Emerging markets and simplifying cross-border trade
Many businesses are looking to trade with customers in new, fast-growing and emerging markets to become less dependent on domestic markets that have either met full potential growth, are stagnant or are in decline.
As such, cross-border transactions are growing fast, with global transactions increasing from $29 trillion in 2019 to $39 trillion in 2022. Underpinning this surge were factors like global trade improvements, cross-border B2C payments, growth in online businesses and borderless e-commerce.
As an outcome, and to compete in the global marketplace, businesses around the world are turning to their banks and fintech partners for faster, securer and more transparent payment solutions.
Online payments allow merchants and consumers to conduct cross-border trade in goods in which they have a comparative advantage. At the click of a button, people can purchase products and services from across the world. In 2021, 2.14 billion people – almost a third of the world’s population – bought goods and services online. Another survey found that in the European Union (EU), 74% of internet users had shopped online.
Transactions in a global digital marketplace across countries depend on sellers and purchasers using compatible payment systems. In many parts of the world, this is tricky. Europe, for example, has differences in payment preferences across member states and is partly the inspiration behind a Single European Payments Area (SEPA) – whereby customers can make cashless payments via credit transfer and direct debit anywhere in the EU and in many non-EU countries, including the UK.
Here, using alternative payment systems designed to be compatible with widely used payment methods, like PayPal, improve interoperability and alleviate some of these issues.
Facilitating SME growth
Small and medium enterprises (SMEs) are as central to economic growth and employment as they are to innovation.
Access to more traditional online payments can be difficult for unproven enterprises, so alternative payment systems have emerged as the solution for many. In providing a single easy payment mechanism, merchants can circumvent banks and card companies and instead engage with a single service provider and ensure customers can have their preferred payment method – whether a debit or credit card, bank account or other.
According to the European Commission’s Annual Report on European SMEs 2021/22, SMEs constituted about 99.8% of all European enterprises and contributed about 65% of overall employment, highlighting their economic importance. Alternative online payments support the growth and further expansion of SMEs online, enabling them to enter new and emerging markets by harnessing online trade – and supporting the domestic economy.
Without access to alternative payment methods, many SMEs would be without the support to trade globally.
Artificial intelligence (AI) and Software-as-a-service (SaaS) expansion
AI has supported many enterprises’ efforts to bring in new revenue streams. Now, digital payment systems are increasingly looking to harness its possibilities. It can be applied to help with data storage capabilities, predictive models, and user experience and empowerment.
It can also support compliance, fraud detection, and cybersecurity. To protect a user’s financial security, AI-powered algorithms can analyse payments and transactions, gather data from different online payments and transactions, learn the patterns from former fraud cases, and determine a pass or fail verdict in near real-time.
AI minimises fraud for complex, high-volume transactions and human error in flagging suspicious transactions and will significantly impact the overall fraud resistance of digital payment systems. It can also be used by businesses to determine how best to pay suppliers or enhance customer service and expand market research.
With a talent shortage and a limited pool of graduates with specialist data skills impacting the ability of businesses to see through their digital transformation projects – AI can help here too. Taking on repetitive and time-consuming tasks so employees are free to handle more complex tasks where a human touch is needed.
Steered by the talent and skills conundrum, SaaS is of growing relevance for many businesses. Finding data engineers to build workflows and a skilled team to operate and manage the platforms the business uses is critical. As such, SaaS is becoming more appealing for businesses so that the only focus for business leaders is using the service while leaving the configuration, optimisation, fine-tuning, and performance management in the hands of an expert.
Digital adoption and its paperless, task-automated systems bring more environmentally friendly business practices. Today, customers, staff, and investors judge businesses by their approach to sustainability and make decisions based on environmental, social, and governance (ESG) criteria. As a result, every organisation must have a strategy with corporate social responsibility (CSR) measures at its core.
Sustainability
Digital adoption and its paperless, task-automated systems bring more environmentally friendly business practices. Today, customers, staff, and investors judge businesses by their approach to sustainability and make decisions based on environmental, social, and governance (ESG) criteria. As a result, every organisation must have a strategy with corporate social responsibility (CSR) measures at its core.
All industries are looking to adopt greener practices, and fintech and financial services providers are no exception. As with most sectors, banks and financial services providers rely increasingly on data centres. With greater scrutiny on sustainability, there’s a growing appetite for data centres that use sustainable energy. And the supply is there, with some even sporting carbon-negative credentials and the ability to provide energy back to the grid to support during spikes in demand.
The expectation for sustainable measures remains high for all businesses both front of house and behind the operational scenes – any organisations showcasing their CSR role in the market, and supporting sustainable initiatives and practices, will need to be authentic. Get it right and it could also contribute to attracting talent as you expand.
Powering growth in global markets for prosperity
Global payments make cross-border trade possible – opening businesses to emerging markets and facilitating SME growth, the backbone of a domestic economy. Having a provider with the right expertise in the regions you want to operate is critical to unlocking new markets. Complemented with AI to improve and streamline operations and SaaS expansion to help with the global skills shortage, even small businesses have the opportunity to bring in international custom.
The next few years will be rough for many businesses, but understanding past and present trends can help explain how best to weather them. And with this knowledge, you’ll be well placed to put your business in a position where, come the end of the recession, it’s ready to take advantage of the following stability.
The cost of doing business is already rising – and we expect this to continue into 2023 as businesses enter a period of consolidation and cost-cutting to combat rising inflation and expenses. In tandem, the customer base will shrink as spending is scaled back.
Planning for this uncertainty is not easy. But as we step into the next year, agility will be key. Those that are able to react and adapt to new challenges and create a sustainable economic model for growth will be best equipped to survive. Crucially, taking advantage of the fintech and payments industry to maximise efficiency, cut costs and navigate changing regulations will be highly beneficial in creating a competitive edge.
Here are my predictions on how businesses will benefit from payment innovation and expertise in 2023 to combat economic uncertainty:
Inflation is the silent killer of businesses and personal wealth. That is why heading into 2023, in this period of economic volatility, businesses will be forced to take a step back and consider how they combat fluctuating costs while streamlining operations and responding to customer demand for reliability and speed of delivery.
We’ve already seen the Bank of England’s efforts to support businesses by raising interest rates, but next year, businesses will look towards the payments industry for more help. So much so, that businesses will increasingly adopt modern payment tools to build speed and efficiency into cross-border products and services – helping to manage liquidity with instant settlement, keep customers happy, unlock new revenue streams and offset inflationary pressures. By increasing the speed of cross-border products and services, businesses can ensure they reliably pay and get paid in real-time, every time.
Fundamentally, those who can modernise their processes successfully will be better equipped to survive this uncertain time with stable and reliable finances.
Many, if not all, businesses aspire to operate globally – taking advantage of talent, market appetite, and regulatory opportunities around the world. However, international expansion is often part of the long-term roadmap – a goal that follows funding, momentum objectives, or customer acquisition.
But today’s economic challenges will see businesses accelerate these global ambitions in the relentless pursuit of growth. Opportunities to expand their customer base and drive new revenue streams become harder to ignore when combatting inflationary challenges and squeezed budgets.
As businesses adopt this global mindset, they will increasingly lean on payment providers as a reliable and flexible financial bridge into these new markets. With this support, businesses of all sizes will feel equal to larger enterprises, both in terms of resources and market opportunities. Unlike ever before, they will be able to leverage the same payment infrastructure to receive and send money in local currencies, at low exchange rates and in real-time. In turn, this will build trust with new markets and mitigate the effects of economic uncertainty.
In 2023, businesses will become increasingly attuned to the complexity of changing global regulations. It’s here that payment providers will play a key role in removing compliance as a hurdle to international growth, customer acquisition or revenue generation.
Fundamentally, leaders want to spend their time focused on business growth, product development and customer experience. And so, managing different regulatory environments can quickly become burdensome and costly. Many do not factor into their roadmap that each market may require a new license to move money or different compliance standards for onboarding customers and verifying identities.
As being compliant and adhering to regulations is of utmost importance, it can ultimately draw attention away from more strategic endeavours that lead to growth. This means that as budgets are squeezed in 2023, businesses will want to ensure time and resources are spent on what will help, not hinder, the bottom line. The right payments partner will remove this headache, managing global regulatory compliance needs and requirements in real-time, so crucial resources and budgets are available to be allocated to growth.
Navigating uncertainty next year will require a considered approach. Businesses will need to consolidate both to drive efficiency gains but also to hone in on the most productive parts of the business. For many, payments industry innovation and technology will be key differentiator in mitigating economic uncertainty. The need to streamline the business, facilitate speed and reliability in payments and remain regulatory compliant under new frameworks will all push businesses toward payment providers. It’ll be these partnerships that will help businesses unlock growth opportunities and offset 2023’s cost pressures.
As shoppers redefine the traditional shopping experience with more shoppers than ever checking out online and in-app, it’s never been more difficult to predict where your consumer is going to head to the checkout. For example, shoppers may initially see a product that they love in-store, then add that product to their online basket, abandon the cart and then revisit the purchase after seeing an ad on social media the next month.
There’s no longer a one-size-fits-all approach to product purchasing. Different consumers purchase products in different ways and as such, have different expectations around the shopping experience– both in-store and online. To convert sales, luxury brands need to meet and surpass these expectations, particularly when it comes to payments.
Seamless payments drive luxury purchases, particularly when it comes to overseas growth and younger shoppers. So, here’s how luxury brands can create a luxury payments ecosystem to amplify business models, unify the customer experience and drive sales.
When paying for a premium product, consumers expect a premium experience. In-store, that experience might include getting a fancy product bag or a glass of fizz when browsing the store. Whereas online, creating that feeling of luxury is slightly more difficult – with payments playing a bigger role than you’d think.
The checkout process should be seamless and quick and anything else becomes a barrier to conversion and may cause luxury shoppers to abandon their carts. An example of this could be complicated authentication checks and slow server response times.
Another key element of the online customer experience is the mitigation of fraud. With more money on the line for consumers, brands that don’t embed double-shield protection, rules and criteria into their payment processes, risk not only the sale but the customers' overall brand loyalty – one of the key drivers for sales in luxury.
Historically, luxury brands have worked hard to address payment friction. Many brands have entered partnerships with a variety of payment methods, for example, Klarna, to offer customers a premium, seamless and simple, purchase experience.
The problem with this is time. The reconciliation of collecting each partner's bespoke payment data (i.e., sales volumes, VAT, purchaser demographics) and then bringing that data together in a meaningful way, is a significant undertaking taking a huge amount of capacity. One that many businesses will, mistakenly, skip when revenue is flowing in.
To create a bespoke shopping experience aligned with the target audience, retailers need to first understand their customer: where in the world they’re based, how they like to shop, their payment preferences, the time of day when they are most likely to make a sale. To easily capture these insights, brands should partner with a merchant acquirer that offers a dashboard of data. The dashboard should provide live insights which instantly allow businesses to identify trends, fraudulent patterns and customers' payment preferences. Leveraging these insights, brands can go on to create the perfect personalised payment experience.
Again, the most important thing for luxury shoppers is a smooth shopping experience, regardless of the brand touchpoint. Whether the consumer is shopping on their mobile, tablet, or in-store via a virtual check-out, the process needs to be consistent and quick.
An easy solution to streamline the process across all digital platforms is securely saving card details. After the first purchase, the customer’s card can be immediately tokenised, protecting them from unauthorised access and fraud. Once stored on file, the card can be used for one-click payments, enabling customers to check out in moments, rather than minutes. The payment process becomes premium and the bespoke shopping experience is improved.
In addition, it’s important to align the payment options available to the wants and needs of the consumer. From open banking to buy now pay later, the diversification of payment methods is allowing brands to target an entirely new consumer.
For example, a luxury retail brand targeting Gen Z and Millennial shoppers may look to offer Buy Now Pay Later (BNPL) at checkout. With BNPL, luxury products have become more accessible to those who want to purchase the products they love while paying in a way which works for them. Consumers can finance their purchases in part and pay off the remaining balance instalments giving them better control over their money. When targeting more established consumers, brands might look to offer other well-known and trusted forms of payment like traditional debit cards. The point is the target audience has huge implications on the payment method and retailers need to know their customer, to know what payments to offer.
Luxury retailers are often at the front of innovation. From Gucci and Louis Vuitton being among the first to have a presence in the Metaverse to redefined high street shopping experiences by providing digital hanging room backdrops, luxury continues to spearhead the retail sector into new horizons. Yet, many brands often overlook the role that payments play in innovation and expansions.
When looking to expand operations overseas, one of the most crucial steps is the ability to receive and send money in different currencies. Merchant acquirers are enabling brands to make cross-border payments simple and seamless, aligning the payment types to the preferences in that market. Overseas, payment options massively vary and it’s important again, to offer payment options aligned to your customers.
Getting payments right holds huge opportunities for building a brand and the most vulnerable part of a brand's interaction with the customers is the checkout. A solid, safe and seamless payment experience leaves the customer with an impression of trustworthiness, whereas a bad payment experience will prevent a shopper from returning, despite the products.
Finally on innovation, when leveraged strategically, payments can be optimised to improve credit card processing, increasing revenue. With the cost of living rising, financial margins are set to become significantly tighter for businesses of all sizes in all sectors. Streamlining back-end payments processes hold huge revenue opportunities for businesses – preventing fraud and saving countless hours on admin - alleviating some of the financial pressures faced, building business resilience.
Adopting an entirely new method of managing payments is always going to be a significant undertaking for an organisation, but it’s so important to get payments right the first time. Seamless payments are expected for premium products, holding opportunities for the business to grow and build customer loyalty. Now’s the time to build a resilient check-out experience, suited to the modern shopper.
But shopping inspiration can come from the most unlikely sources, and business owners may be surprised to learn that FinTechs are making some of the biggest waves when it comes to driving consumers back into stores.
Consider, for instance, the launch of Revolut’s new card reader for shops, or the fact that Klarna has introduced a physical ‘buy now, pay later’ card for customers to use in-store. Finance businesses have cottoned on to the fact that it was only ever ease and efficiency that had consumers step away from stores and queues in the first place, and new finance solutions could very well alleviate all that.
For that reason, Jat Sahi’s advice to retailers is to look beyond the traditional chip & pin or contactless experience.
Instead, look to provide technology that is revolutionising the sector and is both beneficial to customers and in-store revenue. After all, shoppers are increasingly asking “why should I shop in-store when I can shop online?” Jat believes point-of-sale technology (POS) is the answer.
Remove pain-points and increase satisfaction
Now, it’s vital that all brick-and-mortar retailers rival the experience customers receive online.
This means removing all pain points associated with in-store shopping, such as long queues to complete a transaction – particularly as research from the British Retail Consortium (BRC) found that 79% of customers won’t wait longer than five minutes to pay.
Therefore, to avoid basket abandonment, retailers need to provide point-of-sale (POS) technology (the time and place where a retail transaction is completed e.g., through a hand-held device on the shop floor) to customers so they can pay for their goods quickly and efficiently. Indeed, we have seen supermarkets roll out this technology, but it’s time for apparel and homeware stores to catch up. Offering this technology will allow them to compete with eCommerce pure players as it mirrors the virtual checkout experience, and it will also give them a competitive edge as there are no costs associated with shipping or returns.
Within the retail industry, there is a feeling that customers are increasingly loyal to service, not brands and implementing POS technology certainly plays into that. But, on the other side of the coin, POS can also decrease overheads and increase internal operational efficiency.
The benefit for retailers
Stores with high volumes of transactions are an ideal fit for self-checkout technology. The ability for consumers to check out independently through their iPhone or smartphone can increase the number of transactions and create an uptick in sales. What’s more, self-checkout also removes the footprint associated with traditional tills, allowing further room for stock.
Elsewhere, these new digital processes mean that employees aren’t ladened with manual transactions and they can spend their time focusing on what truly matters - the customer. Customers are drawn to in-store shopping for the tactile experience and human interaction - this technology allows employees to elevate this experience and increase customer loyalty.
A balanced approach
But, despite around four in five (80%) shoppers calling for retailers to invest in technology to help avoid queues and all the associated benefits with automation, a soft rollout is advised.
Simply removing all manned tills can lead to the feeling that people are being replaced by machines, which is problematic as this lack of choice means that if difficulties with automation do arise, the shopper is left bewildered and frustrated. Instead, provide both and have lengthy discussions with third-party partners implementing the technology to make sure that all employees are trained on how to navigate the system to deliver the seamless experience promised to customers.
What’s more, it’s also important to remember that while most of the population is digitally native, there are over eight million adults in the UK relying on cash to make everyday payments and excluding this demographic has led to many financial service providers stating that digital transformation has come too soon for many. This further cements the need for choice – as moving too quickly can lead to petitions such as ‘Stop the replacement of people by machines’.
Now is the time to seize the moment
Looking forward, the shift towards eCommerce experienced in the pandemic is unlikely to be reversed. However, what retailers with an in-store presence can do is look at the benefits associated with a virtual basket and replicate these. As a nation, we’re undergoing a period of digital transformation and over the coming month, we will slowly see this technology shift from being ‘innovative’ to the ‘norm’. My key takeaway, plan for this rollout now but make sure it’s a soft transition - if you leave it too long, your competitor will have it up and running in no time.
There is no shame in taking out a loan and often it is the best solution to a financial challenge, but debt can very quickly spiral out of control and can be a slippery slope if you do not know how to manage your loans. This article will look at a few of the best ways that you can manage your loans to prevent spiralling into debt.
People often default on loans or run into financial difficulties because they are not organised. You need to sit down and go through all of your loans and what interest you are paying so that you can work out exactly what your financial obligations are each month. If you use a pawnbroker, for example, then you need to understand your loan and work out exactly how much you are paying back monthly and for how long.
You also need to spend time looking through the contract of the loan (you should always do this before signing anything as well). This is so that you can get a stronger understanding of the agreement, including how long it is for and if you are able to clear the debt sooner. This will help you to avoid any nasty surprises and allow you to adjust your household budget so that you can manage during the course of the loan.
It might seem obvious, but many people do not make their payments each month for one reason or another and this is when you start to fall into dangerous territory. It is smart to set up automated payments so that the money will automatically be paid each month, which means that you do not have to remember and complete a manual payment each month - just make sure that you will always have enough money in your account. You should also look into what the implications of paying late are as every lender will have different terms and conditions. If you are ever struggling, you should always let your lenders know as they may be able to restructure the agreement.
Loans can be a great solution to financial challenges, but they can also lead to even greater financial challenges and debt if you are not careful. The key is to know how to manage your loans so that you can stay on top of payments, adjust your household budget and pay back the loan in full and on time. When you are able to do this, loans can be incredibly useful and a smart solution to financial challenges.
[ymal]
Current financial transaction methods have their limitations, exemplified by the typical £100 contactless transaction limit to prevent extensive fraud, and even risks, such as ATM skimming for PIN thefts.
Cyberattacks went up 600% due to the COVID-19 pandemic and financial institutions and their customers were undoubtedly priority targets for identity theft, the most common type of financial fraud.
With 67% of financial institutions reporting an increase in cyberattacks for 2021 and 79% of financial CISOs stating that threat actors are deploying more sophisticated attacks, the race is on for businesses to stay ahead of hackers and invest in technologies to safeguard both internal and customer data privacy.
In a digital society, where elevated customer experiences are the new normal, people expect their payments to not only be safe but also easy and convenient.
When linked to biometric data, transactions, as well as other pain points for financial services such as lengthy onboarding and account verification, become swift, comprehensive, and exponentially more secure.
Biometric technology’s first forays into the identity verification scene were not without their own set of security and privacy challenges. Back then, some of these technologies proved to be easily hackable, especially facial recognition which could be duped by deep-fakes, 3D printed reconstructions and even photographs of users. Strides made in “liveness” AI algorithms alone now paint a vastly different picture for the security and reliability of biometric authentication, providing 100% secure authentication.
Beyond this, developments in the space are opening up new and innovative avenues for the most common applications of biometric authentication, one of the largest being finance as we have seen from Mastercard’s recent “smile to pay” biometric payments enablement.
Fully automated identity verification engines have been advanced in the most crucial areas for financial institutions: privacy, to remain compliant with rapidly evolving government regulations; customer experience, to rapidly enrol customers, and security; to reduce fraud and avoid financial losses.
At the core of an iconic digital identity verification solution, is the capacity to “orchestrate” multiple dynamic data sets to not only detect and deter fraud, but also to deliver a customer experience, which reduces online friction, converts more applicants to customers, and increases retention rates.
This also extends beyond initially considered use cases to a growing variety of industries, further validating the increasing trust being instilled in these systems. Face ID is no longer just for iPhones but is being implemented in hospitality for hotel check-in, customised personal experiences and room service payments, all without the need for a physical card.
It is not entirely unreasonable for organisations to have a fear of the unknown when comes to implementing biometric authentication, and for their customers who are expected to use it. However, where digital identity authentication has been subject to suspicion of data theft and privacy breaches, we must also acknowledge the gravity of the risks associated with passwords and PINs.
In 2021, 92% of LinkedIn’s users’ data was exposed and sold on the dark web in a breach widely reported as a result of weak passwords, with over 700,000 profiles found to be unlocked with a painfully simple “123456”.
As we move at a rapidly escalating rate towards a cashless and contactless society, passwords and PINs are not only leaving individual security in the hands of human error but are nearing obsoletion. A worrying 59% of IT security respondents report that their organisation relies on human memory to manage passwords. When left to individuals to create and remember dozens, if not hundreds, of passwords, the likelihood of resorting to easily remembered but weak passwords skyrockets – along with their susceptibility to brute-force cracking by hackers.
Keeping track of changing passcodes, PINs, and security questions is time-consuming, less secure, and less convenient than in-depth biometric identity verification and authentication. Particularly social engineering scams, a key driver of fraud losses, rely on victims handing over personal details and passwords. This is circumvented when that information is replaced with biometric authentication.
We do see a convergence between the two where apps use biometrics to unlock a secure password store within the device. However, this typically does not offer added security but serves the purpose of convenience. When the security burden is placed on passwords in our modern cyber-sophisticated age, users are left highly vulnerable to breaches and data theft.
Identity verification solutions need to balance risk with modern digital consumer needs and expectations. Biometrics as the primary or sole means of verification takes the onus of authentication away from the user, whilst maintaining the elevated levels of security that people and organisations expect from financial transactions.
As financial fraud becomes more pervasive and elaborate, and people become more focused on ensuring their privacy, creating a world of trust is pivotal, not only for identity verification, but also for the future of payments. The positive impact that AI and biometrics can have will be substantially limited if there is a lack of trust in how the technology is used. Users need to be sure that privacy is a top priority, and that their data is safe from theft or exploitation.
With AI technology, we can create a smooth, secure, and privacy-enabled identity verification process in which people themselves will be the only documentation needed to verify their identity, an approach central to Incode’s “One Identity Everywhere” future. As consumers, retailers and institutions alike adjust to constant digital innovation, the gold standard in the future of payments will be both frictionless and secure, and where data privacy is absolute.
About the author: Ricardo Amper is CEO & Founder of Incode.
[ymal]
With the biometrics market expected to be worth $18.6 billion by 2026, the potential for this technology is huge.
However, opponents point out that while the convenience of waving a hand or smiling at a camera has potential, there are still big risks if the technology goes wrong – foremost among them are concerns over privacy, security and cost.
While facial recognition has improved over the last few years, there are still errors. For instance, we are all familiar with those frustrating moments when our phones do not recognise our faces for some reason, requiring a PIN to open instead. While this is a minor inconvenience to get access to a text message, when it comes to paying a bill, it could cause huge problems.
Error rates are now less than 0.1%, an impressively low number, but when partnered with the millions of transactions that happen every day that is still hundreds, if not thousands, of moments where biometric authentication could fail.
To reduce the chance of failure, companies will need to have access to several different forms of authentication, such as fingerprints, vein patterns, iris scanning, facial recognition and more. While reducing the risk of errors and fraud, each system has its own accuracy rates and problems that firms need to be aware of. For example, facial recognition can sometimes be thrown off by glare from glasses, and vein pattern relies on high-quality photos in the first instance and ensuring that subsequent scans are not affected by different light conditions.
The trade-off in ensuring success for biometric payments is that companies will have to store more personal data of their customers. This is fundamental to how the technology operates and will reduce the chances of errors, but it also raises the stakes for the company holding the data.
For instance, while a data breach today may result in passwords and usernames being leaked, this information can be changed and updated relatively quickly and easily. Biometric data is much harder to change, and although the processes of using that data may be harder, the rewards are greater – where people might have different passwords for various systems, biometric data would in theory give access to any account where this information is used as a means of entry. Securing these databases is essential.
As well as security concerns, consumers may be reluctant to share such sensitive information with large companies, with ongoing questions around privacy and rights on how those companies use the data of their users. For example, in countries with less protection for individual rights, such as China, a facial database could be used to identify and target certain groups of people by the state authorities, as has already been seen with the Uighur people. If the public becomes distrustful and refuses to share information with payment firms, any biometric technology beyond just unlocking a smartphone will struggle to get off the ground in a meaningful way.
If this is to be overcome, it will be essential for firms and governments to work together to improve regulations and processes. This will help build trust in the new technology, and create conformity across countries on how data should be handled and secured. Firms in turn will benefit from being able to focus on one set of rules, in the knowledge that the rights of people in different locations are being protected.
Any deployment of new technology comes with a cost. In this case, it will require new devices that can read biometric information to be installed in every shop, restaurant and hospitality location, potentially costing billions.
At the moment some high-end biometric systems can cost up to $10,000, a significant cost if you run a small business. After all, it is not the kind of investment that can justify itself through additional business – payments can still be made by other means. It needs consumer behaviour and expectation to reach a point of critical mass where biometric payment becomes expected rather than a novelty. But until the technology reaches an affordable price where it is feasible for businesses to make this investment, there is no way for it to enjoy widespread adoption. It's a ‘chicken and egg’ situation – one of widespread availability and mainstream adoption will drive the other but if neither comes first, biometric payments will continue to struggle.
There is no doubt that schemes like Mastercard’s are going to start happening more frequently, and likely do offer a snapshot of what the future of payments will look like. It is also not as much of a leap in technology as some people believe. For instance, platforms such as Apple Pay already use facial recognition to authorise payments. Bringing in other forms of Biometric payments will remove friction from the authentication process, and no doubt when the technology is ready, customers will love it if it is user friendly enough.
However, we are still a distance away from this becoming a mainstream form of transaction. A lot of work needs to be done to reduce the cost of the technology itself so that everyday businesses can afford it, while serious conversations need to take place to ensure regulations are in place to protect individuals’ data and rights. Otherwise, it will struggle ever to be a viable option.
About the author: Ashish Bhatnagar is Client Partner at Cognizant.
[ymal]
This is something that confuses a lot of people but they seldom stop to find out why they are having to pay this extra money. In some cases, this is marketed a little differently under the title of a service fee, but again there is no explanation about what services this is for exactly. If you were asked “how would you like to pay?” the convenience fee may be in response to the answer you gave to the question. Below, we cover all the important things you need to know about convenience fees and why you’re having to pay them.
In most situations these days customers will choose to pay through a credit card. Especially since the pandemic of 2019, paying through cash has become far less favourable. In fact, people are gravitating towards contactless payment solutions and trying to watch out for their health and safety. In the past, credit cards were considered a luxury. They were not very common and both payment processing companies and merchants needed specialised hardware and software to execute payments. No business wants to increase its costs so the solution was to charge the customers using credit cards an additional cost to cover the processing fees that the business had to bear.
Customers paying through cash or debit cards didn’t pose this problem therefore they were exempt from these additional charges. Today, newer payment options also carry a certain cost for the merchant and since they don’t want to reduce their profits, they pass this on to the customer. These payment processing costs are particularly problematic for merchants in situations where the customer is buying things for a very small amount. Generally, payment processing companies have fixed rates per transaction, much like how merchants have a flat-rate processing fee regardless of the value of your bill. This makes it more inconvenient for people that are buying things of a lower value or those that have a smaller bill overall since they still have to pay just as much in convenience fees.
A lot of people confuse the convenience fee with the card surcharge. While they both serve a similar purpose, the way they are charged does vary slightly.
A convenience fee is charged to cover the processing fees of a transaction but merchants are not allowed to cover the entire fees. For instance, if a transaction costs the merchant $2 to process, they might charge $1 or $1.50 in convenience fees. Also, the convenience fee is a fixed value regardless of the value of the transaction because that is how the payment processor charges the merchant as well.
On the other hand, a surcharge is usually a percentage of the total value of a transaction. Moreover, it is also common across certain payment methods such as credit cards belonging to Visa, Master, Visa Infinite, and other brands. A surcharge is not an alternative to merchants imposing convenience fees but in fact, most merchants charge both of these fees depending on the situation. Also, the convenience fee for using a credit card will be the same regardless of what kind of credit you use. The surcharge will vary depending on the kind of credit card you have since payment processing companies have different rates for different credit card companies. You will find that certain cards have lower surcharge costs than others.
Whether a merchant chooses to charge convenience fees, how much they choose to charge and who they choose to charge are questions that are dictated by the payment processor rather than the merchant.
There are a lot of payment processors that merchants choose to work with. Different kinds of businesses need to work with specialised payment processors. For instance, there are certain payment processors that specialise in working with brick and mortar stores while others work solely with online businesses. There are certain rules that businesses have to keep in mind when deciding the convenience fee they want to charge. They also have to take into consideration their own circumstances such as the number of customers they get, the infrastructure they have, and their own pricing, to find a suitable convenience fee.
Generally, merchants are free to decide the kind of fee they want to charge but given that nearly all merchants are operating under similar frameworks, they all end up charging a fee that is relatively similar. Also, certain payment systems, such as invoicing, keyed payments, and credit cards from certain companies will always be more expensive regardless of which merchant you’re doing business with. This is because handling that kind of payment is generally more expensive for all merchants.
In some cases, merchants will have a higher convenience fee for certain solutions because they want customers to use an alternative. Others will have discounts available for specific payment options because they want to motivate customers to use those options.
As a customer, there are a few things you can do to save yourself from having to face the inconvenience of the convenience fee. The easiest solution is to have multiple payment options at your disposal. If you know your local grocery store charges a convenience fee for credit cards, then pay through cash. Ask them what channels don’t have a convenience fee and become part of that ecosystem. Another option is to look for different stores. One merchant might charge a convenience fee but the store on the other side of the road might not. Explore your options to see where you can save money.
The convenience fee is something that started out when credit cards were new and it really was a hassle for both merchants and payment processing companies to manage the transaction. However, today we are in an era where credit card payments and digital accounts have become the norm. As much as merchants want to remove the convenience fee, they can't remove it until the payment processors change their pricing system. At the end of the day, the customer takes the hit but the merchant also pays the price in the business they lose to competition because of the convenience fee they charge.
Over the last few years, customer payment preferences have changed significantly. Particularly, the COVID-19 pandemic accelerated the shift towards digital payment solutions like Alternative Payment Methods (APM). To highlight the importance of APM integration for businesses, Macropay’s CEO & Founder Adam J Clarke notes that “alternative payment methods are critical. [It is] life or death customer experience.”
This shift in payment and banking trends are also characterized by decentralization. Long gone are the days when customers visited a banking hall to make payments or deposits. In fact, mobile wallets and other open banking solutions even allow people without bank accounts to access loans. In turn,this shift in access to financing has accelerated the need for more flexible and fluid payment options.
For instance, businesses are no longer restricted by borders and can easily access new markets and clients. Globalization and digitalization have given birth to phenomena like drop shopping which lowered barriers of entry for new businesses. However, traditional banking is not evolving fast enough. This is evident in how banking restrictions still make it difficult for new business owners to open bank accounts. In addition, traditional banking tends to be more expensive in comparison to its alternatives.
Previously, payments and banking were controlled by a select few. Financing was centralized, flowing to and from a central bank. This meant payments took a long time as they needed to be verified by the middleman or central controller. In addition, the middleman needed to get paid, which made financial access expensive.
Similarly, access of loans was expensive and, in some cases, prohibitive. This is because customers need to prove their liquidity and provide “know your client” (KYC) documents to open an account. For some, these documents are impossible to obtain. As a result, 31% of the world population remains unbanked today according to World Bank statistics.
However, the rise of mobile wallets, for example, has meant anyone with a smart phone and internet access can access a new way of payment and banking. Businesses now have access to more clients as a result. That is if the business is able to offer clients their preferred payment option.
As client preferences evolve, businesses must keep up in order to stay relevant. With so much change it might be tempting to assume that we have reached the pinnacle in payment evolution. However, Macropay CEO Adam J Clarke begs to differ. He believes that “the great tech revolution is just beginning, and that AI is the future of tech which will continue to change the way the world works.” 83% of financial service executives agree according to Forbes.
As we become more of a cashless society, Artificial Intelligence (AI) will help make digital payments more secure. Cybercrime and digital fraud currently make online payment solutions very risky. AI allows for the early detection of potentially fraudulent activity or a breach in security. This is one of the main reasons why Macropay utilizes both cutting edge technology and AI.
Around the world, cryptocurrencies are coming under regulatory pressure, but some exciting developments have come out of the UK in the past few weeks.
The British Treasury announced that it intends to bring stablecoins under the Financial Conduct Authority's (the UK regulator) remit if used for payments as part of a broader plan to make the UK a hub for digital payment companies.
In January of last year, the British Treasury consulted on whether and how it should regulate crypto assets. Given that stablecoins have a stable value linked to traditional currencies or assets like gold, the Treasury's view that they have the potential to develop into more mainstream usage; therefore, regulating stablecoins would ensure they are used safely by the public.
The FCA has come under widespread criticism in recent months for stifling the innovation of FinTech – an industry in which the UK supposedly wants to be a leader. But as crypto is quickly becoming more widely adopted, delays in implementing regulation is causing the UK to fall behind on this ambition. For example, in the US, stablecoins are already being used to facilitate trading, lending, or borrowing other digital assets. As a result, they are moving to craft regulations to support faster, more efficient, and more inclusive payment options.
The move to regulate the industry comes at a crucial time for the UK economy. Rishi Sunak, Chancellor of the Exchequer, said in his statement:
"We want to see the [cryptocurrency] businesses of tomorrow – and the jobs they create – here in the UK, and by regulating effectively, we can give them the confidence they need to think and invest long-term."
While no official regulation has been published yet, the British Treasury published a response to consolidation and called for evidence, which considers the following:
Establishing a regulatory environment for stablecoins used as payment allows market entry to support innovation while ensuring regulatory standards apply for the customer's benefit, market integrity, and stability. Ultimately, the regulation intends to safeguard and protect the customer, and organisational and reporting requirements will herald the need for self-regulation.
For the UK's FinTech sector, this is a welcome move and will give the UK a fighting chance to uphold its approach to financial services and future technology innovation by ensuring effective competition continues. It also marks a more serious consideration of the crypto industry, with more announcements coming in the forthcoming months.
That said, the proposed regulation comes with a disadvantage to financial promotions. Firms designated as regulated stablecoin service providers will not be able to act as Section 21 approvers of financial promotions. These businesses will not be able to promote investment opportunities to potential investors who aren't certified as high net worth individuals or sophisticated investors.
This announcement is a pivotal and exciting moment for the future of crypto-asset payments in the UK, and regulation is a crucial enabling factor for the industry.
The UK will be able to attract and retain top FinTech innovation and support its plan of becoming a global hub for digital payments by attracting talent from across the globe. The government will be paid dividends in driving investment in UK FinTech and adding to the value of the exchequer.
About Joaquin Ayuso de Paúl
Joaquín Ayuso de Paúl serves as Head of Nium Crypto. Joaquin’s work focuses on expanding the business into the crypto, investment and lending sectors. He is a firm believer in leveraging the core of Nium’s current offerings to provide new avenues for users. His passions also drive him to explore the NFT, web3 and blockchain spaces.
Prior to Nium, Joaquin co-founded and served as CTO of Tuenti, a private social network often referred to as the “Spanish Facebook”. He also founded Kuapay, which developed a secure, mobile, payment method platform in Chile and Colombia. He also recently co-founded Rayo, a digital bank for immigrants in the US, which launched in 2021.
There are rules and guidelines that must be followed/enforced while also ensuring that homeowners are abiding by the bylaws or policies of the organisation. Furthermore, there's the matter of upkeep on the property, making repairs or additions to the common areas, handling member dues, and participating in board meetings. Interfacing with homeowners to run the organisation efficiently is one of the key roles of a community manager but it isn't the only one. A lot of administration, budgeting, and handling of funds needs to occur throughout. To better accomplish this, the use of automation or software tools can be a significant help. Here are five business tools to help you with improving your property management.
When considering the use of software to help streamline running a community, using software to handle accounting is probably the number one priority. Collecting dues, providing receipts, and complete transparency over the process are all something to think about. It's also crucial to be able to budget effectively and easily while having clean access to any pertinent financial reports. So the question is should you use accounting software or property management software? There are pros and cons to each one. The counting software can be inexpensive and multifaceted. It can have plenty of features, easy to use, and get the job done in most circumstances. On the other hand, it doesn't have many features beyond the basics. So, if you need to look back at previous data, find extensive reports, and get a comprehensive overview of all your properties you may need to go a little bigger. Accounting software is ideal for managing a few properties, but property management software might be better for managing a lot of properties. Property management software is usually pretty inexpensive per unit and can have a lot of the same features as accounting software, plus some additional benefits that make it so much easier to stay on top of the HOA's finances. The decision is ultimately up to the community manager, but it's best to weigh the options before making a final call.
In an HOA, the reserve fund serves an integral function. In finance, the reserve fund is a predetermined amount of a liquid asset that's supposed to be available to handle future costs or expenses that may occur. In an HOA, this serves a vital function: to be available to use for repairs, maintenance, and emergency. So, administering the reserve fund is extremely important. Distinct from the operating fund, reserve funds are more of a backup plan. T best practice for reserve funds is to keep expenses written on a separate ledger and keep them in separate bank accounts from the operating fund. A reserve fund should have enough in it to handle future repairs and to be able to cover unexpected expenses. Lack of a decent reserve fund can result in homeowner issues, lack of capital, and big problems down the line. That's why it's so important to use whatever tools you have at your disposal to Monitor and maintain your reserve fund. Accounting software can help, along with some automation in tracking deposits, withdrawals, and expenses involving the fund. Automation is great for this sort of thing because it can help you spot issues early and take swift action.
Getting some accounting software can help with this aspect of running the HOA, but you still need to oversee each of these factors. The best way to do that might be by getting some powerful property management accounting software instead of messing with multiple programs. This type of thing offers a comprehensive solution for banking, budgeting, payments, and more. How so? The property management software can handle electronic banking, take payments, help you budget in real-time, allow for payment plans, and even do batch processing. All of these work in tandem with one another to create a comprehensive payment solution that will benefit the entire organisation.
Part of any community manager's job is vendor management. Vendor management is simply a way to manage suppliers and vendors within an organisation. When applied to a homeowners association, the principles are the same but the practice might be a little bit different. When it's time to select the vendor, there should be a comprehensive vetting process to determine if there's going to be any third party risk from using that vendor. Third-party risk can lead to property, personal, reputational, or financial damage. The last thing you want is to hire somebody to build an addition to the common area and find out they're skimming on supplies and materials, or that they do shoddy work. So assessing the reputation and finding vendors that are going to be able to do the job for a reasonable cost is in the community manager's job description. Using some kind of vendor management software or utility is going to go a long way to helping assess those vendors and build a base of reputable vendors that the HOA can use as needed. There are dedicated vendor management portals specifically for this purpose, but some property management/tracking software also has it as built-in functionality. If it does, that may be your better bet for a one size fits all solution to vendor management challenges. Because maintenance and repairs are a part of the job, it's important to have quality tools to help.
Financial reports are also incredibly important for understanding where your money is going. If you want quick access to all of your reports that you can bring up during board meetings or with communications through members, then using a software repository is going to help. The property management software suites often have this function built in so you can find exactly what you want. No more coming through spreadsheets or random files. Everything is accessible and easy, a convenient location so that you can print it out on-demand or access it quickly to make the important decisions you need to make throughout your management career.
A credit card processor is a third party that connects the consumer and the bank, merchant, and credit card network. This organisation is vital in completing payments made using credit or debit cards.
This industry is evolving and becoming more extensive than ever, making companies confused about whom they will entrust this aspect of their businesses. If you are still on the hunt for the best credit card processor, here are the things that you should consider before deciding which one to pick.
The first thing you should take into account is the cost of the card processor. It would be best if you considered that you are running a business and need to choose services that cost the lowest. Below are the standard fees that card processing companies will charge you.
The first thing you will have to pay when acquiring a card processor is the application fee. You will need to settle this fee to process your application and schedule your business for the setup.
Once you have paid the application fee, the next step for your application is to set up the card processing equipment, which will require you to pay another fee. It will cover the installation cost, like the labour and equipment of the technician.
When you start using the credit card processor to accept payments from your customers, you will need to pay the service provider a monthly statement fee. You pay a fee for the processor to mail you the statement every month.
Another monthly fee charged to you is the gateway access fee. This payment is for the data transaction between the payment processor and the bank.
Your business performance will be charged every transaction, which they call the interchange fee.
The credit card processor will collect a minimum fee from you even if your sales are low.
After figuring out which processor works best based on your budget, the best thing you must consider is the software compatibility. Although most payment processors work well with any software, it is still best to investigate further and ensure that it is indeed compatible. Additionally, you might also want to consider other features of the card processor, like an option to accept digital wallets as payments, as it is becoming a popular payment option nowadays.
Security is a significant concern, especially for this kind of financial transaction. No matter how small or big your business is, security should be your top priority. You must already be aware of fraud and security breaches in this kind of transaction. It is why you should be vigilant and ensure that the processor you choose can provide you with the best security and fraud prevention system. Regarding this concern, opting to acquire a card processing service from the best in class card processor can be viable. Therefore, choose the best and trustworthy names when choosing the credit card processor you will use.
Although a pre-termination fee is still a fee, it is not considered part of the card processor cost. A pre-termination fee will only come into account when you decide to stop the service before your contract matures. The fee for the early termination of your contract may vary from one service provider to the other. It is why you must figure out how much is at stake just in case.
Early termination of the contract is inevitable, especially if you are not happy and satisfied with the service provided by the card processor. Commonly, credit card processing companies charge a pre-termination fee from a couple of hundreds to thousands of dollars.
When choosing a credit card processing company, you should consider those that only charge $400 or lower. It will help you avoid paying a considerable amount of money whatever happens.
The ease of use should be your next concern when choosing a credit card processor. It would be best if you went for a processor that is easy to understand and use. This way, you will never have to encounter any problems related to its operation along the way. Additionally, an easy-to-understand system is also easy to troubleshoot when issues arise. Plus, if your card processor is easy to use, you will never have difficulty teaching your employees how to use it.
You might find it complicated to choose which credit card processor is best for you. However, considering all the factors mentioned above, you are now well aware of what to look for in one. Use this information to help you pick the suitable processor that will help you run your business' payment system.
