Let's face it - payments are getting a major upgrade in this digital age. The payment industry is evolving faster than you can tap your card! With technologies like contactless payments, cloud-based kernels, and mobile wallets, along with regulatory changes like ISO, PCI, EMVCo, 3DS, Open banking, and Secure Remote Commerce (SRC), paying has never been easier for consumers.

If you are a merchant or a payment service provider (PSP), you should be aware of what's changing. In this blog, we will explore the latest trends in the payment industry and how you can stay ahead in this payments industry.

EMV Contactless and Contact Payments

As you have experienced, EMV contactless and contact payments have now become the standard in retail payments. It offers:

• Faster checkout times: No more waiting for chip and pin verification
• Safer transactions:some text
  • EMV contactless transactions use unique cryptography stored in the card to initiate the transaction, making them more secure.
  • EMV contact transactions use chip-based authentication and generate a unique encrypted communication and transaction code for each payment, making it impossible to clone. It also adds extra security layers, such as PIN verification and Card Holder Verification Methods (CVM), such as signature verification and online authentication, which differ based on the issuer and regional regulations.  
• Contactless and QR payments: Smartphones add up as contactless cards, perform QR payments and also as payment card acceptance devices, adding convenience to both consumers and merchants.

Cloud-based EMV kernels

Remember when EMV kernels were embedded inside POS terminals? Well, cloud kernels are changing the game, making it cheaper and faster to launch terminals. Slight concerns like latency and added security measures requirements had deterred some vendors from adopting cloud kernels.

Still, the benefits outperform. Cloud kernels cut down on certification costs, simplify updates, and avoid hardware headaches. With easier troubleshooting and no memory issues, they're shaping up to be the future of payments, offering a smarter, faster way to complete purchases.

Here are some of the use cases where the cloud kernel could be implemented:

1. Faster updates - Enable real-time updates without having the recall of the physical device.
2. Maintain standardized certification across devices - It ensures uniform EMV certification across different payment acceptance devices
3. Reduced cost of EMV Level 2 certification process - After receiving the EMV L2 certification you can directly get the certification for EMV L3 application and integrate the L2 kernel. This will save a lot of time in bringing the terminal to the market.
4. Reduced hardware dependency - Unlike traditional EMV L2 kernels that are tied to specific OS platforms, cloud kernels eliminate the need for re-certification when migrating to new OS platforms.
5. No storage limitation - Cloud kernels avoid the storage limitations of terminal-integrated kernels, enabling unlimited access to transaction logs for error analysis and avoiding hardware upgrades required for adding new kernels.

The Growth of Mobile Wallets 

Mobile wallets have become more popular among consumers and offer a convenient and efficient way to perform transactions. With just a tap on an NFC smartphone, end users/ customers can make payments and store multiple payment methods in one place. They can also store multiple payment methods, such as debit, credit, loyalty cards, and coupons, in a single wallet.

Mobile wallets offer security enhancements beyond convenience:

• Encryption - Protect the sensitive financial data of consumers
• Tokenization - Create unique codes for every transaction by protecting the sensitive card details
• Biometric Authentication - Fingerprint and facial recognition add an extra layer to accessing the mobile wallet.

New trends in adopting to mobile wallets

• Mobile wallets integrate with e-commerce platforms, apps, and physical stores, creating a seamless user experience for customers.
• Wearable payment methods like rings, smartwatches, and bracelets will further simplify transactions.
• Many wallets now support cross-border transactions catering to the needs of travellers.

The Impact of Regulatory Changes on Payments

Regulatory changes significantly impact the payments industry. Standards like ISO 20022, EMVCo C-8, PCI, 3DS, Open banking, Secure Remote Commerce (SRC) and Nexo improve data interoperability, reduce errors, and increase transaction speed and security, benefiting the businesses worldwide. 

• ISO 20022 allows richer, structured data in payment messages, enabling seamless reconciliation and streamlined cross-border transactions.
• EMVCo C-8 is a new Level 2 kernel standard that ensures secure and efficient contactless transactions, addresses compatibility issues, and promotes a frictionless payment experience.
• 3DS 2.0 provides a secure way of encrypting and authenticating card-holder data using risk-based authentication without compromising on convenience.
• Open banking democratizes financial services for banking customers by securely sharing data from banks with FinTech. It enables the customer to have complete control over their finances and unlocks personalized services.
• Secure Remote Commerce (SRC) provides the best user experience during checkout across e-commerce platforms. It tokenizes and encrypts sensitive cardholder information and reduces cart abandonment by making the payments frictionless.
• Nexo Standards allows seamless, interoperable communication between terminals and other payment stakeholders globally. It standardizes the communication between international payment and financial businesses, avoiding proprietary messages that are costly and complex to maintain.

The Role of APIs in Payment Innovation 

APIs are the real enabler behind innovation in the payments industry. They connect payment processors, banks, and merchants, making the payment process smoother and more flexible for everyone. They facilitate real-time payments and support digital wallets by integrating various payment methods. Here are some of the benefits of APIs in the payments industry:

• APIs enable collaboration between financial institutions, fintech companies, and other non-financial institutions.
• Makes real-time P2P payments faster, ensuring transparency and enabling consumers and businesses to transact instantly.
• Integrates multiple payment methods, tokenized transactions, and cross-border functionality
• Enables dynamic conversion rates and instant settlement for international transactions
• APIs help in enhancing the security of transactions by implementing tokenization to replace and protect sensitive data.
• It eliminates intermediaries in cross-border transactions and acts as a catalyst for future transactions 

The Importance of User Experience in Payments

When it comes to making payments, simplicity and convenience decide how your customers transact. A seamless and frictionless user experience not only minimizes efforts but also makes them build loyalty and trust.

Here are the four key pillars that enhances the user experience:

• Simplicity - Making payments should be effortless. Be it swiping the card, scanning a QR code, waving the card over the POS, or tapping the phone
• Faster and effortless transactions

Faster and efficient transactions whether it's online or in-person and reducing the number of steps in entering the payment details like implementing QR code, mobile wallet, and SRC to complete the authentication makes the payments process satisfied and complete for the customer.

• Seamless transition of payment methods

Whether it’s paying for grocery stores or for a cab ride, transitions between payment methods should feel effortless.

Designing an inclusive and user-friendly digital payment platform increases usability and helps instill and retain confidence in users. Incorporating personalized touches like suggesting previously used payment methods creates a sense of reliability that goes beyond convenience.

Automated payment testing systems

Modern payment systems require modern automation testing to ensure efficiency and accuracy.

By using a cloud-based automated payment testing platform you can improve scalability, accessibility, and flexibility in your testing process. Testing teams located at different geographies can collaborate, ensuring smooth and efficient testing processes reducing infrastructure costs.

The Future of Payments

As we conclude we should accept that the payments landscape will always evolve, driven by new technologies, regulatory changes, and consumer behaviours. As a bank, merchant, and payment service provider (PSP) you must continue to adapt to these changes.

Payhuddle will always remain your trusted partner as the payments industry transforms, helping you embrace and succeed in the digital age.