The changing scenario of the payment ecosystem and the strides of the transformation in the sector

We live in an era where technological advancements have propelled significant changes in every aspect of our lives. Even the payment ecosystem has profoundly changed in the last few decades. From the days of bartering and exchanging goods to circulating currency, we have steadily progressed towards a world where digital payments reign supreme. The changing scenario in the payment ecosystem has been fueled by factors like the widespread availability of high-speed internet, new payment methods, digitization, ever-evolving technology, and changing customer behaviour.

The payment ecosystem stands at the cusp of extensive changes, where innovation and intelligence are constantly shaping and reshaping payment systems. This article highlights the strides of change in the sector as we navigate towards a smarter future.

Digital payment is the new norm.

With the extensive use of the internet and the proliferation of smartphones, digital payment has taken centre stage in the changing scenario of the payment ecosystem. The realm once dominated by cash, checks, and cards has now changed into a landscape where individuals effortlessly manage their financial transactions with just a click. As per a report, the transaction value of digital payments is expected to reach US$9.46 trillion in 2023. The increase in usage of digital wallets, mobile payment applications, and contactless payment methods has revolutionised how individuals engage in transactions by offering convenience, speed, and security.

The Unfolding of Fintechs

At the core of this tectonic transformation lies the disruptive force of financial technology, or fintech. Fintech startups use cutting-edge technologies like artificial intelligence (AI), machine learning, and biometrics to offer alternative payment solutions. Online payment options, payment processing services, and virtual currencies are some of the revolutionary aspects introduced by the fintech sector in the payment industry. Agility, affordability, and user-friendly interfaces are some features that have been introduced by fintech companies to ease out the way we transact by making financial services accessible to a broader population.

Bridging the Gap with Financial Inclusion

The evolving payment ecosystem has fostered financial inclusion to a great extent. The population that was once excluded by traditional banking systems has been included in the payment landscape with the help of mobile banking, digital wallets, and microfinance platforms. Fintech startups have empowered the unbanked and underbanked populations by offering them access to financial services and reducing inequalities. With the internet and smartphones, individuals can easily access their finances and make payments that weren’t possible before.

Using APIs and Open Banking

The increased usage of application programming interfaces (APIs) and open banking has encouraged collaboration backed by innovation in the payment space. Open banking empowers customers to share their financial data securely with authorised third parties, which enables access to a range of personalised financial services. APIs act as blocks that connect financial institutions, fintech startups, and other stakeholders in the payment sector to facilitate seamless transactions.

The way ahead

The payment landscape has significantly progressed in the last few years, driven by innovation. However, several challenges lie ahead on its path. The first and foremost challenge is cybersecurity. To safeguard personal and financial data, it is essential to build robust security measures to prevent cybercriminals from exploiting the vulnerabilities of digital payments. Secondly, it is crucial to address the digital divide by offering access to reliable internet connectivity and increasing digital literacy so that people can benefit from the evolving payment landscape.

Conclusion

The changing scenario of the payment landscape offers a compelling vision of a smarter future. Digital payments have become ubiquitous and are reshaping the way we transact. By harnessing the power of technology and human intelligence, we can create a payment ecosystem that is secure, agile, and efficient.

Author: Shatrughan Sharma, Global Head of Payment Security