2015 was a historical year within the payments industry that had numerous events, which transformed the future of payments. Between the EMV liability shift, data breach protection, mobile payments, and the growth of mobile wallets, there were many changes occurring that were significant.
The payments industry is evolving rapidly and will certainly continue to do so throughout 2016 as well. As 2016 transpires, here are some of the top trends predicted to make an impact for the New Year:
Continuation of EMV Implementation
October 1st marked the start of the EMV liability shift in the United States and altered the regulations in regards to card-present credit card fraud. With EMV now in full swing, this form of technology will be a great solution to shield both the merchant and consumer against possible counterfeit fraudulent transactions.
EMV integration will take time, and most merchants still have yet to upgrade their terminals to EMV-capable products despite the mandated liability shift. A study done by The Strawhecker Group found that only 27 percent of merchants within the U.S. were EMV-ready as of October 1st. The main barriers that prevented merchants from becoming EMV compliant in time for the liability shift were due to price and lack of time to research EMV and the compatible solutions. Likewise, although merchants are now fully responsible for any incidents of counterfeit fraud, many are still not concerned about upgrading their terminals right away.
Several merchants may not upgrade their terminals until it comes closer to the time when they need to renew or purchase new terminals. At this time, merchants may feel it more worthwhile to go ahead and invest in an EMV terminal so their business stays up-to-date with modern security and technology. 2016 will be a prime year where many merchants will make the switch to EMV technology as it becomes more widespread and prevalent.
Increase of Mobile Wallets
With the rise of mobile payment acceptance, consumers are now beginning to utilize their smartphones to make purchases. Mobile wallets are one alternative payment option that has becoming increasingly popular amongst consumers. A study done by eMarketer found that mobile payment transactions are forecasted to grow 210% during 2016.
In 2014, Apple introduced Apple Pay as the first mainstream mobile wallet that provided a safe and fast alternative for payments. By the end of 2015, all of the major smartphone manufacturers have developed a mobile wallet – now including Android Pay and Samsung Pay in addition to Apple Pay. All three of these mobile wallet players keep consumers financial information safe and secure by using tokenization. Instead of sending credit/debit card information to the merchant during a transaction, a one-time “token” is sent to the merchant’s terminal, protecting payment details through the payment process. This unique security feature helps differentiate mobile wallets from other forms of payments, making it an ideal option to process a payment.
In turn, with technology advancing to benefit the convenience of the consumer, most customers are now making their purchases digitally. As a result, checks, cash, and even credit card usage could slowly decline over the years and smartphones could become the prime way consumers pay.
Growth of NFC
As mobile wallets have expanded recently, so has the need for Near-Field Communication (NFC). NFCis a method of contactless communication and data exchange between electronic devices, like smartphones and tablets, to other devices such as credit card terminals. NFC is not only a valuable solution for consumers, but for businesses as well, and has already begun emerging at in-store counters, vending machines, and ticketing booths.
When making a payment, consumers will hold their smartphone over an in-person contactless terminal to make a payment and NFC will communicate the data exchange from the smartphone to the terminal. NFC’s vast list of where and when it can be used is highly appealing and is additionally being coupled with EMV terminals, making it even more accessible. NFC is unquestionably evolving the way consumers activate and pay for transactions and 2016 will be a big year for NFC popularity.
Emergence of Blockchain Technology
Blockchain technology is predicted to break out in the payment industry during 2016. Blockchain is a type of database on which bitcoin is based off, where every bitcoin transaction is documented. It is comprised of a vast series of data blocks, where one or multiple transactions are combined, encrypted, and stored in a secure way. With blockchain, transactions are processed quicker and are cost-effective.
Arvind Krishna, senior vice president and director of IBM Research shared his insight on how blockchain has great potential to succeed within the financial and business realm:
“Blockchain-based systems could help radically improve whole industries, beginning with banking and insurance. But its impact could be much broader. It could make a difference whenever valuable assets are transferred from one party to another and whenever you need to know for certain that a piece of digital information — anything from electronic artwork to the terms of a business agreement — is unique and unchangeable by any party without the agreement of all parties.”
It is safe to say that 2016 is foreseen to be an eventful year, as new trends emerge and recent trends continue to grow. EMV will continue to be implemented within businesses and many merchants will begin to upgrade their solutions to become EMV capable. Mobile wallets will additionally expand and become more prominent within digital payments and the need for NFC technology will also become more prevalent. Blockchain technology, a newer trend, is expected to make an impact during the New Year as well.
Here’s to 2016 and the future of payments!