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How Innovation is revolutionising the payments landscape

Financial Technology (“Fintech”) companies have kick-started a revolution in the payments landscape. Using state-of-the art technology, fintech companies are transforming how payments are transacted and processed. Banks and traditional payment providers are having to entirely rethink their approach to how they interact with innovations in order to stay on top of their game.

Technological change is not only rapid but far-reaching throughout the value chain, presenting both challenges and opportunities. Driving this change is the increased demand by consumers for convenience, speed and accessibility to multi-channel payment solutions. The development of device-embedded hardware such as fingerprint scanning, facial recognition and iris scanning, as well as cloud-based authentication is overhauling the user experience to an unprecedented level.

In turn, the need to support customer payment demand through merchant-facing innovations is equally important. The ability to accept new forms of payments via contactless cards and smartphones processed through apps is providing a number of benefits for consumers and merchants alike.

For the consumer, the convenience of not having to constantly input bank information, which speeds up and simplifies transactions is a major benefit. For merchants the reduction in the complexity and cost of accepting electronic payments is now a realistic prospect. Although new kids on the block, such as Square and iZettle, are providing additional competition to the likes of Amex, MasterCard and Visa.

New payment solutions also offer new revenue streams for fintech companies, mobile operators and payment processors. Operator billing, services based on Fast Payment, as well as advertising and cross-selling revenues provide opportunities to charge fees. In addition, data gathered on new innovative payment eco-systems can be monetized by offering merchants and retailers advanced data analysis, allowing them to gain a better understanding of consumer behaviour.

Alongside these new solutions and opportunities, security has improved. Biometric and multi-factor authentication are increasing the level of security during the transaction. GPS geolocation can be used by card and payment providers to check the location of the consumer via their mobile phone. As part of fraud detection measures banks, payment services and fintech companies will increasingly monitor consumer behaviour to detect unusual payment transaction activities.

Yet while payments innovation has increased the overall level of security, new cyber threats are arising with more sophisticated attacks from hackers. Payments made throughout the eco-system are vulnerable at many points. Data is encrypted then decrypted multiple times. Thus, the security is as strong as the weakest intermediary. One of the solutions to mitigate the risk of data being exposed during the process is the use of Point-to-Point encryption (P2PE) where data is encrypted at the origin of the payment using a highly secured disposable key.

Appropriate regulation will be key. With the increase of new payment channels, the regulators are issuing guidance to the PSP (Payment Service Providers). Considering the rapid evolution of technology supporting the payment eco-system and the constant innovation in payment transactions, it is expected we will see new regulations focusing on even tougher security measures in the foreseeable future.

Nicolas Quairel

Partner - Technology Solutions

Nicolas Quairel leads Mazars’ Technology solutions practice. With more than 15 years of experience with Mazars Group in France, in the US and in the UK, he has experience providing IT advisory services across various industries. He has worked with global, commercial and investment banks, insurance companies, retail and manufacturing groups to deliver a wide range of IT security related services. Nicolas’ experience includes cyber security program development and review, IT risk assessment, architecture review, penetration testing, defence, in depth implementations and assessment reviews, He is a Certified Information Systems Security Professional (CISSP), Certified Information Systems Auditor (CISA) and is Certified in Risk and Information System Control (CRISC).
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