Future of Payments

How payment tech is revolutionising how we shop

Saving money is getting more difficult as the technology behind paying for goods and services gets more efficient.

The introduction of contactless debit and credit cards were just the beginning, and as a result, parting us from our hard-earned cash is quicker and easier than ever.

But what does the future hold for this technology and how we part with our dime? We’ve delved into the technology world to identify trends and theories around where this technology is heading and whether a physical wallet will even be necessary in the near future.

Percentage of people who feel the move towards contactless payments is more efficient

Reinventing the way we shop

Amazon

At the forefront of some of today's most outlandish technological advances, Amazon is consistently changing and reviewing the way we purchase items. The latest? A self-service shop, with no members of staff.

This doesn't mean you're faced with the gruelling sound of "please remove item from baggage area", but a whole new shopping experience.

The store features hundreds of cameras and sensors to track and identify each customer and what they're buying. Shopper's credit cards are then automatically billed once they leave the store, ultimately removing the whole physical act of payment. The great thing is you don't need to queue or use a checkout, you just leave.

This could work for all types of shop, not just groceries. You could walk into a clothing store, try something on and then either put it back on the rail or take it with you, paying for any items on debit via an automated service, like Amazon's. This figures in a level of trust from retailers that might not yet exist, and a belief in consumers' honesty, but that is another story.

Late 2017 saw the rise in the smart home assistant in the shape of Alexa and Google Home. Apart from providing you with weather updates and recipes, they can also be used to purchase goods, too.

Alexa can prompt purchases and charge to your Amazon account after a few short sentences. This ease of payment is completely contactless, and could hugely affect the future of smart home devices and how companies market their products.

Could this be an insight into the future of shopping?

Amazon Echo

Consumer science fact

Shoppers who use fitting rooms are almost seven times more likely to make a purchase than those who simply browse the sales floor, according to research by Alert Tech.

Oak Labs confirmed that 84% of all shoppers engage with their smart mirror – and this is just the beginning.

Equally they found a 54% basket lift of those shoppers who did engage with the mirror.

Mirror, Mirror...

Imagine standing in a shop dressing room, while having the mirror before you show you alternative outfits and available sizes. A whole new level of personalisation is potentially coming our way, and it’s going to make it even easier for us to part with our cash. How?

“While Oak is not exclusively a mirror company, we started with a touch screen in the fitting room for a very strategic reason. While consistently ranking as one of the least satisfactory moments in the shopper's in-store journey, shoppers who use the dressing rooms are 7x more likely to convert than those who do not. It is a hugely important moment of expressed intent, but retailers have struggled to optimize this real estate for the past 100+ years”
– Jenni Samuels, Oak Labs
Oak

"Hello.
How can I help you today?"

Another new method of customer service and payment is happening through the power of chat bots and artificial intelligence (AI). You may have already experienced it, when submitting a query regarding a product or service via Facebook Messenger, or when paying a bill at a restaurant.

Intelligent learning means answers, queries and purchases can be made quickly and easily. Paying for your bill before you leave the restaurant, for example, can now be done via a few clicks through Facebook Messenger.

The end of plastic?

The banking scene has changed dramatically over the last five years, with 2018’s open banking initiative taking a whole new approach to how we manage our money.

One company, Yoyo Wallet, is at the forefront of this financial revolution. Currently, it processes more than 2 million transactions a month, from over 700,000 users.

Yoyo is a mobile app acting as a wallet. For shoppers, this means your payments and loyalty collection is done via a tap of the mobile. Yoyo Wallet ensures a truly personalised process by monitoring buying behaviour and offering unique branded offers based on your purchases.

“For the first time, consumers can allow third party providers they trust to gain access to their financial information that only the banks have had at their fingertips for years.

The Yoyo mobile app automates the collection of loyalty and the delivery of rewards and offers, as well as a digitally itemised receipt.”
– Richard O’Donnell, Yoyo Wallet

What is open banking?

The Competition and Markets Authority (CMA) initiated reforms on how banks deal with your financial information. As a result, you can now share your data at your request with financial management apps, providing you with more possibilities in terms of financial management, and as the name suggests, an 'open' view of your money.

Read more about it here
Wallet

Ways we can pay through our body

Iris Reading Jewellery Facial recognition Fingerprint microchip
 

It’s not just the physicality of payments that is changing, but the way consumers manage their money, too. Digital banks are having a huge impact on financial management and ease of access to our money.

“Real time notifications alert customers of account activity and in-app chat provides a direct line from customers to the people who can solve problems.

In the past simple tasks like ordering a new card could only be done by phoning a call centre or visiting a branch. Building this into an app firmly shifts control into the hands of customers”
– Natasha Vernier & Priyesh Patel, Monzo
“A good example of this changing behaviour is the Paym service, which is a simple way to pay your friends back using just their mobile number, offered by most of the UK’s banks. It’s convenient and safe – using the same bank-grade security technology that underpins Faster Payments.”
– Craig Tillotson, Faster Payments

Monzo, which offers a physical card, is fast-growing. It says consumers are keen to have a physical card, but with in-built personalisation and digital opportunities.

Artificial intelligence and financial security

As artificial intelligence develops, society gives it more and more responsibility. But there are dangers that artificial intelligence could be used maliciously. By using it, by inviting it into our homes, are we making ourselves vulnerable to manipulation?

“Through digitalisation, banks and other financial institutions can better protect people from things like fraud.“
– Natasha Vernier & Priyesh Patel, Monzo

As the landscape of payment changes, so too does the world of payment security. With contactless payments, mobile wallets and artificially intelligent home gadgets that have access to the internet and our payment details, there are more ways to purchase things than ever before. But as our payment options widen, the list of potential vulnerabilities gets longer.

Some payment technologies are being developed with security at the forefront, while others are potentially leaving themselves open to fraudulent attacks.

Within our report we’re looking to explore the capabilities of smart devices and connected homes, the impact this technology could have on home and contents insurance, and most excitingly, what the future holds for this expanding digital space.

“An issue that’s becoming increasingly difficult in our digital world, where the quality of fake IDs gets better and better, it’s too easy for fraudsters to set up fake profiles that con people, and the impact and frequency of hacks grows at an alarming rate. We want to build transparency and trust in the personal information we share”.
– Chris Field, Yoti

When surveyed, 57% of respondents stated that security is the most important factor when managing money online.

Despite a growing number of open banks and alternative financial management apps, 65% of those surveyed feel like traditional banks, such as Lloyds or Barclays, are safer.

iPhones

Yoti - Protecting your data

Yoti is the new way to prove your identity. The free app transforms your paper ID documents into a digital identity, giving you an easier and more secure way to prove who you are.

  • They are also rolling out with the UK’s largest nightclub chain to give people a safer way of proving their age.
  • All the different pieces of data (names, date of birth, nationality, and so on) are split up, encrypted, and stored in random locations in their database. Yoti has been designed in such a way that means that only individuals can access their own data, with the unique cryptographic keys needed to access the data secured on their phone.
  • They accept over 140 passports and over 50 national ID documents and driving licences as they strive to build the world’s trusted identity platform.
Man city double exposure

Future methods of payment

60%
40%

Cash made up less than half of all purchases in 2016, at around 40%, with the rest mostly being paid by either debit or credit card, or by digital payment.

80%
20%

And it is predicted by figures from UK Finance to fall even lower to around 20% in 2026, in less than ten years.

When you consider that only 12 years ago cash still made up more than half of sales payments in the UK, our move to an increasingly cashless society has been a swift and encompassing one.

So the question is: what is taking over from paper money and coins?

Unlocking your phone with your fingerprint has become ubiquitous in just a few short years, so it’s not a massive jump to imagine using your iris, your voice or your face to add an extra level to your payment security.

A Swedish rail company is allowing passengers to pay using a biometric chip – around 2,000 people have these chips fitted under their skin, most working in the tech industry. If this method proves to be a success, it could be a more convenient way of verifying who you are without trading away part of your biology.

In terms of biometrics, it seems we are only at the beginning. Ever-more complex biometric tests are being formulated to make it more difficult for fraudsters to copy or hack your data, these include voice recognition software and vascular biometrics – a technology which captures vein patterns and is virtually impenetrable in terms of fraud.

Companies are developing heartbeat analysis and even vein mapping software to identify you, which seems beyond science fiction.

“The future of money will be built around giving consumers complete visibility and control over their money.”
– Natasha Vernier & Priyesh Patel, Monzo
“Behind the scenes a big change for consumers as well as businesses could be new services like ‘request to pay’, which could allow consumers much more freedom to choose how and when they pay their monthly bills, and businesses an easier and cheaper way of asking for payment in the first place.

A lot of this change will depend on clever start-up companies coming up with the new products and services that people want – some of which we might not even have imagined yet.”
– Craig Tillotson, Faster Payments Fingerprint

The cool stuff

Perhaps in the future, we will have full body scans to identify us from our neighbour, with all of our personal data on hand. Our fingerprints, irises, blood type, and even DNA on record for ease of data collection, shopping, travel and more ominously, the tracking of our daily lives.

“Thankfully advances in biometrics means there is a secure alternative to passwords and many companies, including financial services, are already adopting this technology.

Biometrics offer convenience, speed and security, and they’re unique to each person; making them a more secure option for logging into our accounts and protecting our personal information, especially when combined with ‘something you own’, like your mobile phone.

They also allows businesses to know exactly who they’re interacting with - a vital tool to combat financial fraud.”
– Chris Field, Yoti

Paying with your jewellery

Ringly

Barclays was one of the first big players on the scene for smart jewellery, with wrist bands and a watch strap with contactless tech inside. Wearables are predicted to take around 20% of all mobile proximity payments by 2020, according to a report by marketing intelligence company Tractica.

In the future, we can expect to have anything acting as a payment device – rings, which already exist in the form of Kerv and also bracelets by Ringly, are just the beginning. You will be able to buy NFC-enabled stickers you can add to anything, then just upload your personal data onto the sticker, and use it to pay via contactless.

Blockchain and cryptocurrency

Blockchain explained

The founding cryptocurrency – Bitcoin - was created by an unknown person or group of people, known as ‘Satoshi Nakamoto’. During this creation, the first blockchain database was built, too.

Cryptocurrency is a form of digital payment built on blockchain, and is a decentralised system – meaning it’s different from the British Pound which is centralised (as it’s controlled by the Bank of England). Cryptocurrency is not ‘owned’ by anyone.

Cryptocurrency really does contribute to a cashless society as it’s completely electronic, and the ‘money’ doesn’t physically exist.

The promise of blockchain technology would theoretically make payment fraud an impossibility.

A blockchain’s data is shared across a peer-to-peer network, and is constantly reconciled. Being decentralised, the authorisation is spread across the network – meaning there is no ‘soft spot’ or particular area for a fraud scheme to be instigated.

But, this opens the question as to whether this is a future method of payment, and is it just the start of something bigger and better?

Microchipping

In 2017, a technology company in the US offered its staff to have grain-of-rice sized microchips embedded in their hands. These chips allowed the user to log in to computers, get through security doors and pay for items in vending machines.

Could ‘biohacking’, as it is known, be the future of personal payment?

The microchips are loaded with data about you and your credit. This sits alongside other data that clocks up over time and connects to your phone, such as where you are and how long you are there for. You can then ‘scan’ your hand over a sensor, paying for travel, groceries and whatever else you need.

Will people actually use biometric methods of payment?

Will people use biometrics? Will people use biometrics?

Will we be a cashless society?

Fingerprint ID
“With contactless payments on the increase there appears to be a slow decline in the usage of cash, but it is still a very important and vital part of many people’s lives. For example, 2.7 million people in the UK say they use cash for almost all of their day-to-day payments”.
– Graham Mott, LINK

We spoke with Monzo’s Natasha Vernier, head of financial crime and Priyesh Patel, lead security engineer, and in terms of the future of money they rightly state how Sweden is already almost entirely cashless.

With the prevalence of cashless payment methods such as Alipay and WeChat Pay in China, it is highly likely that the UK will get there too. Whether this takes 5 or 15 years depends a lot on the regulatory environment and how quickly these innovations are accepted by consumers.

“The future of spending is about removing friction points and delivering a smooth experience for consumers. Online and cashless are two ways to do this. The ability to pay for things at the touch of a button and have them delivered without any interference is where spending is heading”.
– Natasha Vernier & Priyesh Patel, Monzo

Our theory, is that this will not happen any time soon. Charities, for example, are still reliant on cash, small businesses too. 49% of those surveyed would opt to use cash over card when making smaller payments under £5. However, this doesn’t mean the future of payments won’t continue to develop and advance.

It seems millennials are at the forefront when it comes to embracing the digitisation of banks. When surveyed, 19% of those aged 18 – 34 would opt in for a microchip which would allow instant payments via fingerprint, compared to just 9% of those aged over 55.

Where the consumer’s desire to buy things instantly and conveniently is at the forefront, businesses and banks have no choice but to adapt with the demand. 24% of those aged 18 – 34 consider ease of use and efficiency the most important factor when managing money on line, in comparison to the 16% of over 55s.

It has been suggested that the future is headed towards completely contactless payment methods. With this in mind, how comfortable do you feel in terms of security and your money?

How comfortable do people feel?

As exciting as the future may be, all we can do is make the best of our finances with what we have in the present. MoneySuperMarket hosts a variety of financial services – with in-depth guides helping explain the nitty-gritty financial FAQs, to providing you with a clear variety of financial products, catered to your specific needs.


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Sources

* According to consumer research carried out on behalf of MoneySuperMarket, between 29th March to 3rd April 2018, with a sample comprised of 2,005 nationally representative UK adults, 18 years old +.