How payments tech is evolving to meet today's challenges

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Financial institutions continue to seek out the latest innovations in payments technology in response to customer demand and the shifting economic environment.

From biometric payments cards and contactless smart-rings to a new virtual marketplace and a payment-focused accelerator for overcoming payment processing challenges, here are five ways payments tech is having an impact in the banking world.

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Payments tech innovation to resist market decline

Payments technology fintechs have been flying high in recent years, but have seen their stock prices and valuations drop significantly in 2022 in what experts consider to be an overdue course correction.

"Investors and entrepreneurs attracted by payments market fundamentals and the opportunity to create real value, and of course plenty of hype, fueled payments fintech valuation inflation," said Eric Grover, a principal at Intrepid Ventures.

Despite this, payments tech innovation is likely to stay strong. "Bringing fintech valuations closer to terra firma doesn't change payment-market fundamentals," said Grover. "Small enhancements to payment systems can be worth a lot to consumers, merchants, banks and tech firms."

Read more: What the market slump means for payments tech
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Biometric payment cards emerge as alternative to mobile options

Biometric payment cards with contactless technology that use fingerprints for authentication instead of PINs are being given the opportunity to establish a foothold by certain banks in Europe, Latin America and Asia, despite the recent growth of mobile options.  

"They've been saying cards are doomed to die for 20 years, but surveys continue to show that even though mobile payments are gaining ground, cards are still preferred by consumers," said Michel Roig, head of payment and access at Swedish biometrics software firm Fingerprints.

However, analysts feel that biometric card technology is less likely to be taken up in the U.S. "We're going to see more app-based payments at the point of sale," said Alisa Ellis, global head of innovation and emerging products at Discover Financial Services.

Read more: Why fingerprint biometric payment cards may bypass the U.S.
Facebook Holds Virtual Connect Event
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Zuckerberg unveils new Meta payment mechanism

Horizon Worlds, the brainchild of Meta CEO Mark Zuckerberg, is breaking new ground in the virtual reality environment with plans for payments that will allow creators to sell virtual items and other content on the platform.

"The selling of virtual assets is a proven revenue model, so you can understand why Meta is testing it — particularly as [it] looks for new revenue streams that don't rely on capturing customer data for advertising," said Danny Stefanic, CEO and founder of virtual events platform MootUp.

Perhaps not surprisingly, the announcement of Meta's plans, which also include a new virtual currency and non fungible tokens, was made jointly — by Mark Zuckerberg and his virtual reality avatar.

Read more: Meta has a new plan for payments
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Smart-ring becomes latest contactless payment device

Smartphone. Smartwatch. Now, a smart ring is the latest device to enable contactless payment for the increasingly sophisticated and fashion-conscious consumer.

As the first of its kind in the U.S., Quontic Bank's payment ring has been a pet project of CEO Steve Schnall since he saw the "intriguing and fresh" technology at a conference in Europe in 2019. Now, post-pandemic, he has finally been able to realize his vision.

Fresh and intriguing it may be, but will other banks follow? "Right now the market for contactless payments is dominated by credit cards and smartphones," said Michael Diamond, senior analyst at Futurum Research. "The smart-ring segment is still niche."

Read more: Quontic Bank tests consumer enthusiasm for a payment ring
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New payments tech tool enables proactive response to cyberattacks

Sandeep Kumar, managing director and head of payment consultancy and technology firm Synechron, says it pays to be prepared for a cyberattack at any time. "Something like fraud or a new security risk can come up very quickly and through multiple channels," he said.

Prophetic words, as it turns out, spoken at the launch of Synechron's PayTech Accelerator Program — around the same time that Russia was launching its "special military operation" in Ukraine, raising major concerns about fraud, malware and cybersecurity threats from Russia. 

The payment-focused accelerator provides cyber protection via shared technology tools that enable banks to respond proactively to fraud and cybersecurity payment processing problems, as well as having applications in other areas, including BNPL and international digital payments.

Read more: How a new payment tech lab is approaching the cyberwar threat
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