As the number of devices and connected services rise, our lives are becoming increasingly digitized. Keeping up with this evolving landscape is vital, and 2023 promises to bring with it a host of new use cases and innovations. New technologies are coming to market that provide a greatly enhanced user experience that doesn’t compromise on security. Innovative solutions such as SoftPOS are challenging traditional payment methods, while account-to-account (A2A) payments have the potential to shake up the entire payments ecosystem.
We explore some of the key trends in the ecosystem that will have a major impact on the way we live in 2023. From the changing nature of authentication to paying with your car, the ever-digitizing world will continue to transform our lives.
Streamlining Authentication to Address Increasing Fraud
One major trend from 2022 is the continued evolution of the fraud industry. Gone are the days of simple fraud management strategies; an entire ecosystem exists exclusively for buying, selling, and exploiting sensitive data. Instances of fraud have increased by 20% over the past year, highlighting the clear danger the ecosystem is facing.
To combat this trend, new authentication frameworks can provide a balance between strong security and seamless acceptance. A combination of active and passive authentication can ensure that the payments flow is secure while limiting the impact on the customer experience.
Biometric authentication is leading the way. The use of biometrics, particularly for multi-factor authentication, can expediate and strengthen the authentication process. Keystroke dynamics is a good example: a behavioral biometric modality that analyzes how a user types their password into their keyboard. This can be deployed as a multi-factor authenticator as it combines the knowledge of a password with the manner of typing, eliminating the need for an extra step of authentication. While removing all passwords is something that we may see in the future, this is not expected anytime soon. Therefore, it makes sense to harness the data available to increase security and reduce friction without changing consumer habits.
Delegated Authentication
Authentication processes are also being enhanced by delegating power to merchants. Lowering authentication friction is key to a seamless user experience. Therefore, merchants across Europe are investing in advanced authentication capabilities to allow them to process SCA-compliant transactions without purchasers being redirected to a banking app or having to enter a one-time passcode. This helps reduce fraud and improve authorization rates, all while retaining ownership and control of the checkout experience.
Furthermore, major global payment schemes are introducing new regulations that will see banks recognize the authentication work done on the merchant side. This regulation also prevents banks from doing additional strong authentication if the certified merchant has already done it. This means that merchants can leverage industry authentication standards like FIDO Alliance to create their own checkout journey to reduce the friction between the customer and merchant services. This helps combat both fraud and cart abandonment, helping to deliver higher sales conversion rates and a better return on investment.
Digital Identity Infrastructures
There’s a growing need for a robust digital identity infrastructure. Worldwide, systems are being put in place to create seamless online platforms for storing and managing large amounts of personal data.These will facilitate the next generation of smart solutions across countless use cases. The Aadhaar solution is already in place in India, creating a nationwide database of biometric and demographic data. Meanwhile, the European Commission’s digital ID initiative is on course to be available to 80% of people in the EU by 2030. These advances emphasize the need for state-of-the-art authentication and data protection solutions.
The Emergence of In-Car Payments
Connected cars have been an emerging use case over the course of 2022. Vehicles that offer real-time traffic alerts and vehicle diagnostics—and can even stream high resolution videos—are becoming more common. In this age of automotive connectivity, car brands have an opportunity to enhance their offering for drivers and merchant partners with in-car payments.
Integrating everyday commerce into the vehicle itself through in-car wallets will allow users to pay for fuel, parking, electric vehicle charging, drive-thru meals, or anything else from the comfort of their driver’s seat. Juniper Research predicts that the annual value of in car payments will reach $86 billion by 2025. And with delegated authentication now mandatory for in-car payments, transactions are secure. Leveraging this trend gives automakers an opportunity to build new revenue streams through partnerships and subscription services with merchants.
