The future of payment systems

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The Future of Payments

Exploring the key influencing trends

The global payments ecosystem is constantly evolving into a complex global network. As new Fintech startups disrupt the way we move money around the world, businesses of all sizes need to keep informed about the changing payments landscape. To remain relevant and competitive, you need to understand today’s payment trends and consider how to advance your payment processes to meet the demands of modern commerce.

On this page, you’ll find our handpicked whitepapers, reports, blog posts and videos for you to consult on a variety of important payment topics.

Cost and Value in Banks — A Model Fit for the Digital Era?

Research from The European Research Institute (ECRI) brings fresh insight into how the banking sector manages costs while balancing the need to add value to services provided to both retail and corporate customers.

International Merchant Treasurers: The New Payment “Super Users”

As Europe’s payments landscape is transformed, merchant treasurers now have the opportunity to exert greater control over the financial health of their companies.

Strategies for Fighting Fraud in the Real-Time World

In tackling payments fraud, PSPs are increasingly turning to technology. Successful fraud prevention is all about decision-making – accepting the good transactions and denying the fraudulent ones – with the best available information in real-time.

Balancing Simplicity with Diversity: Transforming Payments Systems for the Digital Age

Does your payment infrastructure need modernization? Read our white paper to learn the best ways businesses can leverage digital payment innovations to stay efficient and competitive.

The Future of Payments: Who Is Positioned for Advantage?

This paper explores how changing payment systems alter the relationship of consumers to banks and retailers, as well as the strategic consequences of the new payment landscape.

The Future of Payments in a Digitalized World

In this paper, we demonstrate that, by adopting digital payment systems, banks are in a better position to compete technologically and financially.

Innovation, Distributed

This report maps the symbiotic relationship between banking and Fintech 2.0.

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Instant Payments — The Journey So Far

This paper explores why there has been such a push for instant payments around the world.

An Insider’s View to Payments & FinTech

This report delivers the top findings of the 2020 Global Payments Innovation Jury, comprising 70 successful payments executives from 37 countries.

Global Payments Insight Series

Check out our series of reports for insights into how to stay competitive in the changing payments landscape.

Key Drivers

From browsing to purchasing, new technologies are altering the payments industry. In particular, The Internet of Things (IoT), Blockchain, and Open APIs have worked their way into the mainstream. Check out our white papers, blog posts and videos for insights into how these innovations are driving significant consumer and business trends.

Internet of Things

The Internet of Things (IoT) is changing how commerce and payment transactions are conducted. Consult these resources to explore how the financial services industry can both address the challenges and seize the opportunities.

Video | Bringing IoT and Payments Together

Blockchain

Consult these resources to learn how Blockchain secures data, avoids duplication, decentralizes information, shares it publically and automatically executes smart contracts, among a host of other innovative benefits for payment systems.

Open APIs

Open APIs are transforming the payments experience for both individual customers and global corporations. Consult these resources to examine how software intermediaries are rapidly emerging as future drivers of banking and financial services.

Insights from our experts

About ACI Worldwide

ACI Worldwide, the Universal Payments (UP) company, powers electronic payments for more than 6,000 organizations around the world. More than 1,000 of the largest financial institutions and intermediaries, as well as thousands of global merchants, rely on ACI to execute $14 trillion each day in payments and securities. In addition, myriad organizations utilize our electronic bill presentment and payment services. Through our comprehensive suite of software solutions delivered on customers’ premises or through ACI’s private cloud, we provide real-time, immediate payments capabilities and enable the industry’s most complete omni-channel payments experience. To learn more about ACI, please visit www.aciworldwide.com. You can also find us on Twitter @ACI_Worldwide.

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The Future of Payments

From trading livestock to waving a plastic card, the way we pay has changed over time – and it’s set to transform drastically in the next few years. We surveyed the nation, spoke to leading finance experts, and analysed transactional data to learn about the payment methods of yesterday, today, and tomorrow.

Get ready to travel through the world of payments and find out how we feel about the state of affairs today, and what payment methods will look like in years to come.

The Future of Payments

The History of Payments

People have been paying for things ever since there were things to pay for – but the way we do it has evolved. From trading sheep to exchanging sequences of 1s and 0s, our preferred payment methods have come a long way.

Explore the history of payments to get an idea how our transactions have developed – and what they might look like in the future.

The History of Payments

01 The History of Payments

Bartering and banknotes: Payments in the pre-card world

Before contactless payments, the world of goods ran on negotiations – think ‘my pig for your bale of hay.’ The first coins appeared between 700 and 500BC, circulated in India, China, and surrounding areas, but it wasn’t another 1,000 years until paper notes entered into the mix.

Before cash caught on, banknotes and cheques were among the most common way to document and make high-value transactions, while coins were the choice payment method for the average Joe.

02 The History of Payments

1950: The year everything changed

The idea of using a card to pay for goods dates back to the late 1800s, mentioned in Edward Bellamy’s novel Looking Backward. In 1914, special customers of the US bank Western Union were given a metal card that allowed them to postpone making payments. But 1950 was the year that things really changed.

The US Diners Club released charge cards that allowed card holders to charge their meals to their accounts and settle the bill later. It began with 27 restaurants signing up to the scheme and had 20,000 members by the end of the year.

Though initially aimed at restaurant patrons, the concept of giving people cards that represented credit caught on,

and banks began to adopt their own version of the practice. The first UK charge card was released by Franklin National Bank in 1951, later followed by American Express in 1963 and Barclaycard in 1966.

From the late 1980s and beyond, people began to embrace debit and credit cards as their choice way to pay. By 1994, half of UK adults had a debit card. Four years later, debit payments had surpassed cheques.

As more people got used to the idea of paying for things using plastic instead of cash, the industry began to develop products and technologies to suit this new consumer demand.

03 The History of Payments

Generation contactless: Technology begins to influence payments

Given this widespread popularity, banks and businesses looked for ways to make it easier for us to spend on plastic. Card reader technology began to develop alongside the demand for quicker and safer payments. In 2003, Chip and PIN technology replaced the old swipe-and-sign method in the UK, offering better security for consumers. But the true leap forward happened when contactless came in.

ExxonMobil, a US petrol company, was the first to experiment with the contactless concept in 1997, allowing customers to wave a Speedpass card in order to pay for their petrol. The UK banks caught up quickly, with Barclaycard introducing contactless credit cards in 2007. A few years later, Transport for London got on board. In 2020, contactless travelled from our cards to our phones with the launch of Apple Pay and Android Pay.

Alongside contactless, the popularity of online shopping, and therefore online banking, began to take hold. Thompson Holidays facilitated the first electronic transaction as far back as 1981, but it wasn’t until the late 1990s that things really took off with the launch of Google Checkout and, shortly afterwards, PayPal. By 2001, more than 100 million card payments had been made online.

Fast-forward to 2009 and the development of bitcoin, the first decentralised cryptocurrency, and payment methods were launched into a whole new chapter, moving from the physical tools in our wallets to 1s and 0s on our servers.

04 The History of Payments

Making safe payments:
Card security

The Consumer Credit Card Act was passed in 1977, marking a revelation in legislation protecting consumers from fraud. Technology hurried to follow suit, with the introduction of the magnetic stripe in 1987.

Chip and PIN authentication made payments even more secure, using a microchip to store card data and a 4-digit PIN code to authorise transactions.

Experts predict that payment technology will continue to balance convenience with security, developing into methods that our pig-trading ancestors would likely find fascinating and baffling. Read on to learn more about how we pay for things today, and what the future of payments will look like.

Consumer Credit Card Act passed

First UK debit card incorporated magnetic stripe

Chip and PIN technology launched in the UK

Expert insight

“Evolution, not revolution”

“The UK market has been historically on the leading edge for early adoption of new payment technologies: for example, contactless cards for in-store payments met a strong success in the UK far before most other markets. The UK has also had a strong track record of biometrics use for both law enforcement and commercial use cases. It will likely be a leading market for the fast adoption of mobile payments using biometrics, wearables, and new peer-to-peer technologies.

“One reason for our success in adopting new payment technologies in the UK has been our step-by-step approach. For example, we introduced credit cards which initially required to be embossed and slip signed, we then moved on to a magnetic stripe on the back of the card to replace, where possible, embossing.

“The next step was to insert a first-generation payment chip into the card but signature was still required. We then introduced a PIN to replace signature, we now have contactless cards that can be just tapped for a payment to take place and in the near future we will replace the PIN with a biometric form of authentication.

“Each move is a small step down a long path of improvement but one that takes into account both sides of the payment process by ensuring each change is relatively small and easy to understand. It’s about evolution, not revolution.”

Howard Berg, SVP of Banking and Payment at Gemalto

The Way We Pay Today

Whether you need to hop on the bus, buy a coffee, settle your water bill, or make a down-payment on a car, the way we pay for things today is different from the methods we used 20 years ago – after all, can you even remember the last time you sat down to write out a cheque?

We’ve pulled together data from a variety of sources to create a picture of what the payment landscape looks like today. Explore survey results and expert opinions to find out whether you fit the bill in terms of the way you handle your daily transactions, and what this means for the wider world of payments.

DRIVING THE FUTURE OF PAYMENTS

WILD RIDE
AHEAD

Change in payments is in overdrive, and will only get faster. Traditional payments players are being squeezed from all sides.

This point of view explores ten trends that Accenture believes will drive the future of payments. It includes consumer views based on the results of Accenture’s 2020 North America Consumer Payments Pulse Survey.

Though they are just teens and young adults today, Gen Z will make up to 40 percent of all US consumers by 2020. This emerging demographic doesn’t remember a time before Google, Apple, Facebook and Amazon, and will influence other consumers.

UX IS THE NEW GOLD

As the payments universe expands, customer experience is becoming the prime competitive differentiator. When companies have the customers’ attention, they better get it right.

MOBILE HITS ITS GROOVE

Mobile payments is poised to finally have its day thanks to APIs and open banking. And delivering a unified mobile payments experience is ground zero in the battle for the consumer.

Consumers want more rewards and are willing to switch cards to get it. Payments players have the opportunity to deliver rewards that meet consumer lifestyle needs, delivered seamlessly in real time.

THE NETWORK EFFECT

The power of the network is built upon collaboration. Working within ecosystems allows companies to multiply capabilities and reach without investing from scratch.

FINTECH AND BANK FUSION

Banks and Fintechs will power the future of payments transformation. Banks have brand recognition, industry knowledge and a customer base to scale. Fintechs have disruptive technologies and agility.

AN ARMS RACE IN CODE

Every credit card account becomes software code. It will reinvent customer experiences, and influence regulations and security measures.

Everyone can be a merchant and every device can be an acceptance device. The payment network becomes bilateral for the first time.

FRAUDSTERS INNOVATE TOO

Bankers view data security as among the top challenges in payments today. As the industry projects $31.3 billion in global card losses in 2020, financial institutions must push to out-innovate the fraudsters.

RIP AND REPLACE REQUIRED

Overhauling existing payments infrastructures is a must for payments players today. Replacing inflexible systems with open and agile frameworks is key to compete.

BUCKLE UP.
BUCKLE DOWN.

The future holds great opportunities for banks, credit card companies and new entrants–if they are up for the challenge. Winners will begin now to evolve business strategies, operating models, systems and cultures, buckling up for what promises to be a wild ride, and buckling down on change.

The future of payment systems

“Nearly everywhere today, headlines proclaim that an Internet of Things is upon us. But what is this digital transformation, and where is it leading us?”

That is the question asked by Jessie Cheng, vice chair of the Payments Subcommittee of the American Bar Association’s Uniform Commercial Code Committee. Cheng is also deputy general counsel at Ripple, with previous experience in the legal group at the Federal Reserve Bank of New York.

The #IoT cannot be fully realized unless the limitations of today’s #payment networks are addressed. Tweet This

In a chapter of an upcoming ABA publication, Electronic Payments in the 21st Century , Cheng outlines the transformative potential of the Internet of Things (IoT) and its ramifications regarding identity, access control, privacy and security, among other legal and policy considerations.

Her main takeaway in the chapter is that the IoT cannot be fully realized unless the limitations of today’s payment networks are addressed. Smart devices, such as the Apple Watch or Google Glass, can make the shopping experience more convenient for the consumer, but they rely on traditional methods of payments (i.e. a bank account or credit card). But those payment rails are fragmented and inefficient. And what if you don’t even have access to those payment methods?

The Internet of Things cannot expand access to underdeveloped regions around the world without a modern payments infrastructure that is interoperable and efficient. It also cannot scale to service and interoperate what experts project will be an addition of $15 trillion to the global GDP in the next 20 years using current payments infrastructure. The IoT solves for communication between physical objects, but it needs to come with a “built-in streamlined exchange of value” in order to grow the global economy.

Cheng discusses how the financial technology industry is already making strides toward this Internet of Value, and cites the Interledger Protocol , developed by Ripple, as the beginning of an era in which money moves as seamlessly as information does online today:

“Until the Internet of Value arrives, the smart objects of the Internet of Things must be cobbled together with today’s traditional payment rails, and the chain will only be as strong as the weakest link.”

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