the value of money, it restricted the Government from printing more paper money and inflating the market. However, in 1971, President Richard Nixon announced that the United States will no longer convert gold for a fixed value to dollars. This ended the gold standard. Now, what does that mean for the economy?
Abandoning the gold standard enabled the government to print more currency at their sole discretion. Money became Fiat currency, which means that instead of gold being the store of value, currency was backed by the government’s promise.
How digital payment evolved
When gold was the store of value, there was a limit to how many Banknotes the government could print. For every dollar in existence, there had to be a quantity of gold backing it.
But when the gold standard ended, the printing of currency considerably increased. This meant primarily two things; one, money started to devalue, meaning that each dollar was worth less when more currency was printed; and two, people needed to carry a greater number of currency notes to buy goods. The purchasing power of the notes decreased. To a regular consumer like you and me, this meant that the price of goods started to increase.
This increase in the “bundles” of money made it inconvenient to carry around that much money. We explored digital modes of payment because of that.
What digital payment means today?
Alongside the desperate need for convenient payments and the technological advances made in the sector, the new context derived from the Covid-19 pandemic has redefined payment habits and methods. This move is largely motivated by changing consumer behavior.
Ingenico research back-ups this change in payments as a result of covid-19 and predicts four trends that will gain strength in 2021:
The rise of contactless payment, new non-numbered cards, the proliferation of measures to avoid queues, and new biometrics systems will become more important in payment systems in 2021 due to the impact of the pandemic.
1. More mobile payment and less cash
The closure of shops during the confinement period resulted in an increase in online purchases. Online shopping increased by nearly 75% during confinement, according to Nielsen data.
On the other hand, the way you pay has also undergone changes. According to Mastercard’s latest study, 67% of purchases in Spain have been made by card in recent months, surpassing cash payment for the first time. In addition, cash withdrawal decreased by 68% in March and, after confinement, 3 out of 4 Spaniards value digital banking more.
That’s why the payments industry needs to adapt to consumer demands and drive new trends and payment methods that we’re already seeing in the market.
2. Cards without number and tokenization
Ensuring security in the payment process is one of the main consumer demands. In this sense, the tokenization of payments like cryptocurrencies with Crypto wallets is a trend that will continue to gain followers in the coming months. With this development of crypto wallet technology, card numbers are replaced by tokens when making payment. These are non-sensitive codes that ensure data security throughout the purchase process.
On the other hand, credit cards will also be changed. In Spain, different entities have launched a new model of the physical card in which no number or data appears that can compromise the user’s security.
Businesses around the world have already jumped on the crypto bandwagon. More and more businesses, especially start-ups, have started creating their own crypto tokens to integrate into their business, for fundraising, and with the hopes of making it big in the trading market. This is due to the fact that it has become remarkably easy to create your own crypto tokens on platforms such as Ethereum, Tron, and Polkadot.
3. Invisible payments
Today, retailers are promoting and developing omnichannel strategies, where the consumer can make different combinations in their shopping experience: buy online and pick up in-store or vice versa, go from stores and receive the products at home.
This is where unattended payments are developed, those in which the same customer does the functions of the cashier.
In addition, ‘invisible payments’ will be implemented in the future. These payments do not need any interaction to make the transaction. An example of this is Amazon Go physical stores, where different devices follow the customer and the products they put in the basket so that, when you leave the door, the data uploads to your account.
According to a Juniper Research study, they expect by 2022 these types of invisible payments to reach $78 billion.
4. Non-contact biometric systems
Services that use biometrics as a safety method are becoming more common. In the payments industry, biometrics has developed as one of the high-security payment and authentication methods. It’s to replace mobile or wearable payments.
The objective is also that the buyer does not have to physically touch any device. The transaction can be validated by facial recognition, among other technologies.
Conclusion
The ever-evolving socio-economic structure of the society we live in has led to people welcoming new and innovative technologies for making payments and managing finances.
During the pandemic, we saw many changes and struggles that changed the way we look at life. Perhaps, these challenges always existed, but only came to our attention because of a situation like this. However, this resulted in the mass adoption of new and innovative payment methods, as well as new Fintech advancements the world over.
2021 is definitely a year to look forward to because of the repercussions of the past year, and the technologies that gained much-needed attention from regular people like you and me.
