The payments evolution is in a state of constant change, with new forms of payment emerging at a rapid rate.
Nick Alexander, Vice President of American Express Payment Consulting JAPA, told attendees at the recent American Express Inside Edge conference that of the 579 fintechs now registered in Australia, 128 of them are focused on payments or new payment techniques.
Mobile driving change
Mobile has been the obvious driver of change, he says, and many businesses are getting involved.
“Chip manufacturers are creating contactless chips, embedding secure elements for phones. Then you've got the network operators getting involved and you've got the handset manufacturers," Alexander says.
The area is still evolving - not just through the growing number of payment solutions on the market, but also via the expansion of networks.
“You've got processors that are providing global connectivity. You've got transit integrators enabling payments in the transit networks and you have aggregators that are expanding coverage and creating niches and adding value to organisations," he says. “And let's not forget the growing number of point of sale providers."
According to Alexander, mobile phone payment solutions are growing at three times the pace of online. This has spawned simpler checkout processes. The old-style, multi-step process of entering your name, address and delivery details and perhaps even a customer account number, now becoming virtually obsolete.
“Just putting in a user ID, or simply just putting your thumbprint on the phone, has been a big change," Alexander says.
He identified four areas where the payment system arena is moving at exponential pace: QR code payments, transit payments, faster payments and advances in payment security.
QR Codes make payment simple
Using QR (“Quick Response") codes, customers can make a bill payment in seconds, by scanning the code on their paper or electronic bill using their mobile or tablet device. Alexander says making it easier for customers to pay means they are more likely to pay on time, improving business cash flow.
The QR code is a two dimensional barcode, which can store about 4,000 digits of alphanumeric information. There are now two different specifications: one for merchants, the other for credit or other payment cardholders.
QR payments are now widespread in China, where it is used by mobile payment products such as Alibaba's AliPay and Tencent's WeChat Pay.
Government financial authorities in India and Thailand are also talking about QR codes being the next step in payments evolution, he says.
“In Australia, it's not been so hot a topic. But we are seeing inbound acceptance of QR codes starting to happen," Alexander says.
Public transport system payments are also changing. There have long been what Alexander terms “closed loop" transit payments, which come in the form of a ticket or card holding a credit balance that can be topped up, but that can only be used within a particular transit authority. Examples of this are the Opal Card in Sydney, the Octopus Card in Hong Kong and the Oyster Card in London.
“What we're now seeing is the advent of contactless payments and a migration from closed loop to open loop," Alexander says.
“This is about using your general purpose credit card or your mobile phone to just tap and go, to get on and off the transit system."
Alexander says that although it sounds easy, the challenge is to make the transaction occur quickly because passengers don't have time to be caught up in verification processes when they are travelling.
There's increasing demand for payments to be processed faster, so that payments occur in just 15 seconds rather than the several hours or sometimes even days that it currently takes.
The advent of a Pay ID – a cornerstone of Australia's billion-dollar New Payment Platform - can allow details such as banks accounts, ABN numbers and other identifying information to be quickly processed.
“If I have a Pay ID that connects my bank to those credentials it will simplify payments. That provides better data, and is available whether I'm paying a friend or I'm doing my payroll," Alexander says.
Alexander adds this can be an enormous benefit in B2B payments and can also be used by card members to pay off a credit card in seconds, if they overreach credit limits.
Finally, Alexander pointed to big changes happening in payment security. He cites the example of Certify, a software platform that takes all the different pieces of information that come with a payment and runs those across many databases.
“It looks at who I am, my card number and expiry date, all of the traditional information. But it also asks: what is the IP address that I'm using? What's the location that I'm making the payment from? Then it runs all this against lots of negative databases to determine legitimacy," Alexander says.
Not only can this be helpful to combat identify fraud, it could help businesses be a little less risk averse when new business comes their way, he says.
Another piece of tech, InAuth, looks at 2,000 attributes that exist and are available on mobile phones. It uses those attributes to help determine the legitimacy of the transaction.
For instance, most fraudsters keep mobile phones plugged in on a desk, so they're all sitting fully charged, Alexander says. “With inAuth you can check using the gyro, the position of the phone."
InAuth can also check a person's social media footprint by checking how many friends and photos are on the phone.
“So if there are no photos and no friends on Facebook, the phone's lying flat and the phone's fully charged, it's a much higher propensity for this to be an illegitimate charge than a legitimate one."
Alexander also says biometrics are becoming much more secure ways to authenticate payments than PINs and passwords.
“Artificial intelligence is also going to play a much bigger role in payments. “I'll soon be able to say 'Hey Google, can you order me a large Hawaiian from Domino's?' and it arrives.
“That's a reality we will see in the very near future."
- New payments solutions continue to emerge, expanding the payment network.
- Mobile payment solutions are outstripping online payments.
- Making it easy for customers to pay is one way that can drive cash flow.
- Fast moving trends include QR codes, transit payments, faster payments and security.