The main conclusion of the “Report on trends and innovation in payment methods” is that COVID-19 is not going to result in any radical change in direction as regards payment methods but rather an acceleration of the digital evolution which had been long taking place in the background but has now become the focus. But what are the big trends regarding payments found in this report?

1. The sustainable growth of digital payments
Spain has around 2 million point of sales terminals for electronic payments, an option that has become increasingly popular among consumers. Meanwhile, e-commerce has been witnessing its own growth due to investment from companies that require a digital presence.

2. The increase of contactless and online shopping due to COVID-19
The measures for preventing the spread of the virus and the risk of physical contact have driven citizens to finally embrace trends that were under heavy development. In this sense, contactless payments have become more popular together with the growth of online shopping among consumers that previously did not use this method. According to data from Nielsen, during the pandemic the number of Spanish households that chose to do their shopping online doubled, going from 450,000 to more than 1 million households. Emerging technologies have also been rapidly embraced, such as biometrics, with the aim of ensuring social distancing and reducing interactions between workers and clients in various sectors.

3. The technological evolution: a lever for transformation
Alongside the progressive change in consumer habits, one of the most significant levers in the transformation of the sector has been its ability to involve a series of emerging technologies:
– The popularization of smartphones and the development of contactless payments at point of sale terminals has ensured that this payment method be implemented on a mass scale.
– The tokenization and encryption systems have made transactions safe and confidential, and have therefore broken down a traditional barrier and made digital payments more widespread together with the growth of e-commerce.
– The use of Artificial Intelligence and Machine Learning have automated and streamlined fraud detection, as well as opening up new options when it comes to offering personalized services.
– Biometrics, the Internet of Things (IoT), Virtual Reality or Augmented Reality are some of the technologies that will be at the forefront of the sector’s development in the short term by fully integrating payment into the customer’s shopping experience.

4. Simplification of the payment process towards invisible payments
Within the redevelopment of the customer journey and as part of the shopping experience, the action of making a payment takes on more value than ever before. Sector companies take part in the development of added value services that allow businesses to have the necessary tools available to them during every step of the shopping process (analytics, reporting, marketing, software for corporate management, etc.). All of this leads to the generation of connected experiences based on IoT and under the convergence of e-commerce and the physical world with cellphones taking center stage. This way, evolution is made towards the combination of strict authentication with simple access, as is the case with invisible frictionless payments. Simplifying the payment process and ensuring that is is truly frictionless for consumers is the big revolution that is being driven thanks to technology.

5. The PSD2 and the sandbox, boosting the disruption
Another lever of decisive growth is the update to the European law that directly governs payment supplier services. The new PSD2 directive updates the law from 2007 and places the emphasis on protecting the consumer through new requirements for contract transparency and a strengthening of security in the online payments market with the introduction of the Strong Customer Authentication (SCA) system. Simultaneously, the new law helps to improve the conditions of equality for payment service suppliers including the new players and fintechs so as to boost competitivity and consolidate a more comprehensive and efficient European payments market. In Spain, another key factor is the creation of the sandbox as a testing space for financial product and service innovation.

6. Collaboration between traditional companies and new players
New companies that have been founded under a startup model and known as fintechs cover a very specialist and unmanageable segment for big companies which, on the other hand, boast client portfolios and experience in financial management. The collaborations between traditional organizations and new players through very different partnership models must drive sector innovation and take advantage of the opportunities to grow efficiency and respond to new consumer demands.

You can download the full “Report on trends and innovation in payment methods” here.