Navigating the Payment Gateway Trends: Take Your Business to the Next Level

Challenges in the Payment Industry

Every industry has its challenges. The payment industry is no exception, despite its breakneck speed of evolution.

• Data Security: Mobile and online payments are on the rise. These payment methods collect sensitive customer data, which means they become prime targets for cybercrimes, fraud, and hackers.
• Fraud Protection: As mentioned earlier, the nature of the sensitive payment data turns these data into targets for fraud. Data indicates that over 4.1 billion individuals globally used digital payments in 2017. The number of users in the digital payments market is forecasted to reach 6.1 billion by 2023, nearly 50% more compared to 2017. With such a large number of users, users, and sellers must take steps to prevent payment fraud. These include regular security audits or outsourcing to a third party to take care of the security systems. Users must also keep an eye out for unreliable online vendors.
• Processing Fees: Running a business comes with its fees. Fees for online payment solutions come in the form of setup fees, transaction fees, etc. They vary by payment service provider, location, currency, and transaction volume. However, these fees can be lowered if your business is smart (e.g., choosing the right pricing model).
• Regulations: There are numerous rules and regulations a payment process must comply with. This, again, depends on the country or industry. Businesses need to do their research carefully to make sure the laws and regulations of the target market are followed to avoid expensive financial penalties.

Top Payment Gateway Trends

Mobile Payments

In recent years, mobile digital wallets have become one of the most popular payment trends, as well as mobile app development trends. With mobile payment apps like Apple Pay, Samsung Pay, and Google Pay, the payment process can be completed with one simple touch on the glowing smartphone screen. Not only are mobile payments simple, but they are also convenient and secure.

Mobile payments have become especially pronounced during the pandemic, when contactless payments were recommended due to health concerns. Now that the pandemic has passed, the popularity of the frictionless payment method still continues to grow, with a majority of consumers having at least one type of digital wallet installed on their mobile devices. According to a Forbes survey, the majority of respondents (53%) say they use digital wallets more frequently than they do traditional payment methods. When compared to conventional payment methods, 47% of Americans claim that utilizing digital wallets results in higher spending.

Alternative Payment Methods

Alternative payment methods (APMs, for short) refer to any payment methodology that does not involve cash or a well-known international credit card company.

These can include domestic cards, cash-based vouchers, electronic wallets like Apple Pay or Google Pay, or bank transfers such as iDEAL (Netherlands) and POLi (Australia and New Zealand). Alternative online payment methods are more common than niche, and in many countries, they are the standard way of paying, especially online.

APMs can become tricky for international businesses that need to cater to various markets. They often need to use a number of different Payment Service Providers (PSPs). Therefore, in order to incorporate new digital payment solutions, sellers are relying more and more on solutions that combine several APMs and PSPs under a single Application Programming Interface (API). This allows them to meet the shifting market demand.

Buy Now, Pay Later

What is Buy Now, Pay Later? “Buy Now, Pay Later (BNPL)” is a term used to describe a payment plan that allows you to make a purchase, receive it immediately, and pay for it later, typically over a set period of time. Buy now, pay later is offered by most major retailers. Though this payment plan is a low-interest option, you are still incurring debt.

Adding buy now, pay later payment services has the potential to boost your revenue. According to McKinzey, 29 percent of respondents who used BNPL say they would have made a smaller purchase or not made a purchase at all if they had not had this financing option. Thirty-one percent say they used BNPL instead of a credit card, while another 39 percent say they used BNPL instead of cash or a debit card. Although BNPL might not be suitable for every business model, this payment plan is still becoming increasingly popular.

Enhanced Security Measurements and Biometric Verification

In the ecosystem of digital payments, financial institutions play a crucial role as middlemen, easing transactions between payment processors, merchants, and customers. Financial institutions are adapting their services to meet the changing demands of consumers and companies as the payments landscape changes.

Another evolution in the payments landscape is the measures to shield the user’s sensitive information during financial transactions. If you have used mobile and digital wallets, you are probably familiar with biometric authentication methods like facial identification or fingerprint recognition. This is to ensure there is an extra layer of security for the users.

Central Bank Digital Currencies (CBDCs)

Central bank digital currencies (CBDCs) are a form of digital currency issued by a central bank. The value of CBDCs is tied to the official currency of the issuing country. CBDCs are similar to - but distinct from - stablecoins. A stablecoin is a private, stable cryptocurrency that is tied to another currency, commodity, or financial instrument in order to stabilize its value over a period of time. Unlike cryptocurrencies (which are decentralized), CBDCs are issued and controlled by the state.

Examples of CBDCs are:

• China with its e-CNY money, which went live in April 2020 as a pilot program.
• Jamaica with the July 2022 launch of the JAM-DEX digital currency.

CBDCs entail a number of potential benefits, including heightened security, efficient cross-border transactions, and so on.

Integration of Blockchain and Cryptocurrencies

Due to the secure and transparent nature of blockchain along with cryptocurrencies - which offer a decentralized form of currency that can be used for transactions, blockchain has been on the rise in the payment industry. A number of large businesses, namely Microsoft and Burger King, have accepted cryptocurrencies like Bitcoin. Even though this technology is in its infancy, it has prompted the payment processing industry to evolve to meet the ever-changing consumer demands.