The past few years have seen a global shift in payment patterns, with increasing de-emphasis on brick-and-mortar retail outlets. Retail eCommerce sales worldwide amounted to 4.28 trillion US dollars in 2020 and are projected to grow to 5.4 trillion US dollars by 2022. The change is real and undeniable. It’s also unlikely to decrease, as technology and society continue to drive the growth of digital commerce by larger and larger amounts every month.
The reasons for this unprecedented increase are many and varied. The recent pandemic has certainly supplied the momentum, but the push towards digital commerce was already in motion long before lockdowns. One of the major drivers of the switch to digital commerce is the emergence of cloud payment technology. It’s important to understand what’s driving the move away from traditional payment methods towards digital commerce. To do otherwise would be to ignore the future of the entire fintech industry.
Security and Reliability
ECommerce itself has been around for quite a while, but there have always been a few major issues that had never been fully resolved. Security, reliability, and cross-platform portability are just a few of the lingering problems that have continued to slow the full adoption of eCommerce, especially among consumers who may have been uninformed, or even mistrustful of electronic payment technology.
All that is changing with the advent of cloud payment technology (CPT). CPT brought an entirely new paradigm to eCommerce by providing the foundational underpinnings that had always been the primary weakness of previous online payment solutions. Gone are the days when every bank and ISP required a different set of code, with every website or virtual Cart requiring its own user interface. No longer are merchants/processors required to hire a programming team merely to move money from virtual wallets to specialized gateways. The burden of PCI compliance and network security has largely been moved off the shoulders of the merchant, freeing them to focus on their business instead of the minutiae of the financial industry.
How is all this being accomplished? Through the power of CPT. The adoption of cloud technology by the fintech industry has allowed heretofore disorganized API and security technologies to be standardized and rolled into one meta-system. Transactions happen in real-time, with universal backup and security measures applied as the payment happens. Should a vulnerability be detected, or financial standards revised, updates can happen immediately across the globe. The move to digital commerce is just as transformative as the move from cash to credit cards was in the previous century. It’s a societal change, not just an evolution within the industry. The long-awaited cashless society may not entirely be here yet, but it’s coming, and it’s inevitable. Whether or not we’re prepared for it is entirely up to us.
Immediacy, accuracy, and security have increased geometrically, and continue to increase as technology advances. However, these aren’t the only benefits of CPT. One of the largest factors that have allowed CPT to push digital commerce through the stratosphere is something most people never even thought about in decades past: multipoint access. Traditionally, payment has been a linear, personal procedure. A customer would walk into a store, pick out the item they wished to purchase, and hand cash to a cashier. This is no longer the case in a world where a merchant like Amazon might have millions of simultaneous orders occurring on any given day. CPT has changed how the world deals with payments forever, and there’s no going back. The trend is obvious, and the writing is on the wall: you’re either using CPT now, or you will be in the future. This is as true for Amazon as it is for a mom-and-pop grocery store.
This isn’t just a matter of payment trends. It’s a global reality. Studies have shown that the decline of cash and in-store payments has been caused directly by government and health organizations who have been increasingly advising consumers to opt for online and contactless payment solutions whenever possible. This trend will only increase as time goes on. The world is changing around us, and payment processing must change with it. The concept of a world devoid of physical currency is no longer the stuff of fantasy. It is literally upon us, with as high as 30% of Americans and Canadians saying that they “rarely or never” handle paper money/coinage. It’s not hard to envision a world where that number will double or triple in the coming years.
Cloud-Based Risk Assessment Solutions
That’s not all that’s changing. A shift away from traditional loans and financing methods has rendered traditional credit scores nearly meaningless. While certain quarters of the financial industry still cling to outmoded methods of assessing risk management, CPT uses instant analysis and sophisticated financial modeling to determine how credit is offered to consumers. Many large companies have already eschewed old-school credit scores in favor of cloud-based risk assessment solutions. CPT can take thousands of data points into account, instantly, and allow merchants to automate the kind of finance or credit terms they offer on an individual basis, to thousands of customers at once. Since CPT uses billions of payment transactions to create these financial models, accuracy approaches a near mathematical certainty and only increases as time goes on.
The result is that digital commerce, already the ascendant method of merchant payment processing, has accelerated beyond even the most optimistic of expectations over the past two years. CPT will continue to push digital commerce forward at ever-increasing rates. As fintech professionals, we must use this information to drive our business and to help clients, partners, and customers adopt new technology. There’s no reason to be left behind. CPT works equally well with all current payment methods. Credit cards, ACH, wire, smartphones, etc. are all part of the global payment solutions encompassed by cloud payments. We must look to the future and plan for it, or others will in our place.
|Shaun McDonald is Nuvei’s VP, Product. With Nuvei since its inception, Shaun has 20 years of end-to-end experience in payments with a focus on fintech product and project management, reporting and analytics. With extensive technical knowledge and payment industry expertise in both the US & Canada, Shaun’s insights and team management have been invaluable to providing Nuvei’s clients maximum product lifecycle value.|