Every year, new payment methods are generated, developed and implemented to eliminate friction between clients and companies. The process tries to adapt to the behavior of each user and the changing landscape of the financial industry. SENLA addresses the main trends that will be part of the payment methods throughout this year and possibly the next, leveraged through APIs, standardization, Blockchain, and security.
Blockchain and Distributed Registration Technologies
Blockchain is one of several distributed registration technologies. It has gained notoriety on its own as a means to ensure the security of transactions. These three recent stories provided in-depth insights into Blockchain:
- How Banking can take advantage of technology Blockchain?
- Blockchain is indispensable for the future of Banking
- Banking Report 2019: The Beginning of Smart Banking
During this year SENLA expects to see the potential of Blockchain put into practice. They do not refer to the processing of payments based on bitcoins, but implementation of the blockchain technology within financial institutions to make payments. The first point in favor of Blockchain is the security. Although data blocks can be altered, it would be detected instantly, so it is practically impossible to break the system’s security. Another advantage of blockchain to achieve the decentralization of payments. Blockchain does not need an entity to verify the authenticity of the information, which means lower costs for both payments and collections.
Strengthen digital identity
SENLA notes that the digitalization of banking has generated vulnerabilities, which have not been slow to be exploited by cybercriminals. Annual losses due to cyber-attack and fraud grew from USD. 5 billion in 2014 to USD. 8 billion in 2018, according to the Capgemini consultancy. Hackers steal the digital identity of customers through social engineering and access their banks, as well as their bank cards.
The way to combat this enormous problem comes from the hand of new multifactor methods of identification, such as biometric behavior, single session initiation for multiple devices, authentication techniques without password and Machine-to-Machine technologies.
In general terms, SENLA says innovation tends to diversify the paths of the supply of services. Each provider has its own structure, parameters, and schemes on which it develops a solution. So in the market, there are countless technologies that are incompatible with each other. This is a problem for banks and financial companies since their systems are not developed to be compatible with emerging technologies, especially because their core Banking was developed 20 years ago. The company says that in terms of implementation, this problem implies an increase in time and costs.
However, market demands are focused on standardization. So it remains to be seen how payment methods of emerging companies align to comply with regulations. This will generate confidence on the part of users, while the Bank will be able to establish new and sustainable payment ecosystems.
The financial industry is opening its systems and data to third companies and suppliers, as part of its strategy to address Open Banking and the use of APIs. This redefines the traditional business model of payment methods and leaves to the expectation the generation of new business models that guarantee the capitalization of transactions. This is especially as it is known in advance that legacy systems are a brake on the implementation of new technologies.
During 2019 banks will need to establish their ecosystem that orchestrates the offer of services and financial products through APIs. This is the path towards which the banking of the future is directed, where the financial industry will be the platform. It is also where technological suppliers and third companies will position their payment methods so that customers decide which is more convenient for them.
SENLA expects that the banks adopting this new paradigm will have the advantage of generating new business models and navigating within a blue ocean, to attract customers seeking personalization, agility and financial experience.