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Five predictions to shape global payments market in 2021

Using biometrics to confirm a buyer’s identity and approve transactions are among the rising trends in the market. Photo: Getty Images
Using biometrics to confirm a buyer’s identity and approve transactions are among the rising trends in the market. Photo: Getty Images

This year the payments industry has had to adapt to new challenges posed by the ever-changing needs of the consumer, and particularly by the coronavirus pandemic.

Marius Galdikas, CEO at fintech firm ConnectPay, has shared his insights about what trends are likely to thrive in 2021.

  1. Increasing payments flexibility

Market players are “bending over backwards” to mitigate consumers’ pandemic-related concerns, ConnectPay said, and are offering flexible solutions. Major players such as PayPal (PYPL) and Chase (JPM) have stepped into the ‘buy now, pay later’ market, which gives customers the option to pay off a purchase over a period of time with zero-interest and fixed-rate monthly instalments.

Meanwhile, WhatsApp is reportedly working on launching a payments service in India to increase inclusion in the digital economy, and Google (GOOGL) is laying the groundwork for Plex, a mobile-first bank account integrated into Google Pay.

“Going cashless acted as a springboard for novel payment platforms, while future income worries encouraged providers to introduce pay-by-month model. With a fair amount of uncertainty expected to carry over to next year, this is only the beginning of novel solutions, designed to adapt to consumers‘ changing habits,” said Galdikas.

  1. Enhanced use of biometrics

Using biometrics to confirm a buyer’s identity and approve transactions are among the rising trends in the market, ConnectPay said.

“For consumers, the option to approve purchases by face, palm, or fingerprints would allow avoiding password overload... It would make the entire process faster, too,” said Galdikas. “Moreover, this provides an extra layer of security, as personal features are harder to replicate by scammers.”

ConnectPay cited a study from April which found that 56% of shoppers would prefer using a biometric sensor on their payment card instead of a PIN, which highlighted the appeal of such solutions for consumers.

READ MORE: UK millennials at greater risk of debt from buy now pay later schemes

  1. Market players want more regulation

Companies operating in under-regulated sectors, such as those in the crypto industry, have started to appeal to policy makers for increased regulation.

“Having a clearly defined regulatory framework would help industries, currently viewed as more ambiguous, to position themselves as reliable allies and pave the way for stronger partnerships with other market players. Not to mention it would help to diminish associations with fraudulent activities, reassuring current and potential clients,” said Galdikas.

  1. Decreasing third-party reliance

Data breaches due to external vendor vulnerability are forcing companies to rethink the risks of having third-party suppliers. This has encouraged payment providers to search for solutions that would help take matters into their own hands, such as moving more operations in-house.

According to Galdikas, “setting up capable in-house solutions allows firms to retain more transactional control and increase fund security, as fewer parties are involved in the payment process.”

  1. BaaS will continue to gain traction

Banking-as-a-service, or BaaS, provides the ability to embed financial services into any company. Sometimes referred to as “embedded finance,” it creates an opportunity for any tech company to become a fintech in a short time. It also means firms can focus on product innovation rather than infrastructure development.

“The interest in BaaS will continue to grow, as it could help tech companies to gain a significant advantage against their competitors,” said Galdikas.

“Embedded finance paves the way for creating financial products, as companies do not have to start the process from scratch: build a banking infrastructure and only then start innovating. For some, BaaS is the only way they can start developing products in the first place, as laying the groundwork before that requires a solid investment. In both cases, BaaS allows to delegate a lot more resources towards product innovation,” he said.

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