By Michael Moore
2015 has been a great year for the online and mobile payments industry, as the technology has truly moved into the mainstream.
From tube stations to gasoline fill-ups to your local supermarket, businesses of all sizes are now accepting digital payments of every kind, making paying for goods and services easier than ever before.
But what does 2016 have in store for the payments industry? We asked the experts to find out …
Spurred on by public launches of both Apple Pay and Android Pay (along with several other technologies such as Samsung Pay and LG's G Pay), 2015 saw huge growth in the number of mobile and digital payments completed, and this will only continue.
And this growth will also help companies looking to grow and expand their business to new territories, particularly overseas. Having an effective e-commerce strategy makes expanding to new countries easier than ever before, but companies need to realize that there are many challenges that come with this.
"In 2016, it will be key for the U.K.'s smaller high street businesses to accelerate what they offer online, and how they keep up with fast evolving customer demands," says Nominet CEO Russell Haworth.
"Despite us seeing a rise in the number of online-only small businesses, research we recently commissioned found that only 13 percent of small businesses currently offer the three online services valued most by consumers. We need to see these numbers shift in 2016 or the high street could find itself in trouble."
"Expanding e-commerce activity across borders involves more than translating Websites and establishing efficient logistics," adds Ralf Ohlhausen, business development director at PPRO Group.
"It's also vital that merchants offer shoppers their preferred local payment method … it's important that providers know their way around alternative payment methods in these regions.
Merchants should consider which markets are particularly suited to international strategies and simulate potential market launch models with partners such as payment service providers."
The success of Apple Pay and its related competitors also helped to push forward the idea that payments were no longer limited to your wallet—or even your smartphone.
The Apple Watch has helped promote wearables as a means to complete a payment thanks to the company's easy-to-use service, and this trend is only set to continue as more and more companies look to equip their products with payment capabilities.
2016 should see even more smartwatches and other wearables becoming payment-equipped, particularly as technology and fashion blend closer together, with Barclaycard's bPay devices leading the way.
"In 2016, we will also see mobile payments become less smartphone-dependent," says Ohlhausen. "Instead, new technologies including smartwatches, bracelets and even rings will give us the ability to provide payment options."
Security Fears Need Addressing
For many, the supposed lack of security surrounding mobile and digital payments remains a major issue. Lots of consumers still unconsciously see their smartphone as something to make calls and texts with, as well as being a social media tool, meaning that they don't associate it with secure banking or retail.
Despite the great work being done by many firms in the security space, more therefore still needs to be done to reassure shoppers and customers alike.
Tokenisation has long been thought of as the answer, but due to a lack of regulatory standards, has struggled to take off in a large way, so hopefully 2016 will bring better news.
"Looking at the retail landscape next year, a large focus will be on ensuring customer information is secure whilst trading continues to perform at its optimum level, even during peak trading times such as Black Friday, when retailers are most likely to be targeted by cyber-attacks," says Rupal Karia, Fujitsu's managing director of retail and hospitality, U.K. and Ireland.
"Security will not only apply online, however. Physical security will also play its part as the bag tax has an unforeseen effect on shrinkage in-store. The retailers viewed as most secure will win hearts and minds as the rate of high profile hacks continues to rise."
And Biometrics Could Be the Answer
2015 also marked a huge leap forward in the range of biometric security solutions being trialed and deployed, as businesses look for that extra barrier to secure their customers.
From Fujitsu experimenting with finger vein mapping technology to banks across Europe adopting behavioral biometrics as a means to authenticate digital banking users, this year has seen banks truly embracing innovation in the security space.
"This overwhelming uptake of biometrics in the banking space has been borne of the sector's need to ensure rigorous security, while offering a frictionless service that doesn't disrupt the user experience," says Neil Costigan, CEO of authentication experts BehavioSec.
"We expect to see this new era of security moving beyond the financial sector, as a result of the growth of on-demand digital services. Digital enterprises that rely on paywalls and subscriptions, from online media publications, to film or music streaming services lose revenue on a daily basis as customers share their log-in credentials in order to split costs."
"Forward thinking biometric authentication technology will surge in the New Year, as new and existing enterprises in this space embrace this form of a security as a means to ensure their digital business model is economically viable."
But Also the Right Legislation
The rapid growth of mobile and digital payment technology has meant that much of the legal framework surrounding it remains slightly outdated.
Payment services within the E.U. are still defined by the first Payment Services Directive (PSD), which was passed in 2007, meaning it is far out of date. However, the E.U. has, after a tough two-year negotiation period, finally agreed on a second payment services directive (PSD2).
The proposed revision defines several priorities, one of which involves strengthening the security requirements for online payments by improving customer authentication in order to combat fraud. PSD2 will also provide a legal framework to stimulate competition.
"This framework will facilitate market entry for new providers and allow the development of innovative mobile and Internet payment methods. It will also force banks to grant such providers access to their crown jewels: the accounts," says Ohlhausen.
"The European Banking Authority (EBA) is set to develop more detailed guidelines and regulatory standards for applying the directive. Although enshrining these in national legislation in all E.U. countries will take a further two years, payment industries should begin preparing themselves now for implementation and start taking steps by 2016."
So prepare for big changes in the payment market in 2016, but also great leaps forward, as developers and businesses adopt the technology in new and exciting ways that will transform the way we live as we know it.