Paypal's CTO Sri Shivananda

Guest Editorial: “Payments Become Like Air” – PayPal’s Sri Shivananda

The future of digital payments is a journey of transformation. If we think about some of the biggest transformations in the last 100 years, they’ve largely been driven by something being replaced, or removed, or disappearing all together. Transformation is often grounded in the concept of removing something – it is the absence of something.

Let me give you an example. When they were first introduced, cordless phones and wireless phones  were named in part by including what was missing – cords and wires. Now we call them phones, or even just “mobile,” because their utility goes far beyond making calls at this point. We use mobiles to take photos, keep up with colleagues, shop and make payments. They are becoming the personal assistant for the masses and have been a primary driver of the digitization of commerce and payments.

Looking ahead as commerce and payments evolve, mobile devices, big data, hyperpersonalization, ambient experiences and  and other advances are changing everything about how we live, how we communicate, how we work and how we pay.

Here’s what we think is in store for commerce and payments in the next 5-10 years.

The road to cashless

In 1950, Diners Club issued its first charge card, followed by American Express in 1958, starting the evolution into what we use as credit cards today. The convenience of not carrying cash or a checkbook has resulted in a card for nearly every way you can pay: credit, debit, loyalty program freebies, points, miles and coupons.

But the move to cards has introduced a hot topic – the concept of a cashless society.

Non-cash transactions are growing at the fastest pace ever, led by Asia which is growing at a 32% rate, according to the Capgemini World Payments Report. Over 60% of payments in developed markets are now digital, and Sweden is expected to become the world’s first cashless society by 2023, says Wharton. The move to cashless has been embraced by many, but in some countries and cities, laws are being enacted to require companies to still accept cash. Cashless is viewed by these lawmakers as exclusionary to people who can’t afford a bank account.

If that’s the case, how do we foster the progression of digital payments? I suggest we look at commerce for the answers.

Commerce becomes contextual, conversational and boundaryless

The early days of e-commerce and payments were fraught with challenges. Connectivity was limited, payments didn’t always work, logistics took too long, and fraud was hard to detect and deter. Consumers couldn’t fully trust that people on the other side of the computer were actually going to deliver the products and services they offered. There were questions around whether online commerce was reliable, competent, or honest – in other words, whether it was trustworthy.

We’ve already seen a massive shift in how and where commerce is conducted; before 1999, you went to the shop, and now the shop comes to you – no matter where you are. The years in between saw the steep rise in online and mobile commerce, and the creation of new offerings like direct to consumer subscription services and conversational commerce via social media, chatbots and voice technology. The payments industry innovated alongside these changes, shifting to allow users to pay for goods and services at every turn, because consumers are mobile and on the go. Digital payments disrupted industries, created entirely new economies and transformed the way we work and live.

Think about how the internet has enabled small businesses to sell to a global customer base and enable access to endless aisles of merchandise to consumers across the globe, in a vast number of currencies. That’s been driven by one thing – trust. Trust that you will pay and get your merchandise if you are a buyer, and trust you will be paid for your merchandise if you are a seller. But trust has to be earned, and to do that, customers need to feel safe.

Security and trust become synonymous

At the heart of a trusted, frictionless payments experience is the secure and proper use of data. Customers want to be informed how their personal data is collected, stored, and shared in the entire commerce journey. In order to harness data and use it responsibly at its full potential, however, a lot of boxes have to be checked: regulatory compliance, privacy, and security. Customer data should be protected by strong cybersecurity measures, supported by evolving fraud and risk features and handled in a way that meets regulatory requirements around the globe.  Building, maintaining and updating the proper controls for all of these areas are table stakes, yet also serves as competitive advantage in an increasingly complex payments landscape.

Digitization of currency helps remove the boundaries to financial inclusion

With any major transformation in the commerce industry, before it can become reality it must first be embraced by the entire ecosystem: consumers, merchants, partners and regulators. This is true of cryptocurrency and virtual currency, and the underlying technology of blockchain. All have uniquely different potential in the commerce and payments industries.

Blockchain for example, is known for having potential in trust, identity, payments, contracts and custody. Virtual currency is not only a way to manage and move money, it provides access to the financial ecosystem without a bank account, something experienced by underserved communities. And while it still remains volatile and under scrutiny on many levels, cryptocurrency is lauded for its anonymity and viability as an asset outside of the traditional financial infrastructure.

The digitization of currency is only a matter of if, not when. The next decade will see currency become more digitized, and will likely experience increased support from fintechs, governments, and regulators. But most importantly, in order for digital currencies to adopted by consumers, consumers must feel that it’s a safe, secure and convenient method of becoming involved in the financial ecosystem.

Ambient experiences provide limitless opportunities for commerce

If we believe now that the biggest advancements in payments is going to happen through the removal of things, payments is up for an act of disappearance – with ambient payments. A world in which shopping intent and paying are no longer two explicit actions.

In the next phase of commerce, the lines will be blurred between consumption, the experiences of everyday life, and paying for those experiences. Merchants will partner with payment platforms to  make commerce as seamless as possible. Just think about the last time you took a rideshare service. Did you pay when you ordered a ride home, did you pay when you arrived home safely, or somewhere along the way?

You didn’t have to think about it. It just happened – because we’ve made the payments disappear. A disappearance made possible by payments that are powered by a robust, safe, and reliable ecosystem.

Payments become like air – invisible, but always there for your needs.

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