A peek into the future of digital payments

December 04, 2018 11:18
The use of biometric authentications such as fingerprint, face or voice recognition will be vital to counter security concerns about digital payments. Photo: Reuters

Driven by increased smartphone penetration and a rise in digital payments adoption, Asia is widely accepted to be leading in mobile payments globally. A study by Kantar TNS found that over half of connected consumers (53 percent) in the Asia Pacific region use mobile to pay for goods and services via apps, compared to 33 percent in North America and 35 percent in Europe. Closer to home, Hong Kong’s smartphone penetration rose 5 percent between 2016 and 2017 from 4.7 to 4.9 million users, according to the Nielsen Media Index 2017 year-end report.

With e-commerce expected to be worth around US$88 billion by 2025, the majority of FinTechs in the region have made payments their focus. However, Asian countries remain at varying levels of readiness. For example, while digital payments have taken off in various parts of Southeast Asia, in Hong Kong, over 70 percent of people claim they have never paid for something using their smartphone, according to a survey by the Hong Kong Productivity Council. Businesses that can navigate the opportunities and challenges of the digital economy will be best poised to harness the growth potential of the payments space.

The emergence of great leaders of change

Hong Kong has also been taking steps on its path to becoming a cashless society. Last year, HSBC launched PayMe, a P2P payments app that enables users to transfer money to one another using a mobile phone app with just a mobile phone number. The entry of mobile payment services providers AliPay and WeChat Pay also helped accelerate the country’s migration to e-payments.

In addition to these initiatives, the Hong Kong Monetary Authority recently announced the launch of a faster payments system (FPS), a significant step for Hong Kong on the path to embracing digital banking. At the same time, the HKMA also revamped its fintech supervisory sandbox, opening it up to technology firms alongside traditional banks, a change welcomed by Hong Kong’s fintech community.

Digital is great but more collaboration is essential

Despite these advances, there’s room for continued improvement and wider acceptance usage by businesses and consumers across all channels. According to a recent survey, about 70 percent of Hongkongers have never paid for something using their smartphone, which contrasts with the high mobile phone penetration rate. While this is largely attributed to fears and concerns over data privacy and convenience fees charged with credit card and e-payments usage, there’s a massive opportunity for companies which can fill the gap here.

As more payment systems come to market, there needs to be greater collaboration in the payments space to create a more inclusive environment for both merchants and consumers. Ultimately, it’s about integrating all the different payment methods to provide a seamless and safe way for consumers to pay for their goods and services.

The future of payment stands and falls with the customer experience

Providing a frictionless customer experience used to be the key differentiator some years ago. Today, not offering the best customer experience is a competitive disadvantage. Shoppers expect faster check-out times and a fuss-free and secure payment process. In the world of retail, modern payment solutions are key to improving the customer experience.

However, even with the rise of IoT and mobile payments adoption, security still tops the list of concerns among consumers. A recent study by F5 Networks found that secure experiences are of foremost importance for Asia Pacific consumers, with 53 percent of them prioritizing security over functionality and convenience of an app. For consumers, it could mean the susceptibility to payment fraud due to day-to-day operations or a lost device. Merchants, on the other hand, need to ensure that transactions are processed securely.

Biometric payments will be vital to counter these security concerns. The use of biometric authentications such as fingerprint, face or voice recognition are more secure than current practices and these biometric identification methods can help protect customers from unlawful purchases if their smartphone is stolen or when faced with malicious attacks by cybercriminals. While the introduction of these systems has taken off significantly due to mobile phone proliferation, there’s still much more that can be done and businesses need to accelerate their adoption of such options for their consumers.

The future might already be within our grasp

What we do know is that successful payment systems of the future must be uncomplicated and offer both customers and retailers real added value. Appropriate solutions are already available today that are far more convenient and secure than existing systems. In an increasingly competitive online business, retailers must therefore focus on integrating these new concepts that improve the customer experience. This will help retain customers.

Much of this lies in future-oriented technologies such as IoT-supported shopping and payment solutions which can help completely close the gap between online and offline trade and combine the advantages of the stationary shopping experience with those of online shopping. Appropriate solutions are already available on the market and are just waiting to be used - the future of payment has already begun!

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General Manager, Wirecard, Hong Kong, Macau & Taiwan