For years, we’ve been using electronic funds transfer (EFT) payments like direct deposit and credit card payments. But with the rapidly changing technology in the financial technology (FinTech) industry. Now, there are several new EFT payment trends emerging. Think real-time payments, open banking, AI advancements, and 5G cellular deployment, just to name a few! In this article, let’s explore 14 EFT payment technology trends that are revolutionizing the way we pay for the stuff we love and how it affects both businesses and consumers alike.
Traditional EFT Payment Types In FinTech.
Electronic Funds Transfers (EFT) have been the backbone of the business payment landscape for decades. In particular, businesses have used these traditional electronic payment methods to facilitate transactions and pay bills with the assurance of secure transfers. In many cases, businesses have only adopted some, but not all of these traditional payment types. The reasons are many to include no perceived need or too complicated to name a few.
Traditional EFT payment types include ACH payments, direct deposit, ATMs, credit / debit cards, POS systems, wire transfers, pay-by-phone systems, and electronic checks. For a more detail explanation of these payment types, click here.
14 EFT Payment Technology Advancements In The FinTech Industry.
Amazingly even though there are many ways to make electronic payments, EFT payment technology continues to evolve, offering more and more capabilities. These technological advancements are driving innovation and transforming the way businesses and consumers make payments. Further, the rise of mobile wallets, contactless payments, and biometric authentication technologies are just a few examples of the significant changes we’ve seen in the EFT payment space. As a result, these developments have streamlined the payment process. In particular, new EFT payment technologies are offering both convenience and peace of mind for users. To detail EFT payment technology advancements, below are 14 technologies that are revolutionizing the way we pay for things.:
1. Contactless Payment Solutions.
Contactless payment solutions have become increasingly popular in recent years, especially in light of the COVID-19 pandemic. These solutions allow customers to make payments without physically touching a payment terminal. One benefit of this is that it helps reduce the spread of germs. Contactless payment solutions include technologies such as NFC (near-field communication), QR codes, and mobile payments.
2. Digital And Mobile Wallets.
Mobile wallets and peer-to-peer (P2P) transfers have made making payments more convient, especially micro-payment. Additionally, these types of technologies are significantly reducing the need for people making purchases with cash. With mobile wallets, users can store their payment information on their smartphones and make purchases with just a tap or a scan.
3. Peer-To-Peer EFT Payments.
P2P transfers allow users to send money directly to another person’s account using just their mobile phone number or email address. Further, peer-to-peer payment platforms such as Venmo and PayPal are becoming increasingly popular. This is because these platforms allow for easy transfer of funds between individuals. In addition, coupled with real-time payment, consumers are making these platforms very popular.
4. Biometric Authentication.
Biometric authentication uses unique physical characteristics such as fingerprints, facial recognition, or voice recognition to verify a user’s identity. This technology is becoming more common in EFT payments as it provides an added layer of security and convenience for users. Also, behavioral biometrics solutions are increasing where an user’s physical and cognitive behaviour is evaluated real-time to prevent fraud. Further thanks to biometrics, the FinTech industry is increasing the use of passwordless authentication.
5. Real-Time Payments And Instant Settlements.
Real-time payments and instant settlements allow for faster and more efficient transactions. With real-time payments, funds are transferred almost instantly between accounts, while instant settlements allow merchants to receive funds immediately after a transaction is completed. Further, real-time payments are even extending to payroll where employees can get paid on-demand. Real-time payments are a real crowd pleaser. Also, a major enabler to real-time payments, is the XML-based ISO 20022 message standard. However on the downside, businesses need to get more real-time with managing cash flow.
6. Cloud Computing And IT Infrastructure Modernization.
Cloud computing and IT infrastructure modernization are transforming the way financial institutions process EFT payments. With the shift to real-time payments and global usage of the internet, banks are upgrading their IT infrastructure and many are migrating to a cloud-based infrastructure.
7. Open Banking And API Integration.
Open banking and API integration are driving innovation in the EFT payments industry by allowing different financial institutions to share data and services with one another. This enables customers to access a wider range of financial products and services through a single platform. Further, API integration enables embedded finance to include EFT payments into non-financial websites and apps. For example, this includes Buy Now Pay Later (BNPL) financing capabilities that reduces Point Of Sale (POS) transactions.
8. Cryptocurrency And Decentralized EFT Payments.
Cryptocurrencies such as Bitcoin are increasingly being used as a form of payment in the EFT payments industry. While still relatively new, cryptocurrencies offer several advantages over traditional payment methods, including faster transaction times, lower fees, and flexibility for non-bank transactions. Further, cryptocurrencies are becoming more mainstream, with increasing acceptance from traditional financial institutions and retailers.
9. Blockchain Technology For Enhancing EFT Payments.
Besides cryptocurrencies, blockchain technology holds promise with other FinTech functions such as electronic contracts. With electronic contracts, blockchain technology enables both traceability and transparency where payments are tied to contract terms. However, blockchain is still in the exploratory stage at this time for most companies and within the payment industry.
10. Payment Gateways Expanding Services And APIs.
Payment gateways act as a bridge between merchants and banks, allowing for secure online transactions. With the rise of e-commerce, payment gateways have become an essential component of online businesses. To stay competitive, payment gateways are expanding their services beyond traditional credit card processing to include alternative payment methods such as digital wallets and cryptocurrencies.
Additionally, payment gateways are offering more robust APIs that allow businesses to customize their checkout process and integrate with other software solutions. However for many businesses, they have to use multiple payment gateways as most gateways do not offer all the FinTech capabilities that their customers require. For example, one payment gateway may not offer cross-border support and another one’s commision is too high for select transactions.
11. AI-Powered Fraud Detection and Prevention.
Artificial intelligence and machine learning are being used to improve fraud detection and prevention in EFT payments. These technologies enable financial institutions to analyze large amounts of data in real-time, identify suspicious transactions, and take action to prevent fraud before it occurs.
12. Machine Learning for Payment Optimization.
Machine learning is being used to optimize EFT payments by analyzing transaction data and identifying patterns that can help improve the efficiency and accuracy of payment processing. By using machine learning algorithms, financial institutions can better understand customer behavior and preferences, which can help them tailor their services to meet the needs of their customers more effectively. Additionally, this can include AI chatbots to facilitate EFT payments.
13. 5G Impact on EFT Payment Systems.
The rollout of 5G networks is expected to have a significant impact on EFT payment systems. With faster download and upload speeds, 5G networks will enable faster and more reliable transactions, while also providing greater security and privacy for users. Additionally, 5G networks will enable the development of new payment technologies that rely on real-time data processing and analytics. As a result, 5G will lead to an increase in the real-time use of electronic wallets and P2P payments as well as increase fraud detection.
14. Tokenization for Secure Transactions.
Tokenization is a technique used to secure EFT payments by replacing sensitive payment information such as credit card numbers with a unique token. This token can be used to process transactions without revealing the underlying payment information, which helps reduce the risk of fraud and identity theft. Tokenization is becoming increasingly popular in the EFT payments industry as it provides an added layer of security for both merchants and customers.
For more from SC Tech Insights, see our article on information technology.
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