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Emerging Trends In Retail, Payment Methods and Open Banking

Retailers are always looking for ways to make shopping more accessible and convenient for their customers. Part of this includes finding new ways to handle payments. Businesses want to be as open to their customers as possible. Helping them support whatever payment methods they wish to utilize is part of what makes everything work.

The trends surrounding the industry are among the most intriguing ones in the industry to watch. Retailers can make more money if they handle additional payment solutions, including some that are becoming increasingly common.

The Rise of Open Banking

Open banking is a practice where open APIs allow third-party developers to produce new applications around a financial system. Open banking helps people access their financial information from anywhere, helping them manage their funds and make payments.

Banking-as-a-service programs can allow people to access their funds from their bank accounts and to pay for items in moments. These apps let people pay for retail items in minutes.

Most of these banking-as-a-service systems will require firm data review standards. The work includes using secure connections and setups to prevent data from being lost.

These solutions would require two-factor authentication to protect data. Two-factor confirmation allows the user to confirm one’s identity and location. The user cannot log onto an account with a username and password, as a second factor will be necessary.

Open banking will work so long as the proper entities create unique platforms. More banks are starting up open banking platforms to help people connect with their funds. Retailers will also need to establish their own open banking accounts to help them accept funds. The flexibility of such setups and the general convenience will be necessary for ensuring everything works.

The Use of Mobile Wallets

Mobile wallets will likely become more prominent when managing payments. Retailers can accept mobile wallet transactions through NFC-ready devices or QR code readers.

Mobile wallets like Google Pay or Apple Pay can be convenient for many reasons:

Customers can link their debit cards or other banking information to a mobile wallet. Customers do not need to use their physical cards, nor do they need to visit an ATM to withdraw physical cash.
Mobile wallets allow data to move through in moments without outside parties. It works like a person-to-person platform to send funds in moments.
These wallets utilize QR codes to help transfer data. It is easier for mobile wallets to move data through QR codes, as the content remains encrypted and less likely to be lost or stolen.
Mobile wallets can also support cryptocurrencies and alternative forms of currency. Customers can send their cryptocurrencies to a retailer, who will collect the fiat currency equivalent of the crypto item. Some businesses might establish their own cryptocurrencies for use in their stores if this trend continues.

Most of the advantages work for customers, but retailers will find many things to love about mobile wallets:

Mobile wallets utilize tokenization to replace an account number with random characters. The system allows data to move through a network without revealing actual bank account details.
Retailers won’t spend money on added transaction fees. Since the transaction goes directly between the retailer and customer, there’s no need to move funds through a network. This point eliminates the interchange fees someone might spend when accepting credit card payments.
Retailers can also produce unique wallets for use in their business spaces. Such wallets provide a distinct branding space. Retailers can recommend certain things, or they can plan reward events that fit one’s needs.
There’s no need to wait for a card transaction to be approved. A mobile wallet deal will be approved right away if the customer has the necessary funds for the transaction.
People may be reminded to come to a retailer more often if that person uses a mobile wallet. The customer will find the wallet to be convenient, making that person want to shop at a certain space more often.

This payment method will be a boon for retailers and customers alike. More locations will likely start supporting this solution once they start noting everything that makes the work so advantageous and useful. It becomes easier for people to handle transactions when they have access to the right payment systems for their convenience.

Additional Biometrics

Biometrics will become a part of payment methods to watch. Biometrics is a physical review solution that makes it easier for people to confirm their details when shopping.

Biometrics can incorporate many solutions. These entail different physical parts and features, but they all produce the same result in reading data:

Iris scanning
Facial recognition
Fingerprints
Voice ID

A person would have to be physically present to manage any of these biometrics solutions, and the way they will work will vary by platform. A fingerprint scanner may work on a credit card, for example. The fingerprint must be read while the card is inside a reader for the card to work.

Biometrics may not be as prominent with some retailers, especially considering the cost to get some of these setups ready. But it may be a necessity for some places, like ones that sell high-value items. The security biometrics provides a positive solution for many uses, especially when managing the high-value or sensitive purchases that customers may make.

A Bright Future

The most significant part of these emerging trends in retail entails how various crimes may become easier to prevent. As the world becomes increasingly cashless, the risk of monetary fraud will also drop. Digital wallets and payments are also making people less reliant on traditional credit or debit cards, potentially reducing the risk of fraud.

Retailers will need to be aware of these trends and how they will change the market. The goal for these retailers should be to establish new ways of accepting and managing funds. Whether it entails accepting crypto tokens or supporting NFC or biometric-based transactions, retailers must note what they can do when collecting payments.

Hot Fintech Trends Emerging from the Pandemic [2023 Update]

The pandemic has been harsh on our financial infrastructure and has brought sea changes in the fintech industry. Fintech companies started coming to the forefront since the previous year, helping to shape digital payments.

In the previous year, people have taken to online shopping in large numbers, and today, almost every buyer is looking for contactless payment modes. As 2020 was approaching its end, the next one has already begun forming a new era with a promising future for the fintech world.

According to research conducted by the deVere Group, the coronavirus pandemic has been a major cause of the rapid growth of fintech apps, the usage of which increased by 72% in Europe.

The situation is similar in the US too, where around 73% of Americans are now viewing fintech tools and solutions as the new normal, as per another report. What’s more, 67% of the American shoppers have planned to continue using fintech apps for managing their day-to-day finances even in the post-COVID-19 period.

Experts have predicted the acceleration of the more fintech trends that are believed to impact every financial area, ranging from making transactions to banking. Some of the top fintech trends for 2023 are:

Digital-Only Banks

The rise of digital-only Fintech banks is one of the recent trends that made headway in 2020. Digital-only banks is the name given to those banks that offer several virtual banking solutions. These include crypto payment gateways, P2P transfers, contactless MasterCard providing free transaction fees, international remittance, and the ability to purchase different cryptocurrencies, such as Bitcoin, Litecoin, Ethereum, etc.

Digital-only banks are extremely convenient to consumers as it eliminates waiting in long queues, tedious paperwork, and the need to make frequent visits to the bank. This trend is expected to gain momentum in 2023, which in turn, would reduce the number of bank visitors.

Because of this new trend in banking, the number of people visiting banks physically is predicted to drop by 36% from 2017 to 2023. Some of the top reasons to go digital-only with your banking are:

You can reset pins right from your home.
You can manage your expenses conveniently.
They offer quick balance review features.
Enjoy instant bill payments on-the-go by snapping pictures.
Digital-only banks come with real-time data analytics.

Blockchain

The cutting-edge technology of Blockchain has transformed the fintech world completely. Since one can make payments faster and more securely, financial institutions like banks can confidently adopt Blockchain technology to stay ahead of the competition. It also comes with low processing fees and has a global reach.

According to a Business Insider Intelligence report, nearly 48% of the banking representatives believe that Blockchain technology will significantly impact the banking industry in 2021 and the years to follow.

The US and China are the leading users of Blockchain technology, which ensures its fast adoption in other markets across the world. Blockchain makes sure that all cross-border payments and the data stored are safe and secure.

One vital aspect of Blockchain is its new philosophy of decentralized finance that works on minimizing centralized procedures. The reason why Blockchain is so popular is its highly protected environment. Once your data is recorded into its system, it is extremely difficult for hacklers or malicious users to modify or access that data.

RPA

Robotic Process Automation, or RPA, refers to the process automation technology that uses digital workers or software robots to automate several tasks, thus saving time and human labor. RPA is designed to manage repetitive business processes using software robots that can fully or partially replace manual operations.

Since the process involves software robots and other digital workers, it is error-free, fast, and more accurate. The RPA technology has been largely beneficial for the financial service industry, as it improves the entire organizational efficiency in a more cost-effective manner.

Additionally, financial institutions can automate several back-end office tasks, including customer onboarding, security checks, trial balancing, account maintenance and closing, mortgage processing, credit card processing, and the list is endless! With RPA, banks can automate their core processes, thus saving time to focus on other vital areas.

Artificial Intelligence and Machine Learning

Banks across the world have started embracing AI to handle their day-to-day operations. According to Autonomous Research, AI is predicted to reduce 22% of the operational expenses of financial institutions by the year 2030. In short, banks will be able to save around $1 trillion by incorporating Artificial Intelligence technologies into their processes.

Artificial Intelligence and Machine Learning go hand-in-hand, since the algorithms of both have the ability to record each transaction with utmost preciseness and accuracy. What’s more, AI can be used to manage and mitigate the increasing cybersecurity risks and threats, as it can identify fraudulent activities immediately.

Besides, AI and ML, together, have tremendous capabilities of managing your customers through top-notch client service solutions, such as Chatbots. With such rapid growth in AI technologies and their increasing adoption by numerous industries, banks, and other financial institutions will soon implement them for better customer service.

Biometric Security Systems

In the face of rising cybercrime cases, customers are looking for more secure payment environments, since digital transactions are more of a necessity than a trend in this pandemic crisis. Therefore, companies in the fintech industry are implementing new ways to offer more secure payment infrastructures, such as biometric security systems.

Biometrics like fingerprint authentication, facial recognition, etc., is the best way to add an extra layer of protection and security to one’s payment solutions. Biometric systems help consumers to be confident while making digital transactions.

Since the current COVID-19 restrictions have made it necessary to go contactless, or more specifically cashless, biometrics is the need of the hour. However, contactless biometrics like face ID recognition is having a higher adoption rate in COVID-19 times, while the touch-based fingerprint reading market is witnessing a downfall.

Open Banking

Open banking is a revolutionary technology that enables users to manage their money more efficiently and get the best deals on products and services. It helps consumers make smarter and more cost-effective buying decisions while also accessing all their accounts in one place.

Open banking is a practice of sharing one’s financial information between authorized service providers at the users’ consent. The technology enables banks and Fintech companies together, allowing seamless data networking across multiple institutions.

Experts and industry leaders predict that open banking will reshape the banking sector as we know it. In fact, a report has proven that open banking has already generated $7.29 billion in the year 2018. The numbers are expected to hit $43.15 billion by 2026!

Open banking has the potential to benefit various banking and other financial institutions, consumers, fintech workers, API industry figures and app developers, and even underserved markets.

Open Banking Use Predicted to Double [2023 Update]

According to new research, open banking users are expected to double up and reach 40 million by the end of 2021. On the other hand, payments are predicted to hit $9 billion by 2024.

Juniper Research has predicted that the total number of API technology users aggregating bank accounts and gaining access to new services would rise from 18 million by the end of 2019 to 40 million in 2021.

Another report named, “Open Banking: Opportunities, Challenges & Market Forecasts 2020-2024” found that the pandemic was a reason behind the increasing demand among consumers to aggregate their accounts.

The main motivation behind such a change in behavior was to gain better insights into one’s financial health and how to manage one’s money more efficiently. Since the COVID-19 outbreak people have become more conscious about how and where to make expenses, and how to cut down on their costs by making only the best purchases.

What is Open Banking?

Open banking is the practice of securely sharing the consumer’s financial information with service providers, to help them provide better user experiences. The process enables you to bring all your accounts into a single place.

For instance, open banking can let consumers view account information, and even access their funds across multiple banks, all without switching platforms.

However, none of your sensitive information would be shared with any third party without your consent. You will never be asked for login details or passwords. The shared data enables service providers to develop and innovate better apps and solutions around banks and other financial institutions.

Open banking has shown consumers new ways to spend and manage their money and purchase more responsibly and cost-effectively. The practice of open banking has been incredibly beneficial for startups, SMBs (small- and medium-sized businesses), financial institutions (like banks), and consumers.

Additionally, open banking can also help businesses explore new revenue streams, have an extended market reach, and have better operational efficiency. It is a more sustainable service model, specifically for the underserved markets. App developers, too, can find it much easier to work with open APIs, saving time and labor.

Since open banking apps have proper access to your financial data, these solutions can recommend you the best products and services to save your money. This improved user experience provided by open banking tools boosted momentum for adopting open banking technologies and principles.

Key Points to Know About the New Research

Juniper reported that the rapid growth seen in open banking practices was pioneered in Europe. In Europe, regulators pushed beyond standardization and minimized the barriers to entry. The reports further showed that the practice was later taken up and advanced by the Chinese and the Far Eastern markets.

The principle of open banking originated from the 2015 European Union reforms, which were designed to help consumers switch between banks more seamlessly. The technology that supports and enhances this also enables users to make faster and easier real-time money transfers or payments. This alone has boosted the rise of numerous digital payment solutions and so-called “challenger banks.”

In the Juniper Research release, Nick Maynard, Juniper analyst, said, “Banks must embrace open banking” to capitalize and accelerate their ongoing digital transformation endeavors. Maynard further said that the practice of adopting open banking could enable banks to introduce more innovative services to their consumers backed by open APIs. Otherwise, they might risk their market position in the face of increasing, digitally agile competition.

The research company also states that payments will be vital for accelerating the growth of the industry. In fact, the total volume of payments to be made through open banking technology is predicted to be around $9 billion by the year 2024. It is mostly because open APIs are promising enough to facilitate more secure and protected “direct from account” payments.

Further, the report said debit and credit card providers should also adopt the new open banking practices and technologies to avoid falling behind in the market competition during this vital shift.

Previously in 2020, Juniper had already reported that open banking “has made significant progress,” in spite of the challenges faced due to the pandemic outbreak.

The report added that providing an enhanced open banking experience can be a compelling selling point that differentiates and labels the service provider as a part of a superior digital app experience.

Juniper researchers believe that open banking can create a high-level playing field across several markets in which regulatory intervention has resulted in the deployment of open banking practices.

However, Juniper highlighted that open banking can be both an opportunity and a threat for many traditional banks and other financial institutions. It is an opportunity because it offers improved consumer experiences and helps them get better deals while efficiently managing their money. It’s a threat because open banking exposes users’ financial information, which can be a boon for potential competitors gaining access to it. And the report states that this threat can be equal for all the players in a specific market.

Hence, established banks must build more innovative and advanced open banking services to provide high levels of security. They must offer better benefits to attract users from the still-developing or less innovative markets.

The Future

With the increasing popularity of open banking technologies, the practice opens doors to several other innovations to be made in the digital payment industry in the upcoming years. It is expected to cause rapid growth in the financial service industry as well, which is keen on taking consumer experiences to the next level.

Besides bringing financial freedom to customers, open banking is also expected to redesign the entire financial service industry and revise the current user flow to eliminate any potential friction points. This is why it is supposed to add value to the consumers while improving their financial lives in the years to come.

FinTech companies and banks have got a new opportunity and way to improve their services, and fix issues such as:

Outdated banking solutions,
Unintuitive user interfaces,
The hassle of switching multiple accounts, and
Lack of resources to bring innovative tools and technologies to the forefront

It’s clear how the adoption of the open banking model by the financial industry can positively impact the future of online banking. If the financial institutions’ transition to open banking becomes successful, then that day is not far when the banking infrastructure or the security and ownership of consumers’ data would not be a decisive factor anymore.

The factors that will matter are a smoother and more convenient user interface, and faster and more secure payment. The banking industry’s transparent future promises to offer seamless access to different accounts, payments, financial data, etc., through any third-party financial solution that can offer limitless financial freedom to users.