Facilitating financial transactions may be one of the most sensitive functions of modern technology: Regulation limits how money moves, data platforms help users track the health of their businesses and hackers seek to exploit vulnerabilities for their own gain.
Recently, much of the industry’s attention has centered around buzzy tech, like AI-enabled interfaces and blockchain. However, the fundamental shifts beneath the latest media fixations may have more bearing on the direction of the industry as a whole.
Here, we take a look at four underlying trends shaping the future of fintech as embodied by four Bay Area companies.
Fiscal Prudence Is The Future of Consumer Spending
Any assessment of long-term consumer spending trends must account for Generation Z, who recently surpassed baby boomers to become the largest cohort of U.S. consumers. But many people aged 18 to 25 are now at home with very little disposable income, waiting for their part-time or service industry jobs in sectors like retail, tourism and hospitality to return.
Fintech company Afterpay builds technology that lets users pay brands in smaller installments, rather than a lump sum up front. Afterpay has also been watching Gen Z spending habits on behalf of the companies it serves.
In a series of blog posts, the Afterpay team observed that growing up in the shadow of the 2008 recession, millennial student debt, and now, the COVID-19 pandemic, members of Gen Z have turned into fiscal conservatives who value “quality, versatility, and affordability.”
“Basics that can be repurposed across outfits, rental options that allow for a rotating wardrobe, and buy-back programs will rise in popularity,” the company writes. “While Gen Z won’t drop fast fashion entirely, retailers can expect a gradual shift towards durable, multi-purpose items.
The Shift To Mobile Opens Opportunities For Fraud
Billing its customer experience as a rival to Amazon for speed and ease, online payment processor Bolt has watched an increasing number of e-commerce transactions take place over mobile. A recent FinancesOnline report estimated that mobile shopping will account for 73 percent of all e-commerce sales in 2021, up from 67 percent last year.
However, the shift to mobile shopping opens up new opportunities for fraud and other criminal activity. Payment processors now build in rules and signals to detect and prevent different types of fraud, including account takeovers, customer support or subscription fraud, service provider data breaches and phishing.
Bolt points to several measures businesses and payment processing providers can take to minimize risk. These include establishing secure Wi-Fi networks to prevent hacking at the source; utilizing biometric identification capabilities on newer devices; and using machine learning to draw insights from payment data.
The company says that going forward, e-commerce providers will have to deal with escalating attempts to access customer data, malware attacks launched through techniques like SMS-based phishing (known as “smishing”) and dupe users with fake apps masquerading as the original.
Omnichannel Integration Is On Its Way
In the context of payment processing, the word “omnichannel” typically refers to technology that can handle credit and debit card payment as well as “card not present” transactions like Apple Pay or Google Pay. But according to integrated payment processor WePay, true omnichannel technology goes much further.
“It involves integrating into back-end solutions, and into [independent software vendors] and software seamlessly via APIs,” WePay Content Strategist Owen Linderholm wrote in a recent post.
The idea, Linderholm writes, is for a payment processor to support as many facets of the business as it can. That includes reporting, supply chains and marketing. It’s all about busting down silos and streamlining operations for business owners.
Redwood City-based WePay was already proving the worth of payment processing technology for tech industry giants like Facebook and Constant Contact when it was acquired by JPMorgan Chase in 2017. The technology has since been integrated into Chase Merchant Services, the bank’s fraud management, data security and payment processing provider.
Online Transactions Are Taking Over B2B Payments, Too
Much of the focus for payment processing technology centers around solving friction points in consumer transactions. However, the accounts payable process represents an entirely separate universe of B2B payments.
For many businesses, the process for accounts payable transactions is still stuck in the 20th century, involving a convoluted process of entering bills into accounting software and manually printing and mailing checks.
However, businesses like San Jose finance management company Sage Intacct are dragging B2B payments into the modern era. The company’s automated clearing house technology allows businesses to pay vendors using a standardized process, with automatically formatted files. The technology can also generate checks against a business’ bank accounts and send them automatically, and also tracks payment status.
