At the center of the payment processing world, financial institutions are witnessing a rapid pace of change.

As an increasing number of these financial institutions feel the pressure of industry regulations, lowered fees and thus revenue, and the incumbent dawn of alternative banking solutions, many regional banks and credit unions are looking for ways to enhance their limited resources.

Embracing Change

With few opportunities for revenue outside of fees, one replacement strategy will be to focus on cost reduction. However, a significant drawback to this idea is that it could squeeze an already pressured staff. It is the bare-naked reality that financial institutions are facing these days – and will have a significant impact on the future services that financial institutions need from their processing solutions.

Another factor in the shift in processing payments world will be the evolving spending habits of their customers and cardholders. As a customer base, we are deeply familiar and comfortable with chip card technology. Today, financial consumers are becoming better learned in credit and debit fraud prevention, increasing expectations on their bank’s card security and safety measures. These consumers’ purchasing behaviors have expanded to include multiple transaction platforms at once, including mobile and wireless platforms. These, in turn, need safe and seamless processing that will remain commensurate with the latest breakthroughs in payment technologies.

Mobile Payments

In 2015, mobile payments in the United States amounted to $550 billion. According to Payment Week, a new report from Market Research Reports Search Engine predicts that number shall reach $2.8 trillion by 2020, “a compound annual growth rate of 39.1 percent.” Payment Week also highlighted a new eMarketer study, which predicts that by 2021, 72.9 percent of the eCommerce market [worldwide] will be mobile commerce.

Mobile payments have taken hold, especially quickly in the QSR (quick-service restaurant) sector. Many companies such as Burger King, Chipotle, and Starbucks have adopted mobile ordering that utilizes a smartphone customer’s payment methods (or wallet), creating cashless transactions that don’t require a real point of purchase system. With razor-thin margins and busy lunch rushes, restaurants opting for cashless transactions experience the loss-cutting advantage of not requiring customers to shell out dollars and coins for purchase, not to mention the health risks associated with handling cash during COVID-19.

Going Cashless

Consumers are beginning to encounter more and more businesses that don’t accept any cash whatsoever, as an increasing number of shoppers ditch traditional currency in favor of credit and debit cards.

Voice Commerce – Say What You Want

Another emerging trend in payment processing is voice commerce. Two years ago, according to IDC Futurescape’s Worldwide Payment Strategies, “In 2018, more than $150 billion will be spent through IoT and Connected Devices,” with 30 billion devices connected to the internet in the next two years.

This prediction led Payments Journal to remark that “2018 will bring a serious discussion on how merchants and their vendors will contend with new channels.” They foresaw “voice-enabled commerce through in-home devices; chatbots initiating payments on social networks, and connected devices managing purchasing decisions and payments.” These predictions have proven right as voice commerce has exploded: many customers can purchase an item from Amazon, for example, without leaving their bed or opening their phone.

Crypto-Purchasing

There is an emerging cryptocurrency alternative payment solution called “Flip.” It is “a device that uses near-field communications to turn cryptocurrency into actual currency at retailers effectively.” It is tap-to-pay and works by “having the device store a pre-loaded quantity of US dollars, which are exchanged automatically from [an] existing cryptocurrency account. Rather than having the retailer accept bitcoin, the Flip system essentially handles a quick sale, transfers the quantity through the system, and pays off the merchant accordingly.”

It seems we will be continuing to buy things quite differently from our grandparents!