Payment technology remains one of the most dynamically developing sectors of FinTech. Its disruptive potential and versatility make it the perfect breeding ground for innovation, actively redefining digital experience in finance. However, challenging the status quo comes with a package of challenges in their own right. When coins changing hands are replaced by bitcoin trading platforms and wads of cash are turned into digital wallets – how well is your business prepared for the ultimate digital-first future?

Why invest in digital payments?

Convenience is one of the main reasons behind the growing demand for PayTech solutions. On the one hand, payment gateways and payment processors give e-commerce the tools to reinvent the shopping experience. On the other hand, digital currency exchange and money remittance are literally breaking new grounds in terms of market penetration across geographies. Yet, it’s just the tip of the iceberg when it comes to meeting the market’s need for online payment services.

That’s precisely what makes financial inclusion of the unbanked not only possible but also increasingly profitable. New PayTech products, especially those available in P2P model, are helping emerging and developing economies skip the need for brick and mortar financial services and jump straight to e-payments and online banking. Similarly, digital wallets accessible via mobile phones enable saving, lending and investing with unprecedented efficiency, transparency, and speed.

What do users expect from payment services?

With so many opportunities lying ahead of payment technology, user experience might be one of those few aspects with the strongest impact on commercial success. In this context, convenience is the end result of identifying and fulfilling user expectations.

UX challenge

Above all else, modern customers value speed and simplicity. That’s why leading payment service providers use agile methodologies to continuously iterate and improve their products. Reduced friction and intuitive navigation rely on adequate software architecture and effective UX design, but it’s an investment with high return.

User-centric approach to development is pushing the bar also in terms of personalisation and automation. Tools for better control over money transfers (e.g. tagging transactions or automatic payments) empower users and are likely to become the focus of future trends. With AI and machine learning, PayTech applications can act as digital assistants: analysing personal behaviours and preferences to generate intelligent insights and recommendations. Recognizing the full potential of PayTech means understanding that many of those trends are driving innovation also in the B2B space.

Mobile challenge

Accessibility of financial services goes hand in hand with the growing popularity of mobile devices. What’s more, it applies as much to regions with limited access to physical banking infrastructure as to highly digitized urban environments. Powered by QR codes and NFC (near field communication for contactless payments and payments via mobile wallets) – the Amazon effect, tap & pay features, and commerce-on-the-go are shaping the new consumer normal.

With the right mobile-first strategy, companies can now not only reach their bottom line objectives, but also integrate loyalty programs to secure deeper user engagement. The benefit of analytics on customer base and locations is another incentive for crafting a business model in line with top trends in mobile app development. Due to the rise of instant payments and blockchain-enabled infrastructure, sending funds anywhere in the world should be as easy (not to mention fast) as sending a WhatsApp message.

How payment providers can leverage technology?

Recent advances in financial technology and regulatory processes are paving the way for a truly universal and streamlined payment experience. But are we there yet? Complexity of the payments ecosystem calls for extra caution, especially in terms of integrations and security solutions.

Integration challenge

With API-driven development, PayTech products can be connected to the open banking world, enabling access to customers’ bank details for payment initiation and balance reporting. Uninterrupted flow of financial data is key both in terms of application performance and regulatory compliance. With this in mind, API-centric strategy can not only give individual users more options but also speed up onboarding for better corporate customer experience.

Code & Pepper is often asked to help select third-party payment service providers or implement integration procedures with focus on optimal compatibility. Although each case is unique, certain factors come into play in a game-changing fashion:

  • RESTful API (better scalability and connectivity, especially in cloud environment)
  • strong supporting libraries and ready UI components (faster setup and development pace)
  • customization potential (adjusting the solution to specific business needs)
  • comprehensive technical documentation (easier troubleshooting and reference value)

Security challenge

It goes without saying that enhanced interconnectivity creates opportunities as well as threats. Concerns for cybercrime and money laundering affect both end users and payment service providers, driving the need for more reliable security measures. Starting with a solid KYC strategy can ensure availability and confidentiality of customer data, while bringing the competitive edge of digital onboarding. It’s also good practice to implement automation of transaction monitoring to boost accountability and enable easy auditing.

Following security standards is equally important on other stages of data flow. Strong Customer Authentication (SCA) is a requirement under the European directive on payment services (PSD2), advocating the use of multi-factor authentication in electronic payments. The catalogue of further security options you might consider in the context of online payments includes:

  • data encryption, both at rest and in transit
  • HTTPS and TLS encryption protocols
  • restricted access to sensitive data on a “need to know” basis
  • OAuth 2.0 industry-standard protocol for authorization
  • OpenID Connect (OIDC) authentication protocol

Today’s challenges are tomorrow’s opportunities

If money makes the world go round, then PayTech can help you prepare for the ride. Making sure that it doesn’t feel like walking on quicksand puts payment service providers under enormous pressure. And it’s understandable, considering the effort needed to balance user expectations, security risks and compliance issues in a constantly evolving environment. Still, it looks like turning today’s challenges into tomorrow’s opportunities is the only way forward.