Council Post: The Digital Payment Boom: How We Can Uphold Safe Online Commerce

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VP Finance & Strategy Eversee,

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The pandemic has changed almost everything from the way we live, from accessing healthcare to shopping and paying for goods.

As contactless became more common, digital payments skyrocketed, and the trend is showing no signs of slowing down. In fact, according to McKinsey, more than 4 in 20 Americans will use some form of digital payment in 2021 2021 Digital Payments Consumer Survey, This includes browser-based or in-app online purchases, in-store checkout using a mobile phone or QR code, or person-to-person (P2P) payments.

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according to this Visa’s 2022 Back to Business Study73% of small businesses surveyed said that new forms of digital payments are fundamental to their growth. Consumers share similar sentiments. Thirty-six percent of surveyed consumers said that digital payment acceptance is a top factor for store purchase choice, in addition to price, while 41% of surveyed consumers said they had given up on a purchase in a physical store because digital payments were not accepted. were done.

Consumers are increasingly turning to mobile wallets like Apple Pay and Google Pay for their convenience. These have the ability to manage credit cards, rewards cards, memberships and more directly on the mobile device. Recent FIS PACE research finds that 32% of mobile wallet users now have three or more mobile wallets downloaded to their smartphones – up from 21% last year.

The machine learning and artificial intelligence technologies that make digital payments possible are able to study buyer experiences and improve them over time – leading to greater fraud protection and security.

Contactless digital payments and P2P payment apps such as Venmo, Zell and Square’s Cash App are also growing in popularity, allowing consumers to digitize the payments they make in store and online. All three players registered phenomenal growth during 2020, which is still going on. more than experts estimate $1 trillion In 2023, mobiles will transact through P2P apps.

While the pandemic sparked an unprecedented need for digital wallets and payments, consumers and businesses continue to use them for their convenience, safety and security. according to this Visa Back to Business Study 2021 Outlook49% of consumers believe that using contactless payment methods such as digital wallets is one of the most important security measures for stores to implement and maintain.

With this growth and emphasis on digital payments, online and offline businesses that fail to provide relevant payment methods in a secure manner will be left behind and lose revenue. In the Visa 2022 Back to Business Study, 59% of small businesses said they plan to use only digital payments within the next two years or are already cashless.

With digital payments at an all-time high, it is paramount that consumers and payment organizations understand emerging trends and ways to ensure a safe shopping experience.

Benefits and risks of emerging payment trends

Another payment avenue that is booming as a result of the pandemic is buy-now-pay-later (BNPL), giving shoppers the opportunity to reduce payment installments, usually interest-free, while allowing merchants to access BNPL fintech. Full payment is received from (for example, Klarna, Affirm, Afterpay) or now growing from the issuing bank. The traction of Visa and MasterCard enabling issuing banks to offer installment payments to their cardholders has been monumental.

Consumers use BNPL providers not only for deferred payments but also for the convenience and user experience – which is often far better than card payments.

Despite the perks, the relatively new payment offering is not without risks. BNPL providers are not yet subject to certain consumer protection laws, and BNPL loans currently lack some of the consumer protections that apply to credit cards, such as dispute protection and chargeback options in cases where goods purchased may be defective. .

Other emerging trends include account-to-account payments, real-time payments (RTP) and open banking. These alternative payment methods are gaining a lot of traction and grabbing market share from traditional card transactions, but payment organizations need to be diligent about new and existing risks.

With more instances of fake transactions and scams among P2P payments, RTP increases the chances of fraud. Open banking, while designed to provide greater financial insight and transparency, can lead to security breaches and fraudulent activity with third-party access.

To combat it, EY’s Jennifer Lucas says “Three ways COVID-19 is changing the payments industry” That we can expect to see “both machine learning and artificial intelligence develop into authentication and risk management models and risk and analytical tools that can leverage big data in new and innovative ways.”

Creating a Safe Shopping Experience

As a payments provider, it is paramount to track evolving developments and proactively prepare for the challenges of change and regulatory framework for a growing and ever-changing market.

Here are three steps to consider for creating a safe shopping experience.

1. Build a strategy to ensure that your merchants follow your unique policies. This strategy will also help reveal any vulnerabilities, such as bad actors laundering money through your business.

2. The world of digital payments needs in-depth risk assessment tools. Merchants can be connected to a broader ecosystem of frauds and must have tools that are able to see beyond surface-level risk assessments.

3. Adopt an automated solution to scale and grow in new markets. This is essential to keep pace with the fast-paced digital payments industry.

The rise of digital payments has created countless opportunities for the payments industry and changed the way businesses interact with customers. As criminals develop technology in the digital, real-time payments sector, payments organizations must develop their own strategies and techniques to identify and mitigate fraud and money laundering risks.

With the boom of the Internet and the ever-expanding growth of the payments industry, we all must pay attention to emerging trends and regulations in order to remain safe and competitive.

Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. am i eligible?

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