The worldwide banking industry was full of innovation in 2019. Whether it was PSD2 going live in the EU, the announcement of FedNow in the United States, or the overall heightened focus on open banking and open API’s, there were sweeping changes occurring across the globe. Given that 2019 brought numerous updates in banking, 2020 is primed for even more. Here are some payment and banking trends that we think will be big in 2020.
Instant payments have been a hot topic in banking for a few years and that trend will continue in 2020. Given overall changes in technology, customer expectations have increased and consumers want more customization, more control over their money, and easier interactions. In 2020, one of the biggest banking developments will be the expansion of a new payment method.
Previously, consumers had two primary ways of paying: physically going to a store or making purchases online. In each case, the customer provides their credit card information in order to complete their purchase. In 2020, there will be an increase in payment through non-traditional card models. More and more stores and online merchants will happily accept non-card retail payments, often operationalized by direct-from-bank schemes and eWallets. Mobile wallets will also become more common.
In fact, in 2020 the use of mobile wallets in the U.S. is expected to be higher than the use of credit and debit cards combined. In addition, by storing information on file and not specifically asking for it at the time of purchase, paying for the items in your cart or the act of checking out will become less common. This will also have an overall effect on the way we look at purchasing items and shopping in general.
With these new payment methods comes a need for better fraud coverage, something that we will see in 2020. By 2022, financial organizations will spend more than $9.3 million annually on tools for fraud detection and prevention. Because alternate payment methods expose additional ways for fraudsters to exploit unsuspecting victims, merchants and banks alike must be prepared. Transactions will need immediate validation, in order to stop fraud from taking place.
However, this new challenge can help product developers and marketers think outside the box in order to create superior products and better position them to customers. While companies will have their work cut out for them, better fraud coverage can have overall increased benefits for the company and help them become more innovative.
Finally, AI will become more dominant in banking and payments. Right now, to authenticate our identities we enter a password or have two step-authorization. In 2020, voice, facial and behavioral recognition will become more common. The facial recognition market will grow from $4 billion in 2017 to $7.7 billion in 2022. While a positive of facial recognition is that it is very hard to fool, many are nervous about privacy issues and it will be interesting to see how perception may change in the next couple of years.
Machine learning is another way in which AI will continue to grow. Machine learning intelligently monitors data in real time and can discover unexpected purchases that are out of the norm, flagging them as fraudulent. It can spot a monthly bill that is all of the sudden higher than usual or if a tip is extremely high. Machine learning can observe a person’s behavior over a period and then use their spending patterns to pinpoint outlier events. We predict the accuracy and urgency of machine learning will only increase in 2020.
Numerous changes in banking and payments took place in 2019, and innovation and developments in those fields are sure to continue in 2020 and beyond. Banks continue to make technological strides in their field and the majority rely on mainframes as their system of record. GT Software has been helping banks utilize their mainframes for over 35 years. Download the PDF of our case study to see how we helped a major German bank improve productivity and customer service.
Contact us to learn how Ivory Suite can elevate your mainframe from legacy to leading edge.
-Amanda Bierfeld Williams, Marketing Coordinator at GT Software