In a segment where investments in innovation are very high, there are many topics under discussion and others that can become news overnight. In recent years, a lot has been said about the fintech boom and the bitcoin boom (and its decline), and the use of Blockchain in the financial sector, among others. In this article, I will present the trends for 2020 in the Payment Methods field.
An important topic to the Brazilian financial market, Instant Transfer was widely discussed last year, during the phase where the rules for transferring funds between different market players (from final users and commercial establishments to banks and fintech companies) were defined.
The interesting part for most users is if the service is available and that its offering is no longer being restricted to banks. Thus, theoretically, the service can be offered at a low cost, revolutionizing the way payments are made, as transfers can be performed directly from a person’s virtual account to an establishment’s account through a QRCode.
Now that Instant Transfer has been regulated, it is expected that, in 2020, it will begin to be implemented and offered by financial service providers (such as banks and fintech companies). Some of them have already started offering this feature on their platforms, though with limited coverage and resources. As examples, we have Santander Way or Visa Direct.
Another topic that is relevant to the Brazilian market is Open Banking. According to the Brazilian Central Bank, “Open Banking consists of standardized sharing of data and services by opening and integrating information system infrastructures and platforms, through the use of a dedicated interface, by financial institutions and other authorized institutions by the Central Bank”.
In other words, this means that your financial data belongs to you and not the banks you have accounts in or credit card operators. Thus, it would be possible to develop a single financial app, through which this data could be accessed, simplifying the management of the user’s financial information.
The Brazilian Open Banking is based on the premises of the General Law on Protection of Personal Data. The LGDP is the Law 13.709 of 2018 and concerns data protection for Brazilians. The estimate is that it will be implemented in the second half of 2020 (more precisely, in August) since the regulation edition started at the beginning of the year. In short, this law defines rules for those who collect, process and maintain any citizen’s data. It also classifies the pieces of data according to their sensitivity, in addition to determining punishments for their misuse.
But, what impact does this law have on the payment methods? Today, any e-commerce website or financial institution collects and processes consumer financial information. The implementation of this law forces these players to rethink how they handle this data. The trend indicates there will be a demand for specialized services in this type of data management and even the emergence of fintech companies specialized in this type of service.
Also known as UX, the concept of User Experience is related to the development of application and website interfaces, emphasizing its functionality and not just its visual aspects. It aims at making these types of applications increasingly simpler and faster, with intuitive interfaces that provide information in efficiently. UX is very important when deciding which financial service to use. Many users consider the application’s usability as one of the main reasons for choosing a service. Thus, fintech companies and banks tend to invest heavily in this area, in order to “captivate” their customers.
Internet of Things
The use of IoT (Internet of Things) — connected objects, used to carry out actions or collect data — has been growing in the payment methods market. Stores like Amazon Go show what shopping will look like in the future: in these stores, consumers can simply pick up objects from shelves and leave, without having to go through checkout. Sensors and cameras, working together with software based on deep learning, identify the selected products and charge the purchase directly to the users’ Amazon account. This is the unique experience Amazon Go stores can offer to consumers.
However, the investment necessary to reach this level of automation is reserved to a few companies for the time being. On the other hand, payments through smart watches and smartphones are already reality and other devices, such as rings, badges and voice assistants, are also entering the list of payment method options.
Known because Bitcoin, Blockchain technology is no longer exclusive to the financial sector. Blockchain is, basically, a ledger that records transactions in a decentralized and unique way. In this type of architecture, all transaction records are replicated to each of the operators connected to the network and, so, each one of them validates their authenticity. When one of these operators tries to generate a fraudulent transaction, the other operators detect the problem, preventing frauds.
Although its greatest application is still in the financial field, it is already possible to see Blockchain applications in logistics for cargo mapping, — large retail chains already use the technology for food source control, for example — in the energy sector, among others.
Smart Contracts define the rules for how stored information should be handled by the Blockchain. Through these contracts, Blockchain validates — or not — a transaction, based on a series of pre-established conditions. However, these rules can only be executed internally (within the Blockchain) and, often, depend on external information for the correct functioning. This is where “Oracles”, mechanisms that enable access to information external to the network using software or hardware, come in.
Thus, through Oracles, a Blockchain network can make an online consultation with other systems to validate the rules of a contract. Some examples of Oracles applications for Blockchain are consultations on currency exchange quotations, checks of temperature and humidity of an environment and reading an RFID (Radio Frequency Identification) label. Automatic access to this information, not dependent on manual data input, increases the autonomy and accuracy of Blockchain-based systems.
The payment method market tends to invest heavily in new technologies. New concepts are introduced to the market quickly, in a race for new customers. Brazil has a complex financial system and, recently, the Brazilian Central Bank has been intervening, creating regulations that allow new players to enter the market and provide competitive services, facing large players.
Due to this competitiveness, the payment methods sector is very heated. In addition to the trends already mentioned, other topics — such as the use of biometrics and facial recognition for payments, investments in contactless payment methods and incentive for greater adherence to the use of digital wallets — will also be discussed a lot this year. Thus, changes and news in the financial area can be expected in the very near future.