How technology is rapidly transforming the way we pay and get paid

We now expect tech­nol­o­gy to solve prob­lems we nev­er knew we had. But when it comes to our mon­ey, tech­nol­o­gy advances have been slow­er. That is until now. Whether it’s new ways to ver­i­fy our iden­ti­ties, sophis­ti­cat­ed bank­ing apps, per­mis­sion to share bank account data or faster pay­ment solu­tions for peo­ple and busi­ness­es, tech­nol­o­gy is trans­form­ing how we pay and get paid. And it is help­ing us to bet­ter man­age our finances while address­ing one of the biggest risks we all face: secu­ri­ty.

Sci-fi-style security is here

The com­bi­na­tion of behav­iour­al ana­lyt­ics and pas­sive and phys­i­cal bio­met­rics reduces the reliance on pass­words and secu­ri­ty ques­tions for user ver­i­fi­ca­tion, which are both knowl­edge-based secu­ri­ty tools no longer reli­able in a world with near­ly 20 bil­lion records since 2013.

How­ev­er, new solu­tions using behav­iour­al and pas­sive bio­met­rics secu­ri­ty could trans­form pay­ments. We are already aware of phys­i­cal bio­met­rics; authen­ti­cat­ing mobile pay­ments with a fin­ger­print or our face is now com­mon­place in the UK. Com­bine that with behav­iour­al ana­lyt­ics and pas­sive bio­met­rics and you have a potent com­bi­na­tion where the trade-off between secu­ri­ty and con­ve­nience no longer exists.

Pas­sive bio­met­ric authen­ti­ca­tion relies on the way we use our phones, com­put­ers or tablets, which dif­fers from per­son to per­son. Engines col­lect hun­dreds of dat­a­points on each user to build a pic­ture of their unique bio­met­ric iden­ti­ty. For exam­ple, how fast do they swipe and type on the screen or key­board?

The range of infor­ma­tion expands with the behav­iour­al ana­lyt­ics lay­er, which lever­ages the data from the pas­sive bio­met­ric tech­nol­o­gy and col­lects insights, such as loca­tions, how the device is con­nect­ed to the inter­net, his­toric pay­ment pat­terns or device and brows­er type. The vast data cre­ates an accu­rate score for each user in real time. If an attempt to make a trans­ac­tion is flagged as high risk, the finan­cial ser­vice provider can auto­mate rules to respond and trans­ac­tions can be blocked, fur­ther ver­i­fied with a phys­i­cal bio­met­ric request or put for­ward for fur­ther inves­ti­ga­tion.

The suc­cess of open bank­ing will rely on estab­lish­ing trust­ed rela­tion­ships, a brand promise, tech­nol­o­gy, process­es, and secu­ri­ty work­ing seam­less­ly and in har­mo­ny

This approach takes secu­ri­ty beyond user names, pass­words, or oth­er secu­ri­ty mea­sures bad actors are pro­fi­cient at bypass­ing. This secu­ri­ty doesn’t only apply at login or check­out as the user behav­iour can be mon­i­tored across the cus­tomer jour­ney, at moments such as cre­at­ing an account or apply­ing for cred­it, check­ing the bal­ance on a gift card or ask­ing for a pass­word reset. This approach to user ver­i­fi­ca­tion helps com­pa­nies remove fric­tion for their trust­ed users while weed­ing out fraud­u­lent traf­fic.

Paul Stod­dart, pres­i­dent of New Pay­ment Plat­forms at Mas­ter­card, says: “The impact of being able to analyse behav­iour­al data is phe­nom­e­nal. NuDa­ta Secu­ri­ty¹ helped a For­tune 200 web retail­er defend against a per­sis­tent attack­er, with its cut­ting-edge behav­iour­al ana­lyt­ics ser­vice. It tracked 77 mil­lion logins over 90 days, with 39.3 per cent detect­ed as high-risk and blocked, and 100 per cent accu­ra­cy. The attack­ers mod­i­fied their attack pat­tern and with­in an hour NuDa­ta had updat­ed its mod­ules to rebuff the new method.”

Innovation in emerging markets

Too many peo­ple are exclud­ed from the finan­cial sys­tem, lack­ing bank accounts or access to basic finan­cial tools. This is true for all economies, but espe­cial­ly for emerg­ing ones. It’s in these mar­kets where we are see­ing the great­est inno­va­tions in pay­ments.

Take Thai­land, where dig­i­tal pay­ments are chal­leng­ing the dom­i­nance of cash. Despite a rel­a­tive­ly high pro­por­tion of the pop­u­la­tion hav­ing a bank account, mil­lions lacked access to bank­ing and finan­cial ser­vices, and almost half of all Thais paid in cash for inter­net pur­chas­es.

The gov­ern­ment and cen­tral bank of Thai­land approached Vocalink² to help them mod­ernise its nation­al pay­ments sys­tem, to reduce fraud and risk in the sys­tem, reduce the use of cash and increase finan­cial inclu­sion.

The result was Prompt­Pay, a real-time pay­ment plat­form that allows peo­ple and busi­ness­es to make and receive pay­ments instant­ly into their bank accounts or dig­i­tal wal­lets linked to their nation­al ID, cor­po­rate ID or mobile phone num­ber. This under­ly­ing infra­struc­ture allows Thai peo­ple to make pur­chas­es in-store or online, pay bills and donate to char­i­ties, and send and receive mon­ey to oth­er peo­ple secure­ly from their dig­i­tal bank­ing app.

“Prompt­Pay has made a sig­nif­i­cant mark on the country’s bid to address finan­cial inclu­sion and sup­port the expan­sion of Thailand’s bur­geon­ing dig­i­tal econ­o­my,” says Mastercard’s Stod­dart. “Since launch, Prompt­Pay has attract­ed 49 mil­lion sub­scrip­tions in a pop­u­la­tion of 69 mil­lion and process­es an aver­age of 4.5 mil­lion trans­ac­tions a day.”

The Thai gov­ern­ment is also using Prompt­Pay to make tax rebates and social wel­fare pay­ments. The Bank of Thai­land cred­its Prompt­Pay among the ini­tia­tives that have result­ed in the 83 per cent rise in dig­i­tal pay­ments since 2016. The Thai econ­o­my has been trans­formed.

Addi­tion­al­ly, 164 mil­lion³ migrant work­ers glob­al­ly rely on tra­di­tion­al mon­ey remit­tance meth­ods where pay­ments can take five days to clear and often lack trans­paren­cy. In the Gulf Co-oper­a­tion Coun­cil region alone there are 35 mil­lion migrant work­ers, pri­mar­i­ly from India, Bangladesh and the Philip­pines⁴. Trans­fast⁵, a com­pa­ny recent­ly acquired by Mas­ter­card, enables peo­ple to make cross-bor­der pay­ments to fam­i­ly or friends in more than 50 cur­ren­cies near­ly any­where in the world. It’s fast, secure and trans­par­ent, and offers a vari­ety of pay-out meth­ods, includ­ing into a bank account, dig­i­tal wal­let or cash.

Power of open banking

The UK has seen the birth of hun­dreds of cre­ative fin­techs thanks to its man­dat­ed open bank­ing ini­tia­tive. Open bank­ing enables peo­ple and busi­ness­es to share access to their bank account data with oth­er providers secure­ly to access a range of new finan­cial ser­vices. It has the pow­er to rev­o­lu­tionise how we inter­act with our mon­ey by pro­vid­ing a wealth of ser­vices such as bet­ter bud­get­ing, sav­ings inno­va­tions, access to fair­er cred­it and tech­niques to improve our over­all finan­cial well­be­ing.

For exam­ple, when a per­son uses Ven­mo, a dig­i­tal wal­let that lets them make and share pay­ments with friends, it’s open bank­ing that allows Ven­mo to ini­ti­ate those pay­ments from the person’s bank account. Or when they use Emma, a bud­get­ing and per­son­al finance app, it’s open bank­ing that allows Emma to aggre­gate recent trans­ac­tions and bal­ances from the person’s bank and/or invest­ment accounts. The same tech­nol­o­gy also enables tra­di­tion­al banks to inno­vate their finan­cial ser­vices; many already pro­vide cus­tomers with a view of their finances across accounts at dif­fer­ent providers.

As expect­ed with any new ini­tia­tive as large as this, there are chal­lenges that lie behind the scenes. Over­com­ing them is crit­i­cal to grow­ing trust in open bank­ing among peo­ple and busi­ness­es. They might nev­er know their favourite finan­cial ser­vices apps are enabled by open bank­ing ini­tia­tives, but they expect the expe­ri­ence of using them to be safe and reli­able, and expect any issues to be resolved quick­ly and effec­tive­ly nonethe­less.

Mas­ter­card Open Bank­ing Solu­tions™ sup­port the banks, finan­cial insti­tu­tions and third par­ty providers by con­nect­ing, pro­tect­ing and resolv­ing issues among ecosys­tem par­tic­i­pants. Open Bank­ing Con­nect pro­vides a sin­gle, uni­ver­sal con­nec­tion to finan­cial insti­tu­tions’ open bank­ing func­tion­al­i­ty regard­less of their appli­ca­tion pro­gram­ming inter­face (API) stan­dard or imple­men­ta­tion. Open Bank­ing Pro­tect pro­vides finan­cial insti­tu­tions with ver­i­fi­ca­tion of third par­ties, fraud mon­i­tor­ing and alerts, while Open Bank­ing Resolve pro­vides a clear frame­work for resolv­ing dis­putes, which is fun­da­men­tal to secur­ing peo­ple’s and busi­ness­es’ trust.

“The suc­cess of open bank­ing will rely on estab­lish­ing trust­ed rela­tion­ships, a brand promise, tech­nol­o­gy, process­es, and secu­ri­ty work­ing seam­less­ly and in har­mo­ny,” says Stod­dart. “That’s why it’s key to address fun­da­men­tal chal­lenges such as frag­men­ta­tion in API stan­dard­i­s­a­tion, fraud risk and dis­pute res­o­lu­tion.

We believe that by address­ing these chal­lenges, as we’re doing with Mas­ter­card Open Bank­ing Solu­tions, we can sup­port the devel­op­ment of an open bank­ing ecosys­tem that will rev­o­lu­tionise how mil­lions man­age their finan­cial futures both local­ly and glob­al­ly.”

New payment methods can transform small businesses

The gig econ­o­my is boom­ing, but life as a gig work­er can be chal­leng­ing; the work can be volatile, there are often dai­ly expens­es, such as buy­ing fuel for the car. For those who rely on gig work as their main source of income, any delay in receiv­ing earn­ings can put a strain on per­son­al finances. In a com­pet­i­tive land­scape, gig work­ers will source work from plat­forms that allow them to access their earn­ings on demand.

For exam­ple, a pop­u­lar ride-shar­ing app recog­nised that pay­ing its work­ers week­ly often wasn’t enough to meet their needs. It imple­ment­ed a real-time pay­ment
ser­vice pow­ered by Mas­ter­card Send™, enabling its work­ers to access and spend their earn­ings imme­di­ate­ly.

Mas­ter­card Send™ is just as ben­e­fi­cial to small busi­ness­es, which can face cash-flow issues. By lever­ag­ing the tech­nol­o­gy, small busi­ness­es can con­ve­nient­ly access their earn­ings on demand, help­ing them cov­er dai­ly expens­es, such as restock­ing their store, and help­ing their busi­ness grow.

“Real-time pay­ments can be trans­for­ma­tive for small busi­ness­es,” says Stod­dart. “Research shows com­pa­nies using real-time pay­ments enjoyed a 16 per cent increase in trans­ac­tions and spent 46 per cent more than a con­trol group over four months.”⁴

Anoth­er key issue for busi­ness­es is pay­ment risk. Com­pa­nies need to mon­i­tor sup­pli­ers and cus­tomers to ensure trad­ing part­ners are in a fit and prop­er con­di­tion. This is a huge job involv­ing a vast num­ber of cred­it risk reports, law enforce­ment lists and media sources.

A bet­ter approach is to use a sin­gle pro­cure­ment plat­form, such as Mas­ter­card Track™. This stream­lines pro­cure­ment by mon­i­tor­ing more than 4,500 sanc­tion and enforce­ment lists. For sup­pli­ers it offers a sin­gle por­tal for cred­it risk rat­ings for cus­tomers. Pre­ferred pay­ment meth­ods are man­aged by Mas­ter­card Track™. Using a plat­form such as Mas­ter­card Track™ ensures max­i­mum com­pli­ance with legal duties and frees up staff to focus on core com­mer­cial activ­i­ties.

And finally

Behav­iour­al ana­lyt­ics, inno­v­a­tive new appli­ca­tions and faster pay­ment solu­tions are all des­tined to change our finan­cial for­tunes as both indi­vid­u­als and small busi­ness­es. What’s inter­est­ing is how new part­ner­ships are essen­tial to deliv­er pio­neer­ing prod­ucts, often part­ner­ships that meet cus­tomer needs and would not have been thought pos­si­ble just five years ago.

This era of col­lab­o­ra­tion will under­pin fur­ther inno­va­tion as the finan­cial sec­tor is dis­rupt­ed by new, cre­ative ideas designed to boost both com­pa­nies’ bot­tom lines and our own finan­cial well­be­ing. Tech­nol­o­gy is pro­found­ly chang­ing our rela­tion­ship with our mon­ey at pace.

Dis­cov­er more of our think­ing on the fric­tion­less future at mastercard.com/frictionlessfuture

¹ NuDa­ta Secu­ri­ty is a Mas­ter­card com­pa­ny

² Vocalink is a Mas­ter­card com­pa­ny

³ www.ilo.org/global/topics/labour-migration/lang–en/index.html

⁴ www.mastercard.us/content/dam/mccom/en-us/documents/mastercard-send-debit-lift.pdf

⁵ Tran­fast is a Mas­ter­card com­pa­ny

Sci-fi-style security is here

Innovation in emerging markets

Power of open banking