The Next Generation Payment Ecosystem

Automated Teller Machine (ATM) led the way back in the 1960s and it took well over 3 decades to gain popularity.

The Next Generation Payment Ecosystem

By Iffy Kukkoo

01 Apr, 2020

We are witnessing an unprecedented churn in the payments space. The components have been in the making for decades - but the global digital revolution has given them a convergence platform. We are well and truly in the middle of the plastic money revolution.

Automated Teller Machine (ATM) led the way back in the 1960s and it took well over 3 decades to gain popularity. While the developing nations were getting on the adoption curve, plastic money was conceived. It had huge advantages over traditional payment methods. The prospect of entirely replacing cash made it a universal hit. Again, developing nations with some of the world’s most populous countries were slow to adapt to it, given a lack of infrastructure. Also, all the stakeholders (consumers, merchants, issuing banks, acquiring banks, regulators) needed to make their share of investment to make it universal.

We have come a long way since then and the innovations in the mobile phones and data penetration domains have been game changers, especially in populous countries of Asia. Payments have been digitized to an extent that it requires almost negligible investment from consumers and merchants.

The emergence of Asia’s manufacturing and IT services centric economy has given a major boost to the global digital ecosystem – completely revolutionizing payments.
Here are some of the technology trends that are redefining payments and would transform the sector in the next decade:

Change in Consumer Profile

Technology Takes Centerstage

The digital wave has hit industries across sectors. E-commerce, utilities, travel and tourism, food ordering, transportation, ticketing, bill payments, etc. are all undergoing massive transformations.
Consumers have traditionally had their hands tied with respect to available payment choices. That is no longer the case now, as consumers have become more knowledgeable and tend to prioritize convenience.
Therefore, payment providers are constantly competing with each other for retaining existing consumers and attracting new ones. Cashbacks and related loyalty programs are commonplace. Consumers are also becoming smarter, not committing to a single payment platform and using the most rewarding ones.


Millennials already form the core of the modern workforce. Freelancing and gig economy are becoming popular across the globe. The next decade will see digital natives (those born in the 2000s), the generation Z, globe-trotting more than ever as businesses will trust them with greater responsibilities to drive digital transformation across the world. This generation wants everything, here and now!

Shift to Mobile

The costs of smartphones are crashing, data has become dirt cheap and users are switching to mobile phones for accessing the internet. The next decade will be powered by digital payments, virtual creditcards, 3d secure transactions, and many other innovative solutions that will continue to grow the share of mobile users.
Consumers no longer want to go to their banks. The millennials just do not accept going to banks and demand all banking and financial services to be made available online. Banks are developing their mobile banking apps to address this need – where consumers can access their account details, make transactions, handle investments, insurance and do much more through their smartphones.

Virtual Payments

Card-based payments have firmly established themselves globally in the past two decades. Despite its associated risks, consumers trust their plastic cards for carrying out secure, cashless and instant transactions.
Despite their advantages, consumers are required to carry a separate physical card (and often multiple cards from different banks) for executing transactions, fragmenting the entire experience. Fin-tech companies are solving this through virtual credit cards.
Virtual payments are ideal for consumers without personal cards, ideally those looking for short term, low value payment solutions. As you can only pay at specified merchants for limited services, they have a high degree of security. Corporates find it especially useful, as it goes a long way in integrating compliance seamlessly in the process
Virtual payment methods offer many benefits over plastic cards:


Virtual payment cards are built within the corresponding mobile apps. It gives consumers the convenience of not having to travel with an additional card. It makes use of the smartphone – a device consumers anyways carry – to scan payee details through a QR code and smoothen the entire experience.
Though a considerable number of consumers belonging to the older generation find it tough to get used to, the tech-savvy digital natives have taken to this as a duck to water.

Cost Savings

A virtual card saves logistics cost at the issuer’s end. Users can carry it around in their mobile phones and they no longer need to stuff multiple cards in their wallets. It does not need to be sent physically to the customer. It is delivered digitally through the internet, saving time and costs. These can be administered digitally and can be replaced in a short turnaround time.

High Acceptability amongst Digital Natives

Acceptability of virtual payment solutions remains a hot topic in the payments industry. Even in developed countries like the United States of America, there are many businesses and individuals who still prefer old-school cheque over digital solutions.
However, the encouraging sign is that approximately 45% millennials do not even own a card in a traditionally card-dominated market like the U.S. This is a common trend around the world and as a greater number of digital natives join the workforce, the number would only go up.
These are the consumers that demand integrated, friction-less solutions and it is only a matter of time before businesses embrace this. They have never used plastic money and now that they have a choice between physical cards and virtual ones, they find virtual cards more attractive for its convenience.


Frauds related to plastic cards have existed as long as the cards themselves. Traditional plastic cards have a fixed number and other sensitive user data in their embedded magnetic strips. Hackers have utilized this vulnerability to perpetrate many financial frauds across international borders, which are nearly impossible to trace.
A virtual card holder does not have to worry about its physical security. A consumer can store it safely in his mobile phone and there is no magnetic strip or sensitive information leak to worry about. There is a new (virtual) number generated for each transaction, which expires by the time your transaction is over. Even if attackers somehow gain access to that number, it cannot be misused, as it expires within seconds.

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Mobile Payments

Most of the western world has successfully transitioned into using plastic money in the previous two decades. Developing economies such as China and India were not ready for it and are still playing catch up. However, affordable smartphones and dirt-cheap data plans has made them pioneers of digital wallets - where payments can be made through mobile phones!
As developing economies get bigger and attract investments from the developed ones, business travel is getting a major boost. Corporates will be adopting the QR-code based payments popular in developing economies to improve traveler experience.
In simplistic terms, any payment made through a mobile device is a mobile payment. FinTech firms have come up with multiple ways of realizing this. It started from a simple digital wallet that a traveler could load before a trip - just like a prepaid card. Mobile wallets and banks have since seen the benefit of partnering with each other and now we have mobile based payment solutions that can directly transfer money from one bank account to another instantly, eliminating an intermediary such as the digital wallet.

Invisible Payments

Card payments (physical or virtual) and mobile payments are visible forms of payments. These involve presenting a card to the merchant. Even QR code based mobile payments or virtual cards sitting in traveler’s mobile devices constitute the visible payments category.
Isn’t it exciting to think of a solution where the payer does not have to present anything and still make the payment in a contactless, frictionless manner? Well, if we look at a closer look at our daily transactions, the technology is already here!
We save our card details on online platforms such as Amazon, Uber, Zomato, etc. It is a one-time exercise and we are not required to present cards the next time we transact with them. Automated toll collections use the same concept, where an RFID tag is mapped to a vehicle number and bank account, allowing the customer to drive off as the transaction is automated. It is a win-win situation for all parties involved. Some of the advantages are:

  • Frictionless transactions
  • Payment data securely stored over centralized servers
  • Instant access to transaction history to generate reports
  • Easier expense management
  • Simplified claims settlement

Integration of Banking, Payments, and Financial Services

Payments form a core component of business travel. The global payment landscape is in the middle of an unprecedented transformation. Corporate travelers need a technology-enabled infrastructure where they have all the modern payment solutions at their disposal. Payments need to be instant, seamless, mobile and secure.These are the top payment trends that will dominate the next decade:

The Rise of Generation Z

While millennials form the core of the workforce at present, generation Z (those born in the present century) is already making its presence felt on the internet. These are the digital natives that have not known life without smartphones and mobile internet. They want the best and want it in an instant. They prefer their mobile phones over laptops. As a payment provider, you have a very small window to attract them, as their attention span is very short.

Fintech and Banking Overlap

Banking has gone mobile and a mobile banking app is a necessity rather than luxury. Consumers find it cumbersome to use separate apps for banking and financial service needs. Fintech and banking have realized the benefits of collaborating with each other. Right from mortgage to electronic transfers, these two are very different organizations with tremendous potential to drive synergies.

Rewards Galore

Consumer expectation has peaked and they want to be incentivized for every transaction they do. Banks have been introducing and improving rewards programs for decades but now they face stiff competition from retailers and card issuers. The consumer finds himself surrounded by innovative offerings (cashbacks, discounts, air miles and vouchers) from a host of merchants vying for his loyalty.
This trend is set to continue, with a U.S. card company having already spent 30% of their revenue on rewards and loyalty offerings last year. Customer loyalty is becoming fragile by the day. Retailers are looking to take advantage of this by offering attractive up-front rewards to sign them, given that 48% of consumers would instantly switch their primary rewards card for something better.

Stronger Network Effects

Banks have tried collaborating with retail partners and merchants to gain a competitive advantage over each other. They now realize the value of collaborating rather than competing with each other. Banks and financial institutions stand to reap long term benefits by just being a part of the digital payments' ecosystem. Network effects play an important part in providing customized, cross-device payment solutions to consumers. Banks and financial institutions know that they can multiply their reach by partnering with fin-tech and card issuing firms, without going through the hassle of building solutions from scratch.

It's Raining Payments

Online payments through a bank’s website and card-based payments were considered a watershed moment in consumer behavior. While the older generation is still convincing itself to trust internet banking, we have been hit by the next wave of digital payments revolution. Thanks to mobile wallets, countries like China have been able to largely by-pass cards and straightaway took payments mobile.
Anybody can make, request or accept payments through a unique QR code generated by their mobile phones. Biometrics based authentication is already beyond the testing phase and this is set to become mainstream, depending on how much the regulators are willing to cede control.
As with all tech advancements, attempts at fraudulent transactions will also be on the rise in the next decade - something to watch out for.

Posted By: Iffy Kukkoo
Resident Editor-In-Chief

Iffy is our exclusive resident technology newshound editor, relentlessly exploring the beauties of the world from a 4th dimensional viewpoint. When not crafting, editing or publishing our IT content, she spends most of her time helping people understand life and its basic principles. You know, the little things around you, that you've failed to grasp each day. IT blog has updates on IT Consultancy, IT Contractors and Software Development related posts, on how your business can be managed effectively using technology.

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