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The best digital payment innovations

Digital payments have changed the way we do business and conduct everyday tasks. The use of physical money and cheques is much less of a feature of everyday life than it once was.

These changes are significant in their own right, but a number of innovations with digital payments at their core have also made an impact. We’ve picked out some of best innovations resulting from the inexorable rise of digital payments.

Paying with personal devices

The ubiquity now enjoyed by smartphones has driven the development and uptake of a number of different digital payment services.

For example, digital wallets that are stored on devices and linked to bank accounts or payment cards are being used to make online purchases and to buy items from physical shops through contactless technology.

Tech companies have played a role in this, with Apple Pay making it easier to add payment cards and to authenticate payments via the iPhone fingerprint scanner. Amazon and Google also offer digital wallet functionality via mobile.

The use of personal devices for payments is now moving beyond smartphones, with many wearable devices offering the functionality.
Peer-to-peer transactions

These types of payments make sending and receiving money easier, enabling people to split restaurant bills, pitch in for a collective gift, or pay back a loan from a friend.

They are made possible by apps that connect to your bank account or a credit or debit card and quickly transfer money to your chosen recipient. Many of these apps also include social features, such as messaging or sharing, while others are built-in features of social platforms.

The best-known peer-to-peer mobile app is probably PayPal, which enables users to quickly transfer money between PayPal accounts for a small fee. Users enter the recipient’s email address, set the amount and hit ‘Send’.

Google Pay lets users store and send money to friends and businesses, as well as pay in shops and for public transport in some cities, such as Portland, Oregon.

Facebook’s Messenger app also allows users to transfer money to friends. Users just add their debit card, enter the amount and message the recipient. However, like Google Pay, money can take a few days to transfer.

Zelle is a newer arrival. Users can send money to anyone with a Zelle account, regardless of who they bank with. Transfers are instant and there are no fees.

Simplified payment services

Some digital payment innovations have been made possible through advances in payment network technology. Payment accounts can now be identified by email address or mobile number, rather than account numbers and sort codes, streamlining the payments process.

In the UK, Paym enables smartphone users to securely pay for goods and services by using the recipient’s phone number. It is available to customers with current accounts at 15 UK banks and building societies.

Users register to use Paym within their online banking app then enter the name and amount they want to pay. The app will automatically open your phone’s contact list to add the recipient. If the recipient isn’t registered with Paym, they receive a text saying someone has attempted a payment to them, giving them the option to register.

Cryptocurrency and blockchain

Cryptocurrency is regarded as the next major milestone in digital payments. The concept of a decentralised currency, which uses a type of cryptography to enable automated and (usually) pseudonymous digital payments, has been around for some time. But it was the arrival of the Bitcoin cryptocurrency in 2009 that brought it to wider attention.

Blockchain technology, invented to serve as the public ledger of Bitcoin, is a key supporting technology for cryptocurrencies. A blockchain is a list of records, or blocks, linked together using cryptography. Each block contains a scrambled version of the previous one, as well as a timestamp and transaction data.

A blockchain stops data being modified and also solves the problem of double spending – caused by replication of digital data – without requiring a trusted authority or central server.

Cashless economies

The use of various new digital payments methods is just the tip of the iceberg when it comes to what digital payments can eventually achieve.

Countries like Sweden, Finland and South Korea are fast moving towards becoming cashless economies, thanks to support from the government, financial services sector and retailers. According to the annual World Payments Report, Sweden, a country of just 10 million people, overtook the US in terms of the amount of cashless payments made in 2016.

Notes and coins represent just one per cent of the Swedish economy, compared to 10 per cent across Europe. And up to 95 per cent of purchases made by 18-24-year-olds in Sweden are with debit payments or the Swish payment app. More than 4,000 Swedes even have microchips implanted in their hands to make payments.

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The best digital payment innovations
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