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Innovation in the payments sector is closely related to consumer expectations. Once the prerequisites are established, traders who do not follow them risk falling behind in the market, putting competitive pressure on all the elements in the ecosystem to stay afloat. However, it’s not always easy to encourage businesses to adopt innovative technology, given the various hurdles these front-runners have to live up to. Key barriers preventing merchants from adopting innovative payment technology include integration, regulation and connectivity. Let’s take a look at why the latest innovations in the payments industry present such major obstacles to the planned process.
Simplify integration between devices
To begin with integration, a key barrier to adopting new technology is the wide gap between old and new software and hardware. Marketers want to be able to offer their customers a connected experience across their channels. This means integrating an EPOS solution with an older POS payment terminal, where each terminal brand uses different APIs. Both sets of technologies should be able to work in a unified ecosystem, but there are few standardized protocols for migrating from one vendor to another.
But there are several shifts that stand to lay the groundwork for more integrated payment ecosystems. First, the current transition to Android POS payment terminals means that payment hardware will gradually become more compatible. In this sense, communication between Android terminals removes a major integration barrier by standardizing messaging and protocols between devices. In addition, progressive ePOS solutions and POS payment terminals are set to be further enhanced with new sets of digital APIs. These APIs connect to the cloud, allowing them to connect to individual terminals from there. Integrating with cloud APIs in this way, rather than writing code for individual device protocols, simplifies communication with end devices in the long run.
Use regulatory frameworks for innovation
Regulatory bodies play a vital role in laying the foundation for fair competition and innovation to drive the sector forward. The continued support of regulators to guide and support industry standards in the payment space is fundamental to the expansion of state-of-the-art technology and the advancement of the sector as a whole. As seen globally, regulatory bodies have the power and responsibility to encourage competition and ensure an improved end-user experience for consumers. For example, the current state of open banking end-to-end payment flows in many European regions could be greatly improved. If they continue as they are now, adoption will stagnate as financial institutions are slow to implement the necessary APIs. It is up to regulators in these regions to push for collaboration between financial institutions and fintechs to address these issues.
It is not an insurmountable task. A great example of regulation driving innovation is in India. In the past, during the pandemic, the sector has moved to digitize payments nationwide, to help the general public struggling to function without cash. Specifically, the National Payments Corporation of India has mandated various industry players to collaborate in creating the Unified Payments Interface – ‘UPI’. This national, real-time payment system supports inter-bank, P2P and person-to-merchant payments. As a result, merchants down to the smallest street vendors can offer QR code payments without expensive hardware. And often use nothing more than a small printed sign.
Communication and understanding are key.
The final obstacle is the lack of communication between parties in the payment ecosystem. This creates a huge gap in public awareness around new payment methods such as QR codes and open banking. With the slow adoption of these services, there’s little incentive for creators to keep pushing forward. The reason for this difference in public perception, although arguably, is that the responsibility for educating consumers falls on merchants rather than payment providers. However, merchants often don’t understand new payment technology or lack the resources to properly educate their customers on how it works, keeping adoption rates low.
The solution to this is for all providers in the payments ecosystem to ensure that merchants are educated and equipped with the resources to introduce new payment methods and understand how to use them. This allows merchants to let their customers know that these methods are useful and safe. A good example of this is the rollout of Apple Pay, which has a clear message from payment processors to issuers – supporting merchants and customers on how to use it and promoting it as an option.
What’s next for payment technology?
Although consumer expectations are driving the adoption of new payment methods, meeting this demand will be difficult if the barriers merchants face are not prioritized. As a result, payment providers are taking advantage of the transition to Android POS terminals and cloud APIs to simplify the integration process, regulators need to be more involved in the space, and all parties in the payment ecosystem need to work together to better serve merchants. Communicating with their customers. If this doesn’t happen, we can expect commercial and consumer adoption of new technology to slow down, slowing down innovation in the long run.
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