Innovation Monitor: Face-scanning, stablecoins and “UX is the new gold” — The Future of Payments

Innovation Monitor: Face-scanning, stablecoins and “UX is the new gold” — The Future of Payments

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In this week’s edition, we’re covering the future of payments. As we curated the pieces for this week, we noticed a clear difference between items written pre and post-COVID. New constraints and concerns around transferring physical cash has rapidly accelerated innovations in payments.

As a starting point, we recommend this Accenture piece from earlier this year that captures the pre-COVID notion of how payments will evolve. Two of the “10 Megatrends” identified that resonated strongly with me were “UX is the new gold” and “The network effect”. Venmo is clearly the poster child for a fast, sleek interface that offers a social layer to make payments somehow seem “fun.” And these opportunities exist for every financial services company.

As always, security and privacy around payments, transactions and users are increasingly important. This in-depth McKinsey report raised some innovative ideas around how banks can leverage AI and data products to improve security and curb fraud.

More recently, Accenture and Oliver Wyman wrote pieces on how COVID will accelerate the transformation of payments. The pieces highlights Voice authentication, bringing brick-and-mortar stores online more quickly, and improving fraud protection among others.

Finally, there are some of the more futuristic ideas. There’s a video of how Curve is experimenting with an AR payments experience. And while the cryptocurrencies hype has subsided, we’ve linked to a fantastic HBR piece on how stablecoins can transform ecommerce. It’s also worth checking out, a biometric tool for retailers. Finally, did you know Visa is creating their credit cards out of sustainable plastic?

Next week we’ll be covering the topic of Jugaad Innovation. It’s the idea that Western countries can learn about flexibility and agility in innovation from emerging markets, where often fewer resources are able to be allocated, and more creativity is required. There was a somewhat famous HBR article in 2011 that pushed the concept mainstream that is quite interesting!

Please reply or email me at if there are any startups or corporate initiatives in the space you’d like us to recognize! We wish you and your community safety, calm, and solidarity as we support each other through this unprecedented time. Thank you again for reading.

All best,
Erica Matsumoto

What Does a Cashless Future Mean?

The Economist looks ahead to a future without physical cash, covering the incentives behind the calls to go cashless and the downsides of adopting digital payment methods.

Cashless payment methods could reduce the cost of processing transactions (handling cash costs countries about 0.5% of their GDP yearly) and make it easier for governments to catch financial crimes like tax evasion. On the flip side, it might open the door to more cybercrime and harvesting of personal data by companies and governments.

The Economist (YouTube) — 5 min watch

Watch Now The Top Eight Ways COVID-19 Will Impact Payments

Lower revenues, more demand on customer service teams, and a surge in non-performing loans may force the payments industry to permanently adapt to a post-pandemic world. Accenture’s global payments lead Sulabh Agarwal highlights the top ways in which the industry might change:

  • We may see more adoption of cashless payment methods to mitigate physical interaction.
  • Improved methods of fraud protection using tech like AI and machine learning (cases of attempted fraud have increased during the pandemic).
  • Increased fraud and economic distress may spur parties to adopt blockchain-based asset and payment tracking.
  • Payment fintechs may find it harder to acquire funding as investors look towards lower-risk environments.
  • Token-based mobile wallets such as Apple Pay and Google Pay, which allow for contactless payments, might see more widespread adoption. For reference, “Tokenization is used to replace the… credit card number with a token. A token looks like a normal credit card number, but it’s not the original…. Tokenization stops the original card number from being used during transactions.”

Banking Blog | Accenture — 6 min read Read More How Payments Can Adjust to the Coronavirus Pandemic — and Help the World Adapt

A detailed analysis from McKinsey of the payments industry’s financial outlook and the anticipated operational changes due to the pandemic. The article highlights some of the strategies payment providers around the world are using to help their customers stay afloat.

For example, banks in China have helped their small merchant clients set up ecommerce platforms and some banks are temporarily waiving transaction fees. McKinsey also lists some of the adjustments the industry should gear up for after the pandemic: stabilizing digital currencies, leveraging data to curb fraud, and making all payments contactless.

McKinsey & Company — 17 min read Read More COVID-19 Spurs Payments Innovation

The pandemic has increased the pace of innovation around payment systems. Merchant Payments Digest gives a roundup of the latest developments:

  • Google is reportedly testing a system that will support voice authentication for payments.
  • Samsung, SoFi, and Mastercard are teaming up to launch Samsung Money, which will allow Samsung Pay users instant access to and easier management of their accounts.
  • JCB is partnering with FIS to drive up the adoption of JCB’s cross-border QR code payment solution, which enables cardholders to make payments by scanning a QR.
  • Facebook rolled out Shops to help merchants set up stores on Facebook, and DoorDash has launched Storefront, a platform that will enable restaurants to build online stores “at the click of a button.”

Oliver Wyman — 3 min read Read More Is Stablecoin the Next Big Thing in E-Commerce?

Marco Di Maggio and Nicholas Platias predict that stablecoins will see widespread use in ecommerce: “Stablecoins seem poised to succeed where its predecessors failed.” Stablecoins address the high-volatility issue that has hindered the acceptance of traditional cryptos. For example, Terra, a stablecoin that is already in use in South East Asia, applies an automated monetary policy to ensure stability — it uses a secondary currency, Luna, to vary the supply in response to price changes.

Stablecoins, and blockchain tech in general, also offer several advantages over credit cards: the absence of middlemen means reduced transaction costs and automatic transaction verification mechanisms. Di Maggio and Platias say that the above incentives, coupled with regulation, would encourage more merchants to accept stablecoin.

HBR — 8 min read Read More The Global Commercial Payment Market Is Worth $125 Trillion and Ready for a Shakeup. Mastercard’s New Solution Is Setting Out to Modernize the Industry.

This sponsored post addresses how the Mastercard Track Business Payment Service, which the company launched commercially last month, will improve payments and cash flow. The platform allows suppliers and buyers to share standardized payment data; each payment is accompanied by remittance data that makes it easier for businesses to do reconciliation.

Suppliers can set their payment preferences such as the size of the transaction and how they get paid by different buyers; on the other side, the platform “optimizes opportunities for card payment rebates, and early payment discounts” for buyers. Mastercard Track also enhances security in transactions: it leverages payment IDs to “codify transaction counterparties and safeguard sensitive bank account information.”

Business Insider — 4 min read Read More Visa on How to Make Plastic Cards Sustainable

Visa has teamed up with CPI Card Group to make a sustainable card, Earthwise High Content Card, that is made up of up to 98% upcycled plastic. Upcycling entails the creative reuse of plastic materials (see the difference between recycling and upcycling here). A press release said the card is EMV-compliant and can support both contact and contactless payments. With the deal, the two companies will give all Visa-issuing financial institutions across the globe access to the new card. — 3 min read Read More Curve Creates AR Pay: Pay Using Augmented Reality Technology

Financial companies are exploring ways of incorporating VR and AR in their services. In April, Discover Curve introduced an AR payment technology that would allow customers to pay without a physical card, “just as long as they can see the POS terminal.” According to Curve, the method leverages AR to read a POS machine and sends card details through the Mastercard network (details about how it works are still scarce).

Other companies are making moves too: PaymentsSource lists seven cases of how businesses are leveraging AR and VR in their processes — from TD Ameritrade using VR to teach finance to Le Casino 4, a French grocery that is planning to use AR display in its stores.

Lovely Mobile News — 1 min read

Read More This Week in Business History June 26th, 1974: The very first scanning of a UPC code was on a pack of Wrigley’s chewing gum

At 8:01 in the morning, a bar code reader is used for the first time at a supermarket checkout, when a pack of Wrigley’s gum is passed through a scanning machine in Marsh Supermarket in Troy, Ohio.

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