India is emerging as a leader in the digital payments market with maturing digital banking platforms and systems.
By Satyajit Kanekar
In such times, it is interesting to see what the future holds for us. In this article, we will take a closer look at the technological advancements likely to be influencing digital payments trends in 2022.
Artificial Intelligence and Machine Learning
For effective detection and prevention of threats within seconds, banks and financial institutions are using ML. Eighty percent of fraud specialists using AI-based platforms open that the technology helps in reducing payments fraud. AI and ML are better suited to interpret trend-based insights and scale up as per requirements.
AI is a game-changer in the payments industry and we can expect more innovative uses of this technology, such as voice-activated payments. Bank of America already has a chatbot that provides report updates, balance notifications, customer services and money-saving tips to its users. AI is also designed to play a huge role in RegTech.
Blockchain technology delivers monumental value on a fast international ledger. The technology can be used to transfer payments person-to-person around the world. It is interoperable, affordable, accessible, and efficient. The cost and time consumed are significantly lesser, making it an optimum solution for digital payments.
On the other hand, digital currencies such as cryptocurrencies are also gaining popularity worldwide, especially with millennial investors. According to the Atlantic Council, 9 countries have already launched a CBDC (Central Bank Digital Currency) and around 30 are in the process of developing one.
This form of authentication includes methods such as fingerprint scanning, iris recognition, facial recognition, heartbeat analysis, and so on. Biometrics is a unique way of ensuring safety and security in the digital payments ecosystem. It is a highly-secure technique and aids in building customer trust and loyalty. With a rise in identity theft and payment frauds, biometric authentication is a great way to ensure reliability and security for all online payments.
Buy Now, Pay Later
BNPL has already taken the eCommerce industry by storm. Today, these processes are seamless and just take a few clicks. Consumers can now pay interest free-installments which leads to increased affordability. This trend is only going to get bigger as more and more debt-averse Indian consumers focus on its advantages.
Tokenization means replacing actual card details with a unique alternate code, known as a “token”. This will be specific to an individual’s details and only to one merchant at a time. Since the details are masked, there is reduced scope for misuse and fraud. A tokenised card transaction is safer and more secure. For multiple cards, multiple tokenisations will be required.
As per Juniper Research, the number of digital wallet users will exceed 4.4 billion by 2025. By storing payment information for different payment methods, users find it easy to complete purchases online. Digital wallets do not require a bank account with a physical bank and store all payment information securely and compactly. This is supported by Near Field Communication (NFC) technology which allows devices in close proximity to easily communicate with each other and share data. With an increase in contactless payments, NFC has become a popular term in the digital payments domain.
Wearable Payment Devices
This is yet another secure method for customers to purchase products and services. The technology is integrated into their smartwatches, wristbands, or smart rings and is a tap-and-go payment method. It is an excellent way to ensure secure and error-free payments. In fact, as per research, the wearable technology market is expected to reach $1.37 trillion by the year 2027.
Primarily a cash economy, India has been adopting digital payments at a rate like never before. The industry is booming and digital payments in India are set to grow to $1 trillion by the year 2026. India’s very own UPI (United Payments Interface) ended 2021 on a high. According to the data released by the National Payments Corporation of India (NPCI), in December, UPI recorded 4.56 billion transactions, worth Rs 8.27 trillion.
India’s journey needs collaboration between banks, fintech, regulators and the government. NPCI keeps introducing different mechanisms to facilitate easy and transparent digital payments. Solutions such as UPI will continue to drive digital payments adoption in the country. Moreover, as e-RUPI takes charge, we can witness increased innovation and usage of this payment solution for donations, gift vouchers, and government benefits. These initiatives are welcome as they are improving financial inclusion in our country.
The future of payments is digital. The aforementioned trends will play a major role in India’s vision of being a cashless economy.
(The author is co-founder & CEO of Mobileware Technologies. Views expressed are personal and not necessarily that of FinancialExpress.com)