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7 Key Payments Innovations in Fintech for 2020

Grzegorz Smialek 45f04a104a

13/02/2020 |

8 min read

Grzegorz Śmiałek

Payments are one of the most exciting areas of technological innovation today and a strong technology fintech trend. Banks, card companies, and fintech startups are busy developing new technologies to address the rapid market changes and evolving consumer trends. 

Governments are also implementing new regulations that reduce the threats of the growing ecosystem of new payment solutions. Such measures are geared at making such payments more secure both for banks, merchants, and customers. 

Read this article to learn more about the most important payments innovation we will see expand in 2020.


The key paymentstrends in fintech we'll go through are:

  1. Network tokenization
  2. Strong Customer Authentication (SCA)
  3. Biometrics
  4. Back-office integration
  5. Expansion of bank offerings
  6. Collaborations between banks and fintech startups
  7. Non-cash payments


7 payments innovations & trends in fintech for 2020

1. Network tokenization

The e-commerce scene is constantly changing, and more stores are now following the trend of the subscription economy. This means that more sensitive card data than ever is going to be shared by customers to complete payments and check out. That's why businesses need to take steps to secure this information. To deal with the increase in fraud, tokenization will become a common way to protect payment details. 

So, what exactly is network tokenization, and how will it help fight fraud? 

Tokenization is a measure that safeguards the card number by replacing it with a unique string of numbers (token). The customer's sensitive card number will be substituted by a different token for every merchant. As a result, it's not going to be transmitted during the transaction, making the entire payment more secure. 

Tokenization helps to protect both businesses and customers from issues such as data theft and fraud. Even if hackers somehow manage to get into the system and steal tokenized data, they're not going to be able to use the stolen tokens to pay online. That's because it's necessary to link the token to the payment information stored securely by payment partner. 

Note that network tokens will always work – even if the payment card changes are stolen, the token can still be used to pay for services, ensuring that consumers can enjoy products without any disruptions.

2. Strong Customer Authentication (SCA)

Another key payments innovation in fintech and security measure that will rise in 2020 is Strong Customer Authentication. Since the implementation of the second Payment Services Directive is rolling out across Europe, certain transactions will require authentication for purchase. The deadline for addressing this regulation is December 31, 2020, as set by the European Banking Authority. This means that while some banks will launch SCA gradually over the course of the year, for others it may go live only at the end of the year. 

Businesses are going to invest in technologies that will allow them to dynamically apply SCA and make sure that payments aren't declined due to the SCA measures not being active. That's why banks are going to look for and introduce solutions that enable smooth implementation of SCA this year.

3. Biometrics

In 2019, we saw the very first biometric fingerprint credit card issued by a UK bank. In 2020, expect to see more of this kind of payment innovation. It's safe to say that consumers are now used to biometric authentication. Just consider smartphones that unlock themselves with fingerprint and facial recognition. Biometric security is becoming the new normal. That's why providers are going to research new ways to increase the security of their services in response to new regulations but also the increasing sophistication of fraud tactics. 

This is where biometric data is going to play a key role. 

For example, transactions completed through 3D Secure to already include biometric authentication such as voice recognition, facial scan, or fingerprint scan. Moreover, 3D 2 can use the data collected during checkout to authenticate transactions without forcing the customer to authenticate them over and over again. As a result, businesses can improve the customer experience for mobile transactions that require strong authentication. 

Consumers should expect their personal features to become a secure way to pay as both merchants and banks will be looking to find new ways to prevent fraud.

4. Back-office integration

During the past few years, most financial services companies have been focusing on frontend projects to improve customer experience and gain a competitive advantage. This often led to less focus dedicated to back-office digital transformation projects. As a result, many banking institutions today rely on infrastructures and systems that place customer data in silos that trigger disconnected customer experiences. This is going to become a problem for banks that are looking to become leaders in the new payments ecosystem. 

In 2020, back-office optimization will become a new area of focus for many banks. Other factors that drive back-office optimization are the need for real-time design so that systems can handle transactions 24/7, as well as easier deployment and scalability by being cloud-ready. Several companies have already been invested in optimizing their back office to prepare for the banking system for the open banking initiatives of the future and enable third parties to integrate with their system seamlessly.

5. Expansion of bank offerings

Merchants are starting to adopt alternative payment methods, and card company will do their best to expand their offers. Alternative payment solutions that offer real-time transaction capabilities are preferred among customers in the e-commerce context. That's why merchants are now offering more payment options than ever to cater to customers with different needs. 

Alternative payment sources such as e-wallet, mobile, and net-banking solutions now outpace traditional payment sources such as cards and cash. That's why in 2020, banks will be creating smart point-of-sale solutions for merchants to allow them to offer multiple payment options. 

For example, last year, ING started piloting a tap-on mobile app that transforms mobile devices into point-of-sale terminals. Visa is now working with First Data and Samsung to build a software-based system that allows merchants to accept contactless payments of any amount on their handsets without using any additional hardware. 

To expand the revenue streams and offer customers the best experience, banks are going to invest in developing innovative point-of-sale devices that take advantage of alternative payments.

6. Collaborations between banks and fintech startups

Banks are going to become involved in even more targeted collaborations with fintech startups to improve their B2B payment interactions. After all, most payments innovation in fintech is driven by startups and scale-ups.

Fintech ventures have revolutionized the B2C payment space with many new payment offerings. That revolution has now led B2B companies to expect similar experiences from their service providers. That's why in 2020, we're going to see more banks collaborating with fintech startups to leverage their technological know-how, advanced data analytics, and machine learning capabilities for developing solutions in B2B like accounts payable and supplier financing. 

For example, HSBC announced a $26 million investment in a fintech startup called Proactis to take advantage of its accelerated payment solutions and promote B2B payments to smaller suppliers. 

In 2020, an increasing number of corporate clients will want sophisticated offers from banks like efficient cash cycle management and improved data management. Collaborations with fintech startups will enable banks to offer such customized solutions to corporate clients.

7. Non-cash payments

Customers are now moving away from cash payments – it's a fact. In 2020, we will see a new set of alternative cashless payment methods grow and capitalize on that opportunity. Mobile and QR payments, contactless cards, and digital wallets are going to become more significant than ever. 

A large share of non-cash transactions still belongs to cards, but all these innovations are growing in terms of the number of transactions. Tech giants are also experimenting with cashless products and services. For example, Amazon introduced cashier-less stores in the United States and plans to expand the concept globally. Apple launched its own payment. 

Countries all over the world are picking up on this trend as well. For example, the government of India realizes the potential of digital transactions for transparency and promotes their growth. India introduced the Unified Payments Interface in 2016 to encourage faster payments. 

Instant payments and the increased adoption of alternative payment methods will drive the growth of non-cash transactions. Note that emerging markets will become the leading adopters of global non-cash trends thanks to the spread of technologies such as QR codes.


Payments innovations in fintech for 2020 - wrap up

The payments ecosystem is changing at an increasing pace. In 2020, we're going to see the expansion of several trends that have resonated with consumers strongly in 2019. Needless to say, we might also witness the emergence of brand-new trends that match the new customer expectations regarding payments. 

Are you looking for IT teams that have expertise in digital payment solutions? Get in touch with us and let's talk about your project. Our teams have delivered such technologies to organizations operating in the financial services sector to help them deliver value to customers.

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Grzegorz Smialek 45f04a104a

Grzegorz Śmiałek

Managing Director at Codete. He is a Master of Law and has a Harvard Business School degree. A business leader with extensive experience in finance and team management. Specialist in startups and business development.

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