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Revolutionizing Payments: A Faster Digital Experience

The global payments landscape has experienced rapid change, from the introduction of real-time payments to mobile wallets. Learn how emerging technologies are driving faster payment systems for businesses.
Jennifer Barker, Head of Treasury and Digital Solutions, J.P. Morgan
October 1, 2018
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The world of payments is evolving faster than ever before. A true cashless society is not a reality yet, but noncash payments are becoming the norm—both for consumer transactions, like buying groceries and paying rent, and for businesses offering more flexible options for their customers, suppliers and employees.

Today’s global marketplace is uber-competitive. Companies compete on price, innovation, technology and speed to market. One way companies are differentiating themselves is by replacing outdated payment methods, such as paper checks, with more flexible digital options, such as Apple Pay, Zelle and eWallet. Businesses are asking customers and vendors "How would you like to pay me?" and "How would you like to be paid?"

While many businesses are embracing this change, the reality is that 50 percent of payments in the US are still manual and paper-based.1 These payments require more working capital and time to settle, essentially making them more expensive to process. Digital payment methods offer the opportunity not only to settle electronically, which is much less expensive, but also to apply the payment faster, which improves working capital for businesses. The payments industry is ripe for transformation, and a number of nontraditional payment providers are offering instant processing and settlement. Learn what’s shaping the payments landscape for businesses and how they should think about payments going forward.

Top Payment Trends for Businesses

Consumers expect a seamless payments experience.
In today’s digital-first world, demand for personalized and seamless customer experiences has become increasingly important. Payments are no longer an afterthought—rather, they’re embedded in the end-to-end commerce experience. Consumers today have much higher expectations, and companies are racing to keep up with their demands. The speed and convenience of online shopping has shaped customer expectations in industries beyond retail. Consumers now compare their experience across industries and expect service providers to offer a competitive end-to-end experience.

Mobile technology is changing the way businesses operate.
There are 7 billion mobile phones in the world, and about 4 billion of these are digitally enabled to make and receive payments.2 It’s projected that by 2020, $3 trillion worth of payments will be transacted on mobile.3 Consumers have access to an expanding range of services through mobile apps. Today, you can order your favorite food or a ride and have it arrive within minutes. You can order goods online and have them delivered within an hour. So customers are asking: Why can’t payments be made and settled within an hour, too?

Gig workers are demanding faster payments.
The gig economy operates on a global scale, and it’s influencing how employees want to be paid. Gig workers are often hired, managed and paid through mobile apps. Independent contractors and contingent workers who work multiple gigs don't want to be paid every other week—they expect to be paid every week, every day or even every hour. For employers, offering quick and flexible payment options to employees is a good differentiation opportunity to compete in today’s on-demand marketplace.

Global competition is fueling the demand for real-time payments.
More than 35 countries have instituted some form of real-time payments system where payments can be sent 24/7, 365 days a year. In the US, the public and private sectors are collaborating to adopt a real-time payment system to stay competitive in the global marketplace. Real-time payments will dramatically simplify payment processes, from transaction initiation through reconciliation, as well as speed up settlement and improve customers’ working capital.

4 Technologies Reshaping Payments

1. Blockchain

Blockchain is known as the technology that underpins Bitcoin and other cryptocurrencies, but it may also help make advancements in the payments space for both domestic and cross-border payments. Blockchain is used to transfer information between two trusted parties in an efficient and cost-effective manner. Similarly, a payment essentially moves money and the information associated with it from point A to point B. Blockchain can potentially be used in payment processes to improve the transparency, security, speed and cost of payments for businesses. One way blockchain is being used to streamline payments is the Interbank Information Network, which minimizes friction and reduces payment delays for cross-border payments through the peer-to-peer exchange of sanctions screening information.

2. Internet of Things

It used to be that digital commerce and payments had to be completed with a laptop or a computer, but today the online shopping experience has expanded beyond desktop and mobile. Consumers are increasingly connected—from their smartwatch to home appliances to smart clothing. Many of these smart devices are payment-enabled, so users can search for an item, get recommendations and make a purchase in one seamless experience.

3. Artificial Intelligence and Machine Learning

Most of us use artificial intelligence in our daily lives, whether it’s a chat bot offering customer assistance online or a digital assistant, like Alexa or Siri. This technology is increasingly being used to elevate the customer experience and provide personalized recommendations for consumers. Similarly, machine learning has unique capabilities for a broad range of payment applications. It’s especially effective for analyzing large data sets, finding anomalies in the data, and revising algorithms to adapt and learn from the data. Financial institutions have used technology to monitor and detect credit card fraud for many years, but as cyber criminals become more sophisticated, advanced machine learning models are identifying new tactics in real time.

4. APIs

Application Programming Interfaces (APIs) are used to embed a payment experience into a broader application. When you make an in-app purchase on your phone, the app likely has multiple APIs working together to provide a consistent customer experience. APIs allow payments to be made quickly and seamlessly directly from the application you're using.

Preparing for the Future of Payments

The payments landscape will continue to evolve, but one thing is certain—the pace of change will increase. The future of payments isn’t simply going to be about moving money from point A to point B. The new focus will be on convenience, security and meeting the real-time needs of consumers and businesses.

Payments are being used more and more as a tool for customer and employee engagement. Businesses will use electronic processes and enhanced digital workflow capabilities to easily track, audit and manage their payables and receivables in real time. These advancements will create opportunities for faster settlement time, a better customer experience, and improved cash flow visibility and working capital.

Key Takeaways

  • In today’s competitive world, taking the time to understand how technology is transforming business is critical. Not every payment technology will make sense for every business. Think about what payment problem you’re trying to solve: Are you trying to improve settlement, reduce costs, improve working capital, or make the payment process more efficient? Different payment solutions will solve different pieces of the puzzle.
  • Focus on cybersecurity and look closely at existing control processes before adopting any new payment technology. Implement dual payment authority measures and ensure two people are looking at a payment before it’s processed. Apply additional controls, such as regular employee cybersecurity training.
  • Tap into the power of feedback loops. Bring customer engagement forward in the product development cycle—from concept to design to user experience testing—so you can be sure to provide a seamless customer experience.

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12016 AFP Electronic Payments Survey Report
2Ericsson 2017 Mobility Report
3Mobile Payments in US to Reach $3 Trillion Within Two Years,” Payment Week (Feb. 26, 2018)



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