Payments prediction: Your face is the future

November 9, 2020

This article was originally published on Business Insider.

  • According to a recent Mastercard global consumer study, more consumers are using contactless cards or their smartphone to make payments, noting a large increase in the use of digital wallets.
  • Because of the economic trends prompted by the pandemic, two Mastercard executives predict a future in which passwords and one-time pins, powerful tools to verify transactions in the present, will become relics of the past.
  • Ari Sarker, co-president of Mastercard, Asia Pacific, and Sandeep Malhotra, the company's executive vice president of products and innovation for Asia Pacific, share their vision of what an advanced global payment system might look like for consumers and merchants.
  • Because of his work, Business Insider named Ari Sarker to our annual list of the 10 leaders transforming finance in Asia.

The COVID-19 outbreak has accelerated the adoption of digital tools that allow us to work from home, shop online, and engage with each other virtually, while lockdowns have forced almost all businesses to move to online channels. With these shifts, the way money digitally moves has changed dramatically and set the stage for a transformation in digital commerce that was previously thought many years away. 

The future is being brought forward, in large part, by the rapid consumer adoption of touchless transactions. They've become the new norm across much of the world as people have looked to safe and efficient ways to pay during the pandemic. According to a recent Mastercard global consumer study, 54% of consumers say they have increased usage of a contactless debit or credit card and 44% say they are tapping a smartphone mobile wallet or digital wallet more since COVID. 

The scale and speed of this shift is extraordinary in and of itself, as transforming consumer behavior is difficult in the best of conditions. However, it will only be game-changing if businesses and governments capitalize on it. The moment for innovators to unlock a whole new world of online commerce experiences — or risk missing out on the momentum — is now. 

Changing commerce for consumers

Mobile phones are already ushering in new opportunities for more touchless digital payment and commerce experiences. Today's mobile phone represents the identity of consumers, securely captures payment credentials tied to that identity, and serves as a shopping mall to millions of consumers. Tomorrow's technology will be able to expand these capabilities to mobile devices everywhere.

Greater interconnectivity of devices will enable consumers to receive hyper-personalized shopping experiences. Already, consumers of some cosmetics companies can use VR to help them test makeup colors without needing to go in store. In the not-too-distant future, these capabilities will expand: A shopper will be able to enter a clothing store and be recognized by biometrics, browse the latest collections, and see a personalized message pop up on an interactive screen to showcase items available in the right size. She'll be able to swipe through colors to see which one looks best on her virtual avatar. Once she decides on the items she loves, she'll be able to send them home or take them with her, as well as pay now or later.   

This interconnected future will rely as much on consumers' eagerness to embrace it as it will the willingness of small businesses, banks, and governments to invest in the needed cybersecurity layers. All IoT devices and the links between them must be fully secure, data privacy measures must meet the highest standards, and individual identity data must be fully protected. 

Together, these layers will allow a consumer's identity to become the payment instrument that enables her to buy on the spot just using her voice, face, and other unique biometrics. Behavioral tells — such as how a person interacts with a connected device, types on a keyboard, or navigates through content— will become part of how a device recognizes its user and completes payment. Passwords and one-time pins, powerful tools to verify transactions in the present, will be a thing of the past. 

All of this will make daily transactions ultimately more seamless and enjoyable. For example, with the ability to recognize speech patterns, a smart home device can execute a spur of the moment shopping list called out by an enthusiastic viewer of a food program – and have the items delivered just in time for dinner. 

Changing commerce for merchants

Merchants will also benefit from tomorrow's invisibility of payments, as payment-acceptance capabilities will be available on their own connected devices. Instead of relying on dedicated hardware, these merchants will be able to use software solutions delivered into their phone, tablet, or laptop. Placing point-of-sale technology in the hands of all sellers — from multinationals to SMEs to social commerce microentrepreneurs — will give them the freedom to take a range of payments without the cost and maintenance of specialized hardware. 

This will decouple transactions from cash registers and give merchants the ability to create whole new ways of interacting with their customers across their shopping experience. In another example, when a customer enters a store in search of a bike, the salesperson can use a mobile device to serve as a personalized guide through the buying experience. It can scan QR codes on the bikes of interest, line up the features, and educate the customer on his options. The buyer can test run a few and get instant personalized recommendations on size, height, color, and accessories. Happy with his decision, the seller can make the purchase on the spot, needing just the customer's face or a hand wave to transact. 

The rising presence of IoT smart devices, with their sophisticated AI algorithms, will expand this personalization to help businesses also anticipate and motivate purchases. A smart refrigerator will be able to fill a grocery list throughout the week and automatically order without intervention. A smart car could schedule an oil change when the mileage limit is hit and pay at the garage just by displaying the license plate at the entrance.  

Connecting payments across borders

Behind all this will be an invisible and smart multi-rail network of payments that optimizes the connection between every kind of buyer and payment instrument with every kind of acceptor and point-of-sale machine. These payment rails will include cards, account-to-account transactions, central bank digital currency, buy-now-and-pay-later programs, and new and emerging forms of deferred and installment payment products. 

If regulators around the world work together to prioritize easing cross-border payments and driving interoperability between payments technologies, this payments network will also be fully global and borderless. Many of today's real-time payments (RTP) systems, for example, are domestic in nature; the RTP landscape has been developed via a variety of localized schemes with individual rules. In order for this payment rail to cross borders, regulated entities must exist that enable exchanges between two schemes. 

Further, these interoperable systems will best operate across payment types, and create a healthy balance between protecting cross-border payments from unintended or criminal purposes while allowing them to be transparent, efficient, and more real-time. Distributed ledgers and secure and consumer-consented data sharing, driven by open banking, will further ensure payments are traceable and secure around the world. 

Efforts to make cross-border transactions more seamless will yield great dividends. With the right balance, technology can connect every size shop — from Uniqlo in Japan to Amazon in Seattle — with supply chains, other businesses, and consumers. This will make commerce not only more digital but also more efficient. 

The future is here

Tomorrow, contactless payments will be driven by biometrics and the full integration of AI, state-of-the art technology tools, and the social-commerce space. Merchants will be able to access every global customer through all payment methods and have multiple channels to deliver the best products and services to them. Consumers will only need to decide what and when they want to buy, and the experiences they enjoy the most.

This future of digital commerce — frictionless and rich with new experiences — is just within reach. Its distance from the present is limited only by the pace at which businesses and governments stretch their imaginations and capitalize on the momentum of change the pandemic has created.