“If the last couple of years taught us anything, it’s that forces beyond our control are relevant in how people adopt new technology,” Yinglian Xie, co-founder and CEO of DataVisor, writes in the PYMNTS eBook, “Endemic Economics: 32 Payments Execs on the ‘Next Normal’ That Never Happened.” That means companies need to evolve to meet elevated customer expectations about immediacy, digitization and safety.
While the past two years have been a lot to take in in many ways, I believe that digital payments are in a better state than in early 2020. This is especially true due to the progress the entire system has made toward real-time capabilities. This trend is here to stay, and I believe it is big enough to warrant its own hit, miss, or reset analysis, so here it goes.
Hit the Mark
True innovation can’t flourish without adoption. If the last couple of years taught us anything, it’s that forces beyond our control are relevant in how people adopt new technology. The combination of an exacerbated need for digital payments driven by the pandemic and an immense amount of work from payments innovators in startups and large companies alike has changed how we think about transactions. We all have higher expectations of immediacy, digitalization and safety.
The numbers can back this up: According to Visa, 78% of global consumers adjusted the way they paid for items in the wake of the pandemic.
Missed the Mark
Nobody could have predicted the impact of the COVID pandemic, but perhaps we could have done more to mitigate the negative effects of the massive shift toward digital payments, which opened up new doors for fraud to flourish. From phishing scams targeting disadvantaged population groups and our elderly family members to unprecedented increases in the sophistication of coordinated bot attacks targeting overburdened retailers, there are a lot of lessons to draw for the future.
Case in point: Statista reports that 62% of small and medium-sized business (SMB) retailers and 82% of large ones reported increased fraud attempts since the start of the COVID-19 pandemic.
Needs to Hit Reset
Consumers are ditching cash and checks in favor of digital payments, but many transactions still run along technological rails that were simply designed for a different time. With all this growth in the digital economy, we need to reinvent certain aspects of our infrastructure if we want to enable true real-time payment capabilities.
For example, we’re looking very closely at the implementation of the 3D Secure 2.0 protocol as the payments industry’s biggest collective push to reduce card fraud and preserve the user experience and sense of immediacy.
We’re also paying a lot of attention to how ACH payments are evolving, and I am optimistic about how same-day ACH transactions are gaining adoption. We need to be on the lookout for unintended negative consequences of this increased adoption, and we have recently started seeing bigger waves of ACH fraud attempts.
There’s still a long way to go to provide customers (who don’t like to be told that a transaction can take days to clear) with payment experiences that are immediate and safe, but the ACH system is an impressive feat, and a lot of great minds are working to perfect it.