Until recently, any financial transaction required going physically to the bank. With the advent of the internet, it became possible to transfer money by means of a computer connected to the web. In both of these methods, the customer was very much involved in transferring their funds. Smartphones and universal mobility changed all this considerably. If payments change as fast as they have in the last few years, it will soon seem hard to believe we have ever gone to a bank, used a plastic credit card and made all of our payments in just one official currency.
Gradually though, today’s users begins to look at payments as something done incidentally while performing other activities. You pay for things as you walk, travel by car, or work at your place of employment. The number of operations required to authorize money transfers has been reduced dramatically, which is very much in the interest of e-commerce companies. After observing the behaviors of its customers over the years, Amazon chose to adopt one-click payments. This was its reaction to the fact that many shopping transactions have been abandoned. Customers would put purchases in their basket only to change their minds about buying them, put off by the lengthy data authorization procedure. Buyers given a chance to use a simplified payment model will end up buying more. This obvious factor drives companies to create and promote ever simpler transaction systems.
The twilight of smartphones?
Technology speeds up and simplifies processes replacing inefficient tools with equivalents that ensure greater user convenience. And while mobile payments are becoming less and less complicated and burdensome, the smartphone may well turn out to be a transitional stage in the evolution of transactions. I have devoted one of my articles to the rise of virtual assistants such as Siri, Alexa, and Amazon Echo. Their popularity is growing steadily. This means that many companies from various sectors try to adapt voice control for use with their own products and services. If we agree that users of the future will interact with their devices without the traditional interface (keyboards and keypads) and gravitate towards touchless UIs (voice, facial scanners), the trend is sure to spread quickly to the private financial market.
In a more distant future, it would take a research breakthrough leading to the development and commercialization of a technology for connecting the human brain directly to a machine to be able to say that user interaction with devices has been reduced to just one thought (a thought that would allow a payment to go through).
I won’t even notice paying
People’s data is beginning to fuel smart technologies. Soon, human input will no longer be necessary for their effective use. The goal is to make all human interactions with smartphones, computers, car and other devices and machines as fast, efficient and intelligent as possible without people noticing or having to pay attention. Ultimately, future payments should become “invisible.” They will no longer require devices fitted with interfaces and applications that require user input. Payment intermediaries and banks may no longer be needed. The technology will advance in lockstep with the spread of the Internet of Things, i.e. a system of interconnected devices that communicate with one another through sensors. Such interconnectivity will translate into device independence and intelligent data processing. In addition, cloud technology and glocalization will support the integration of data from external devices such as stores, cars or fridges and other household appliances, with the personal data of users. Including the data having to do with user finances.
Smart refrigerators, store shelves and the cloud
Imagine a refrigerator that automatically “discovers” you have run out of some products you need. Orders for such goods will be placed automatically, sending the information to an online store, which will instantly ship to you the products that your fridge has ordered. The products will then be paid for, also automatically. All these processes will run in the background using the data that the store accesses with your consent. The payment (which some day will be denominated in one of many digital currencies) will be charged to your digital wallet, which forms part of a blockchain-based system. The chain of such operations will no longer rely on the kind of conventional authentications that are required by banks and intermediary institutions. If you choose to purchase a product offline, a similar mechanism will kick in. If you pick your goods up from a store shelf and put it in your basket, the online retailer will note that in its system and notify the cloud accordingly. It is there that the transaction will be carried out. Automatically, without your knowledge or confirmation. Data about your purchases will be processed by store systems and will go to the cloud not only to charge you but also to prepare your personalized promotional deal. All these events may also be observed by … your fridge, which may choose to intervene and e.g. add missing products to the order.
Banks cease to be banks
Today’s and future payment methods illustrate the extent of the transformations taking place in modern financial markets. The development of blockchain technology, the Internet of Things, voice assistants, successive cryptocurrencies and corporations planning to issue their own money complete the picture of the great financial disruption we are witnessing. Desperate to survive, banks will have to move beyond their role of purely financial institutions that offer loans, deposits and other conventional products. I think they will migrate increasingly faster from the realm of finance towards that of technology. Banks becoming tech companies? You better believe it. It is already happening.
Corporations creating their own billing systems
We all know how controversial cryptocurrencies can be. One of the many complaints against them is that cryptocurrencies is a purely technological construct having no physical assets to back them up. However, this argument is gradually losing its validity. Welcome to the age of currencies created by corporations. The future of the financial market and of payments will belong to GAFA (Google, Apple, Facebook and Amazon) and any other organizations that hold vast amounts of data on customer behavior. Facebook is on the brink of launching the Libra, while Amazon is planning to set up its own financial and payment platform. The currencies issued by corporations would have equity backing in the form of an enormous asset made up of terabytes upon terabites of customer data. Today, such companies offer social network tools and various consumer goods. If they add currencies to their portfolio, customers may well wonder what sense it makes to stick with traditional money and banks.
You too will issue your own currency
It will be technologically, formally and legally possible to make your own money and issue it to the public. Any private users that conclude that their currency (or token) may succeed in the market may simply go ahead and issue it. If it is successful, the users’ purchasing power will rise rapidly. If put into practice, such scenarios will of course affect the way transactions are made. Paying with your own money will be psychologically significant and give the consumer a sense of independence from the financial market. In addition, the more users use a given currency, the more efficient and simple the billing mechanism of its issuer will become owing to the principle of system self-improvement through deep learning.
I have once written that one of the most valuable commodities of our time is trust. All the mechanisms described here are absolutely possible. However, the one thing that is needed to make them happen is having humans choose to connect to such systems. The manufacturers and service providers that create their own currencies will increasingly have more tools at their disposal to construct their own financial ecosystems. Their biggest challenge may be to persuade their customers that their solutions are trustworthy. On this issue, I cannot be sure that consumer confidence is going to grow in direct proportion to technological development.