Be it eCommerce or the financial services industry, fast, secure, and frictionless payment options are a must for customers.

According to Statista, the total transaction value of digital payments is expected to grow at the rate of 9.52% (CAGR 2024-2028), resulting in a projected revenue of US$16.59tn by 2028.

It is about time SMEs catch up if they want to retain and win new customers in the cashless world we now live in. Having access to the right set of tools and prioritizing customers’ demands can help SMEs bring their A-game. But, the biggest challenge facing SMEs is high costs.

This blog reveals 5 hacks for SMEs to level up and adopt digital payments, all the while being cost-efficient.

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Why must SMEs adopt digital payment solutions?

Traditional payment infrastructures are not adept at handling the rampant market fluctuations or gearing for a cashless economy and customer demands. Not to forget about the operational inefficiencies and costs underlining software updates, upfront charges, and maintenance.

SMEs seldom operate on high budgets that can afford system failures, market fluctuations, operational costs, security breaches, and so on. Having a payment system that nails down the foundations of modern payment functions and is easy to optimize for, will help SMEs stand the test of time.

The adoption of digital payment solutions can help SMEs get there. Here are the top 5 SME tech adoption hacks to bring modern digital solutions to your ecosystem without the burden of heavy costs.

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How can SMEs adopt digital payments?

Here are some hacks we’ve found fast-scaling SMEs’ use:

Hack 1 - Find the digital payment tool tailored to your business needs

Tons of digital payment options are available in the market, but not all of them are for you. Do not search for the option that offers the best of everything, instead, scout for the one that best fits your unique business and customer needs.

Why?

Small and medium businesses need affordable and flexible options that come with features like low transaction fees and minimal setup to best complement tight profit margins. Other SME requirements include seamless integration, scalable solutions, and multi-currency yet localized support.

Not all solutions house these needs, making it critical to be picky.

Key factors to consider:

• Payment options - your business needs a solution that offers the latest as well as the standard payment methods. Credit and debit cards, digital wallets like PayPal or Google Pay, and bank transfers are a must. But, also look for the latest methods like cryptocurrency if your business needs it.
• Customer experience - your payment solution’s checkout experience affects your cart abandonment rate. A frictionless process with minimal steps and features like one-click payments helps bridge the gap and improve customer experience.
• Integrations - your ideal digital payment solution would offer integrations with your existing tech stack, be it an eCommerce platform, point-of-sale system (POS), accounting software, or inventory management systems.
• Security - compliance with industry standards like PCI DSS (Payment Card Industry Data Security Standard) is critical. Go for the payment solutions that are compliant and offer added security and fraud prevention.
• Flexibility - rigid systems like traditional payment methods would only barricade your business success. You need an option that would adapt to the latest innovations or demands and allow you to scale efficiently.
• Localization - cross-border transactions backed by hyper-localized payment options is another important factor to consider.

Bonus features:

• Added Value Features like built-in invoicing, detailed analytics dashboards, or loyalty program integrations
• Payment solutions optimized for mobile
• 24/7 customer support team

Payby is equipped with all the above features and so much more, meticulously tailored to the SME digital adoption needs.

Hack 2 - Cut down manual processes with automated flows

Some things are best left for humans to handle, but a lot of other repetitive tasks like invoicing, payment reminders, and reconciliations can be automated. Automation for small businesses is a boon to efficiency and a hack to human error that could benefit your business.

Make the most of this innovation by deploying it in areas like customer interactions, payment processing, invoicing, and more.

Key benefits of automation:

• No recurring chores - cutting down on recurring tasks can help save hefty business hours which can otherwise be used towards strategic activities that lead to business growth. Higher accuracy and productivity levels are added perks.
• Better hold on cash flows - automation flows can save you from missing out on payments and outstanding invoices, ensuring better cash management. Features like reminders, tracking & analysis facilitate the management.
• Top-notch assistance - automation can enhance the payment experience for customers by adding personal touch points like payment confirmations, instant receipts, real-time status updates, and more.

Bonus benefits:

• Fewer human errors
• Higher possibilities to scale

Payby allows integration capability with leading accounting tools, playing a key role in the automation of major tasks like invoicing, reconciliation, and payment tracking.

Pro tip - We offer additional third-party integrations to help you automate multiple other functions beyond digital payments like inventory management, payroll, and expense tracking.

Hack 3 - Use payment security to win customer trust

SMEs are more vulnerable to online security threats than their enterprise counterparts because they lack a tight security system to protect themselves. But your small business cannot afford those loopholes.

Securing your payment system shouldn’t be heavy on your business wallet. Choosing the right partner clubbed with taking security measures yourself will save you a major chunk of your expenses and loss from any security breaches.

Key steps to extended payment security:

• Multi-Factor Authentication (MFA) - MFA is a strong security system that verifies a transactor’s identity via multiple steps like pin and OTP verification. That extra step of verification keeps a huge fraction of fraudsters on hold.
• Tokenization and Encryption - tokenization works by replacing a card’s number with a unique token. Encryption ensures all sensitive data entered is altered and encoded to ensure no data can be read or used by fraudsters.
• PCI-DSS Compliance - The Payment Card Industry Data Security Standard (PCI-DSS) dictates how sensitive and personal data should be treated. Compliance with these security standards is mandatory, and non-compliance attracts legal penalties.

Bonus steps:

• Keep up with periodic security audits and revamps
• Adopt best security practices and train your employees to enforce them
• Have a backup plan for breaches or cyberattacks

Payment solution providers like Payby offer cybersecurity for SMEs by acting as your shield against payment security threats and implementing rigorous protocols to safeguard transactions.

Hack 4 - Map out a journey to digital literacy for your employees

Tools and processes alone do not guarantee digital transformation for SMEs. Your workforce should be equipped to take it ahead and make the most of the digital features.

Digital literacy among your employees will ensure they can operate, troubleshoot, and contribute to the benefits of new payment systems.

Key strategies to maximize digital literacy:

• Training sessions - your employees must know how to use the new system, from processing transactions to troubleshooting for issues, the dos and don’ts of usage, and more to avoid making mistakes or misuse. It will help you save costs from errors and improve productivity.
• Knowledge base - a readily available knowledge base that comprises resources, FAQs, guides, video tutorials, and more can help clear out any minor hiccups in SME digital adoption.
• Cybersecurity training - train your employees on threats like phishing scams, safeguarding customer data, and preventing breaches to increase awareness of the possible threats facing them.

Bonus tip: Stay updated on every new feature launch and software update and conduct training or peer-to-peer learning opportunities for successful adoption.

Payby supports workforce digital literacy for our partners by offering a dedicated knowledge base, and a rich collection of guides and blogs to keep you and your employees aware of the latest happenings.

Hack 5 - Carefully strategize your digital shift to stretch your budget

Tons of tools will not transform your small business. It will only be an additional expense. Doing your research to make strategic cost-efficient decisions and optimizing your budget will help you in the long run.

Key strategies for optimization:

• Invest smartly - an overly complex solution with tons of features and options will only complicate the entire digital transformation experience for you and your employees. Invest according to your need, and add features when you scale.
• Incentive programs - governments have multiple grants and incentives in place for SME digital adoption. Do your homework and avail what you can to minimize your financial burden.
• Save on tools - do not opt for multiple tools, rather find tools with multiple functionalities to cut down on your subscription charges.

Bonus tip: keep an eye on all your software subscriptions now and then to find and eliminate overspending.

Payby offers standard and customized plans that are affordable yet cater to all your business needs without compromising on any aspect.

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Conclusion

SMEs have to embrace digitization and modern digital payment solutions if they want to stay competitive and on top of the game. Using efficient hacks can transform them into digital natives and put them on the path to prosperity.

Payby’s products are carefully built for SMEs and optimized per their needs. We take it a step further and provide you with all the assistance to scale up in the future, catering to your needs at multiple stages of growth.

Get started with Payby today.

Payment technology has evolved significantly, from cards to biometrics, and now, voice-activated payments are emerging as the next big breakthrough.

We’re already familiar with the advancements brought by voice-based digital assistants like Siri and Google Assistant, and now, this technology is gaining traction in the world of finance. Leading financial brands have begun implementing voice-activated services for tasks such as card activation, fund transfers, bill payments, and more.

This promising development signals a future where payments are increasingly powered by voice technology. In this blog, we’ll explore the direction the payments industry is heading, the progress made so far, and the challenges along the way.

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What are voice-activated payments?

Voice-activated payments aka voice payments are done via voice-based instructions through a digital assistant-embedded electronic device such as a smartphone, smart speaker, a car, etc. It uses AI and natural language processing (NLP) to recognize the voice of the account holder and follow payment instructions.

Though in the early stage, this technology has the potential to be one of the major contactless payment methods in the future.

The increasing utilization of voice assistants is shaping the adoption of voice payments. The surge in demand for contactless payments, popularity of voice assistants, and mobile commerce are steering the growth of voice-activated payments.

As per research, the global voice payments industry is expected to reach USD 7.51 billion by 2032, growing at a CAGR of 12.08%, from what was worth USD 6.92 billion in 2023.

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How does voice technology in payments work?

Voice payment is the most convenient mode of digital payment where customers do not even have to visit an app to make a payment. Customers can speak to their voice assistant, commanding it to make a payment on their behalf. The process relies on AI, ML, and NLP where voice commands are converted into digital commands to process the payment.

The process varies depending on the voice assistant your customers will use. But, here’s the general process of setting up and making voice-based payments.

1. Linking an account - the first step is to link up their voice assistant to their preferred payment method.
2. Using a prompt - your users will now have to say a prompt and direct their voice assistant to make a financial translation of choice.
3. Processing - the digital assistant will interpret the prompt and use the linked payment method to securely process the transaction.
4. Confirmation - this step ensures security in voice payments where customers have to confirm the payment via a follow-up voice command, password, or fingerprint.
5. Proof - your users will now receive a confirmation message that mentions all the transaction details.

Currently, voice recognition payments are available in select participating stores, online payments, donations, and bill payments.

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What are the benefits of voice-activated payments?

Here are all the reasons why people are considering making the shift to voice payments and why this technology is set to reach heights:

Accessibility

Voice payment facilitates hands-free operation, offering a high degree of accessibility. Customers can make payments while engaged in other activities like playing a sport.

Secondly, people having a hard time with digital devices or traditional banking methods can seamlessly use this method to make payments. It makes digital banking and financial services more accessible to the masses.

Effortless

Transactors do not have to enter card numbers, account numbers, and more for every new transaction or platform. The process of remembering passwords or navigating through a platform is eliminated here. They can seamlessly command their voice assistant to use the linked payment methods to process the payment, making the process a breeze.

Security

Voice payments do not process a prompt by anyone. It uses voice biometrics to recognize a voice, which is unique to every individual and processes the transaction. The technology picks unique traces of timbre, pitch, and more to recognize a voice that cannot be mimicked. It acts like another layer of security that is otherwise lost in the process of entering passwords, which can be done by anyone.

Speedy

Speed is another great benefit of using voice-activated payments. The hassle of manual entries of payment details in the payment process is replaced by swift voice commands. A one-time setup with a voice assistant gives customers a head start for a lifetime.

In-trend

We are all chasing the latest tech and customers want to have an early piece of the pie. This is another great advancement in technology that a lot of people are excited to try. And, the early adopters in the financial industry will have the edge.

Inclusive

Voice payments are inclusive because they help specially-abled people make payments independently. For example, visually challenged or people suffering from neurological disorders can make payments without supervision.

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What are the challenges in voice payments?

Here are the reasons why this technology has been slow in picking up the pace of adoption:

Security

There is a fair share of critics who are unsure of the safety and security of this payment method. Because the process of this technology is not as tangible as the other payment methods, and because any mishaps can lead to loss of money, a lot of people are hesitant.

One wrong command, misinterpretation of command, or an unintended command may lead to the transfer of funds to unknown sources that can be difficult to retrieve.

Privacy

There’s another privacy concern facing this technology. Not all customers are happy with voice assistants listening to all of their conversations. They believe information from their private conversations can be stored for future use by digital devices which is a potential threat to privacy.

Accents

Voice assistants are not accurate in understanding and responding to all non-native accents, thereby acting as a big barrier in voice payments. It makes accessibility a challenge for certain communities and not everyone will be able to use this method seamlessly.

Reliability

There have been promising advancements in this technology with questionable reliability. Voice recognition technology is young, making it vulnerable to misinterpretations. Frequent misunderstandings are reported in this technology that lead to incorrect transactions or failures. This technology has a long way to go in terms of accuracy followed by reliability.

User educations

There’s a lack of awareness about this technology where people are not informed about the technicalities of this payment method. The benefits and risks involved are equally uncommon knowledge. There has to be more awareness about safety usage, its critical features, and more, to increase adoption.

Integrations

Voice payments are not yet a standard method of payments and only select platforms offer this method. The inconsistency in the availability of this technology across different platforms might lead to its rejection.

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The future of voice technology in payments

We have witnessed the popularity of contactless payments and voice assistants. Voice recognition payments sit at the intersection of these two powerful inventions, making it a revolutionary payment alternative of the future.

With enhanced AI and IoT integration voice payments will witness better traction in the future. Widestream availability across platforms globally, better security, as well as voice recognition backed by user education and preference for convenience, will position voice technology as a mainstream payment method in the future.

Retailers looking to increase their customer bases will grab this technology as an opportunity and provide voiced-activated payment options in their ecosystem. For customers, a hands-free and frictionless payment system will offer better satisfaction and ultimately drive adoption.

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Conclusion

The common objective of voice-activated payments is to introduce convenience, a contactless experience, and less friction in the payments process. But, there’s a lot of advancements, upgrades, and work to do for this technology to reach heights.

Demand for convenience is paramount and merchants have to take steps and initiatives to introduce it to customers. You can do so by offering secure alternative cashless payment solutions that are created to reduce friction.

Payment solutions like Payby are designed to reliably handle end-to-end payments, making it simpler for businesses and consumers to complete and record transactions. We offer multiple payment modes and in-app payment solutions, among many other features to help you set up the most robust digital payments infrastructure for your business.

Get started with Payby to experience the difference.

Emerging markets are rapidly embracing digital payment solutions, transforming traditional financial transactions. This shift presents significant opportunities for both businesses and consumers. Companies benefit from innovation, while customers gain access to more inclusive financial services.

However, this progress comes with its own set of challenges. Stakeholders must navigate issues like regulatory compliance, security risks, technical difficulties, and more. To fully leverage the advantages of digitization, it’s essential to understand both the benefits and potential obstacles of digital payments.

In this blog, we’ll explore the five biggest challenges and opportunities for digital payments in emerging markets and highlight areas for improvement.

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Five biggest challenges in digital payment adoption

While much of the world has swiftly adopted digital payments, emerging markets have shown some resistance. This hesitation stems from various challenges faced by governments, businesses, and consumers. Here’s taking a look at some:

1. Broken technology infrastructure

A major barrier to digital payment adoption in emerging markets is infrastructure, particularly in rural areas. Limitations like unreliable internet connectivity and the lack of payment networks hinder customers from fully embracing digital payments. Additionally, underdeveloped technology infrastructure prevents them from accessing seamless digital transactions across different platforms.

2. Rigid regulatory compliances

Operations without regulatory compliance are impossible, and markets with rigid, outdated regulations make it challenging for innovation to thrive. Fintech companies must adapt their products and services to meet these regulations, but legacy frameworks often stifle innovation and technological advancements.

Also cross-border policies differ across markets. Countries with strict or lengthy regulatory processes can create operational hurdles for businesses looking to expand or innovate.

3. Inaccessible financial services

Access to financial products and services is still a challenge in many underdeveloped regions across emerging markets. Though nations are gearing up towards financial inclusion, multiple regions are either unbanked or underbanked.

With no access to financial services, digital financial services are distant, because people are either unaware or they have a hard time availing the services. Other financial inclusion challenges include cultural barriers, high costs, lack of technology awareness, and so on.

4. Weak safety and security systems

Digital mediums and payment solutions are prone to security threats like cyberattacks, fraud, and data breaches. People from emerging markets resist digital payments for this reason rather than learning best practices to safeguard themselves.

For emerging markets to transform into major digital hubs, people must learn to trust technology and understand data security. It is when they open up to digital payment methods that adoption will follow.

5. Lack of customer education

Digital literacy is important for widespread digital adoption. People from rural areas as well as elderly people are not tech-savvy and are not aware of the digital payments process. They are also unaware of safe practices that ensure the safe usage of digital platforms. 

Government fintech initiatives to amplify digital literacy in payments among users will eventually pave the path to digital payment adoption.

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Key opportunities for growth in digital payments

Digital payments do not just have the power to lift the digital and financial infrastructure of emerging markets but also can uplift the economy as a whole. Massive growth opportunities are tied to digital payments across sectors like technology and fintech innovations. Let’s go through the crucial opportunities that can drive digital adoption:

1. Mobile payment solutions

Mobile phones are a major boost to digital financial services because they are used across nations, including remote areas. It is via mobile payment platforms that underbanked and unbanked populations are able to avail themselves of financial products and services.

For example, M-Pesa is known as the early and major driver of digital payments across Kenya. They are known for their revolutionary initiative globally and are a testament to mobile payments being the opportunity for growth in digital payments.

2. Fintech innovation

Fintechs are the new-age startups contributing to financial upliftment and innovation with their unique tech-enabled solutions. They are bridging all the gaps left by legacy banking systems as well as the lack of banking infrastructure.

Some prime examples of fintech innovation across emerging markets are peer-to-peer lending, microloans, and alternative credit scoring systems. Their motive is to understand the gaps and come up with solutions that make it easier for businesses to better serve their customers and make customers' lives better. Fintech solutions accelerate digital payments adoption.

3. Government initiatives and policy reforms

What private organizational initiatives cannot do, government-backed initiatives can. It is critical for governments to take the necessary steps to build the digital payments infrastructure. And, many governments from emerging markets have taken the rightful measures to invest in technologies that promote digital payment adoption.

They have also made necessary policy reforms that support the fintech ecosystems and break the monopoly of legacy systems. Furthermore, emerging markets are seeing multiple partnerships and ties between private and public sectors, incentivized by the government, to introduce digital financial services to the underserved sections of the society.

4. Cross-border payment and remittances

Millions from emerging markets migrate to developed nations in search of better livelihoods and opportunities. They send back money to their families in their base countries and a broken digital infrastructure makes the transmission lengthy and expensive.

The huge number of transactions undertaken is an opportunity to boost digital payments in emerging markets. Fintechs with their quicker and cheaper solutions for foreign remittance are paving the path towards great digital payments adoption.

Also read: Guide to optimizing cross-border payments

5. Telecom and financial institutions

Telecom and financial institutions are joining hands, acting as the enablers of digital payments in emerging markets. Telecom brands are expanding their network coverage to sign users up for the digital payments ecosystem. They help provide financial services to regions with no access to traditional banking.

This partnership has also enabled the telecom companies to come up with innovative solutions like mobile wallets, contributing to financial inclusion. Better opportunities will arise out of more such partnerships.

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Predictions for future trends and areas of investment in digital payments

The current advancements in digital payments in emerging markets pose strong trends for the future. Current advancements clubbed with technological and regulatory advancements will give rise to massive business opportunities and adoptions.

Here are some predictions into the future of digital payments that can be capitalized:

1. Cryptocurrency and blockchain adoption

Cryptocurrency and blockchain technology are replacing traditional payment infrastructure as a safer and more advanced alternative. Decentralized finance (DeFi) comes with low transaction fees, efficient process, easy settlement, less friction, and transparency.

Trends show a revenue forecast of USD 11.71 billion in 2030 for the cryptocurrency market verifying a potential opportunity. Cryptocurrency could become mainstream in markets with volatile currencies in the future.

2. Biometric authentication for payments

The new boon to digital payment security is biometric authentication, such as fingerprint, facial recognition, and voice identification. Eliminating the step to enter a PIN that can be replicated, biometric authentication enhances the security of transactions and keeps frauds at a distance.

This method is also very convenient, hence the global market for biometric authentication in payments is expected to grow at a CAGR of over 17.1% between 2024 and 2032.

Read more here - Digital identity verification

3. AI-driven fraud prevention and risk management

With increased adoption in digital payments, the likelihood of risks and frauds will skyrocket. AI can help curb similar security challenges with the help of machine learning algorithms that have the capability of detecting fraudulent activities.

AI and ML play a huge role in detecting, flagging, and preventing businesses and customers from fraud attacks. They can help individual customers trust digital payment methods as the AI market in fintech is expected to reach $22.6 billion by 2025.

4. Contactless and NFC payments expansion

COVID-19 has been monumental to the adoption of hygienic contactless payments. The convenience it offers contributed to its continued growth in the post-pandemic era. Near-field communication (NFC) technology is a prime example, offering speed and security.

5. Government-backed central bank digital currencies (CBDCs)

Governments are making efforts to establish CBDCs as an alternative to fiat and cryptocurrency. They are a safer and more efficient alternative as witnessed across China, U.S., and Europe. This step aims to reduce cash usage.

6. Embedded payments in everyday platforms

Businesses can offer a better payment experience to their users by integrating advanced payment solutions into their applications or websites. Users can make payments on the same platforms and businesses can offer frictionless payments experience.

7. Digital identity and KYC (know your customer) innovations 

Verifying identity digitally makes the onboarding process quick and secure. Fintechs are trying to bridge the gaps in the process of customer verification ensuring the solution can help with fraud prevention and regulatory compliance.

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Conclusion

Businesses looking to succeed in emerging markets, as well as those operating within them, need a payment solution provider that truly understands and adapts to the local market dynamics. Solutions that offer security, regulatory compliance, unique and tailored services, scalability, and more.

Payby can help you win this market with its unique features designed and tailored to market needs. We can help drive adoption of cashless payments with online and offline digital payment infrastructure to meet consumer preferences at every touch point.

Get started with Payby today.

We’ve witnessed high adoption of digital payment methods that offer convenience and speed to both customers and businesses.

With conveniences comes the risk of exploitation and we’ve also come across a high degree of fraud attempts. Making it much more critical for businesses to deploy robust fraud preventive measures that are immune to sophisticated fraudulent practices that cause financial losses.

This blog showcases everything you need to know about the role of machine learning in payment fraud detection and prevention.

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Understanding payment fraud and its impact on businesses

An attempt to manipulate or tarnish the legitimacy of an online transaction with the intention to either cause financial harm or steal sensitive information that can be used for financial advantage is known as payment fraud. Payment fraud is one of the many types of financial fraud that scammers resort to extort money.

Some of the examples of frauds specific to the payments industry include - credit card fraud, identity theft, account takeover, and friendly fraud. Criminal groups and networks are the masterminds of payment frauds where they find vulnerable systems and use tactics to benefit from them.

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Impact of payment fraud on businesses

Payment frauds do not just cause financial losses. There’s more for businesses that fall prey to fraud:

• Financial - first and foremost, but there are different types of losses impacting businesses. Beyond the loss of revenue, companies have to incur chargeback losses that occur when customers dispute a transaction, penalties, and fees like bank, legal, and more.
• Reputational - businesses that fall prey to frequent fraud attacks are deemed to have weak security systems. As a result, customers lose trust, the word starts spreading, and brand reputation takes a hit.
• Operational - managing and preventing a fraud attack is expensive. Plus, comes with temporary operational disruptions that demand manpower investment.

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Role of machine learning in detecting and preventing payment fraud

Machine learning algorithms play a massive role in detecting fraud attempts by analyzing huge data sets. They have the unique ability to read through tons of historical data sets and learn what’s normal pattern or behavior.

Based on the learning, they develop the ability to identify abnormal data behavior and deviation that are possible fraud attempts. And, they do it in real-time which helps prevent attempted fraud. Fraud detection algorithms immediately flag and block any attempt of fraud.

Furthermore, ML models evolve with more exposure to data over time, both legitimate as well as fraudulent data, helping them analyze and successfully predict fraudulent transactions from any future or new attempts.

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Advantages of using ML for fraud detection

Here’s why your business needs a robust ML fraud detection and prevention system:

• Real-time detection - ML models can detect, flag, and take action against an incoming threat in real-time, keeping your business clear from attacks.
• Fewer false positives - it is a hassle when legitimate transactions are flagged and blocked, tampering with customer experience. ML models have fewer possibilities of false alarms as compared to manual processes.  
• Adaptability - with continuous learning through data, ML models can adapt to new fraud patterns and develop the best response to new threats.

Key machine learning techniques for fraud detection

ML models use multiple techniques to detect fraud. Some of them are as follows:

Supervised learning

Here ML models are trained with prepared cluster data sets that are labeled as legit and fraudulent. Some examples of algorithms developed with supervised learning for fraud detection are decision trees, random forests, and logistic regression.

Neural networks

ML models here are trained to analyze and handle data similar to a human brain which makes it possible for the models to interpret large amounts of data and pick up sophisticated as well as non-linear patterns. Neural networks for fraud prevention depict high accuracy in fraud patterns like multi-account fraud or synthetic identity fraud.

Clustered detection

This approach groups transactions into improvised clusters based on similarity and behaviors to pick patterns that suggest fraud. ML models refine through these clusters to detect fraudulent behaviors apart from legitimate ones more efficiently. 

Anomaly detection

Payment processes have expected behaviors and any deviation from this pattern is picked up by ML models and flagged. This is anomaly detection in payments, where ML models report any new and inconsistent behavior that indicates fraud. Any data with no historical record is reported.

Text and network analysis

Frauds are rarely done in silos. A group of networks in partnership generally following the same intent come together and execute frauds. Certain ML techniques can hand-pick these networks based on their connections and behaviors such as users, accounts, and devices. Similarly, ML models can also read through texts from reviews, emails, and more, to identify suspicious networks from keywords.

Risk scoring

ML models designate risk scores to certain accounts, networks, and users based on their past behavior, location, devices, and more. The risk scoring method indicates businesses to be wary of certain users and accounts and ensure corrective verification is done before processing transactions. High-risk accounts indicate a higher probability of fraud.

Identity verification

ML can better verify the identity of the transactor based on the biometric data, proof submission, transaction history, and more. This ensures frauds like identity theft are kept at bay streamlining safe and secure access of accounts to original users.

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How are companies using ML for payments 

Based on their business nature and industries, companies have improvised to include ML models in their process for payment security.

Financial organizations like banks and payment processors who deal with financial transactions are using ML models to minimize chargebacks that result from fraudulent transactions, in real-time.

eCommerce organizations on the other hand are using ML and AI in payment security for a secure shopping experience that is free of account takeovers and data theft.

We are also seeing new-age technology start-ups emerge. These start-ups have mastered fraud detection and prevention with their advanced ML models developed in-house and offer their security services to the masses.

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Challenges and considerations in implementing ML for fraud detection

ML can do a lot of heavy lifting in fraud detection, but only when equipped with the right resources. Here are some of the considerations to ensure the output from ML models is at its best:

Privacy and security

ML models handle a lot of data and it is critical to ensure the safety and security of the sensitive data is preserved. Additionally, compliance with regulations like GDPR and CCPA must be maintained.

Data requirements

ML models learn from data, so the quality of output they produce will be equivalent to the data feeds provided to them. High-quality data must be severed to the models to ensure the learning, analysis, and accuracy are of high quality as well.

Model training

Fraud techniques have changed and they will continue to. While a lot more new techniques that can override ML algorithms will emerge, to prevent this from happening, ML models must be constantly trained to fight against new threats.

User experience with accuracy

False positives are a major blow to user experience and any vulnerability can lead to incoming fraud. So, it is critical to ensure the accuracy of fraud detection and enhanced user experience go hand in hand.

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Future trends in machine learning for payment fraud detection

While the progress we have made in machine learning for payment fraud detection is fascinating, the future has a lot more in store for this industry. Here are some of the trends we may see in the future:

(XAI) and model transparency

The classic ML models use complex modes of decision-making, making it difficult for organizations to understand the ML output. Using the Explainable AI (XAI) model fosters transparency in processes making it easy for fraud analysts and compliance teams to enhance the ML model's functionality.

Federated learning

This is a collaborative method of training machine learning models where multiple organizations come together and train the same ML model, without having to use the actual customer data that’s sensitive in nature. This safeguards the security of user data and facilitates utmost advancement in ML training.

Blockchain adoption

Transactions with blockchain technology become immutable, making it difficult for fraudsters to manipulate data. ML integration reinforces it through strict data analysis for better prevention.

Behavioral biometrics in action

This acts as an additional layer of security where ML models scan through biometric behaviors like typing speed in real-time, to detect anomalies and ultimately fraud.

ML-rule hybrid models

A match between traditional rule analysis systems and flexible and adaptive ML systems will strengthen how frauds are detected and prevented.

Deep learning for anomaly detection

Deep learning techniques like Convolutional Neural Networks (CNNs) and Recurrent Neural Networks (RNNs) can process data at big scales and pick even the slightest indicators of attempted fraud.

Tailored learning with AI

ML models can self-learn and train with no manual updates, learning and adapting to new data behaviors and patterns. Human expertise can take it to the next level where experts make constant measures to refine and enhance the accuracy of the ML model's output.

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Conclusion

Machine learning models are a boon to the security of online transactions, but a hassle for businesses to keep up. That’s where choosing the right payment solution provider makes the difference.

Payment gateways like Payby use advanced technologies and techniques like ML and AI to ensure accuracy in fraud detection by reducing false positives, real-time fraud detection, and security against upcoming threats.

Get started with Payby to experience the difference.

Customer demands and expectations have outpaced traditional payment systems.

With the advent of new payment options, customers are ditching outdated infrastructure and inflexible payment solutions. They demand instant, seamless payment processes and businesses failing to adapt will have a hard time.

APIs (Application Programming Interfaces) in payment gateways can help businesses get there, plus scale up. They help businesses add the latest payment options such as digital wallets, credit cards, and more to their ecosystem, offering flexibility and customization.

This blog explains how APIs have a hand in modernizing payment gateways.

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Understanding APIs and Payment Gateways

APIs facilitate communication between software systems that share no infrastructure or codebase, streamlining the exchange of data, functions, and commands. They assist with integrations between applications, systems, and services. For example, APIs make it possible for companies to accept payments on their website, without having to build the feature themselves.

That’s where payment gateways came into being. It is the technology that made online payments on merchant websites possible.

Payment gateways leverage APIs to facilitate the exchange of data between banks and customers, aka payments, by ensuring safety, security, and ease of transactions. Over time, payment gateways have evolved by minimizing friction through simple processes, enhancing security via encryption, and authorizing payments.

Every online store sits at the intersection of APIs and payment gateways. Be it an eCommerce platform, financial institution, or a third-party service, payment gateways can integrate into all of them via APIs. APIs have changed the manual and laggy processes with real-time payment processing, changing the face of payments in the modern day.

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What are payment gateways?

Simply put, payment gateways are the enablers of online payments using digital methods like debit cards, credit cards, digital wallets, and more. But it was not always as seamless as it is today. Walking back to the history of payment gateways, they were traditionally built on three critical functions:

• Authorization - they checked the methods of payment to verify the availability of sufficient funds, i.e. the concerned bank account. Digital wallets are the latter invention.
• Encryption - they masked sensitive card details to ensure any exchange of data between the customers and banks is not visible, readable, or accessible to third parties.
• Security - they ensured compliance with standards such as PCI-DSS, that were put in place to prevent fraud and online theft.

Limitations of traditional payment gateways

While the three critical functions enabled online transactions, they were not sustainable to the increasing needs and demands of customers.

• Lack of flexibility - merchants only had limited options to accept payments, confining them to limited business opportunities, integrations, customizations, and more.
• Limited scalability - merchants had a hard time expanding their business to new markets and geographies.
• Rigid payment methods - debit card/credit card was the only accepted payment method initially, making it difficult to integrate the latest options like mobile payments, buy-now-pay-later schemes, digital wallets, cryptocurrencies, and more.
• Slow processing - payment gateways were initially very slow, taking a lot of time to process payments, resulting in delay and dissatisfaction.

That’s where APIs have proved to be the game changers. API-driven payments have filled all these gaps created by traditional payment gateways.

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How do APIs differ from traditional payment integration methods?

Connections in payment gateways were traditionally custom-coded. With APIs in Payment Gateways, integrations are easier. Here are other reasons why APIs are game changers:

Shift in modularity for flexibility 

When payment gateways were first introduced, they used one-off coding to link one system to another. Data exchange was limited to systems and methods.

APIs on the other hand introduced integration with not just systems but websites, mobile apps, CRM systems, and more via modular and reusable components.

Increased processing time

Payments back in the day were very slow because they were processed in batches. Delays in payment processing as well as payment data sync were a common sight.

APIs swapped this process with real-time data exchange, facilitating transactions and confirmations in seconds. Not just payments, with APIs fraud detection and reporting are as well done in real-time.

Seamless integration at scale

Because integration was traditionally done with complex coding, businesses had a hard time scaling. Not to forget about the downtime needed to upgrade or move connections across systems during a scale-up event.

All that hassle is a thing of the past with APIs. APIs come with massive integration possibilities for merchants looking to level up their business. It has become easier to add new features and payment methods without massive upgrades.

Heightened security with compliance

Complying with security standards such as PCI DSS has been in the books, but the process to attain compliance was manual. Any changes required manual configurations making it hard to stay compliant because of the possibility of human error.

APIs leverage modern security protocols like OAuth, tokenization, and encryption leaving no space for manual process-borne errors. Because these protocols are streamlined for auto-upgradation as per the latest complaint requirements, manual efforts are put on hold.

Tailored to customers preference

Making payments work was the sole objective of traditional payment methods. Customization and customer experience were not possible because the integration frameworks were limited.

Fast forward to today, payment solutions are built around user experience, offering tailored solutions that fit the needs and wants of businesses and customers. Businesses are able to innovate and build their processes around their customer needs, increasing satisfaction. That’s APIs for you.

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Challenges of API-Driven Payment Solutions

APIs facilitate modern payment solutions yet face a bunch of challenges businesses must keep an eye on. Being aware of them and taking action helps steer clear of them. Here are some possible challenges you can face and how to fight them:

• APIs are the game changers for modern systems. Traditional rigid systems cannot integrate with these more API-based solutions. If you haven’t done it already, it's time to upgrade your systems.
• Breaches and API abuse can still happen with weak security protocols. API-driven payment gateways with strong authentication, encryption, and monitoring are critical for data security. Choose the right option.
• Security standards change with regions, markets, and geographies. Find yourself a payment solution that caters to your domestic and international compliance requirements.
• These modern payment solutions come with extra costs for management, in the form of financial and manpower investments. Do your due diligence always.

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Future Trends in API-Driven Payment Gateways

We have witnessed a groundbreaking world of payment solutions, keeping us curious about the future of payments gateways. Here’s what the future trends of payment gateways look like:

• Open banking - open banking has made it possible for FinTechs and third-party providers to exist. Data that was previously secured within legacy financial institutions is now open to the builders. APIs will continue to enhance the safety and efficiency of this exchange of data.
• AI and ML - APIs powered by AI and ML will offer predictive analytics, risk assessment, and personalized customer experiences. Payment gateways will keep finding new ways to better serve customers through new features and less friction.
• Blockchain - APIs have already paved the way towards integration between blockchain networks and decentralized finance platforms. This will open a sea of opportunities for the payments industry with access to blockchain features like smart contracts and encrypted transactions. We can expect better security, transparency, ease, and costs in the payments industry.
• New partnerships - previously gated, financial institutions have not just opened up data access to FinTechs, but also new partnership possibilities. Legacy systems like banks are partnering with young tech-savvy companies via API ecosystem to modernize their offerings and it will continue to evolve. We will see new business models emerge, and they will make payment solutions robust and versatile.

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Conclusion

APIs are the reason for today’s modernized payment solutions. They have introduced flexibility, scalability, and integration capabilities for businesses and payment gateways, making it easy to serve customers with customized services/products and a great user experience.

To make the most of what APIs offer, businesses must keep up with the latest advancements made in this area. Payment gateways like Payby handle this for you, so you and your team can focus on core business initiatives.

Payby supercharges your business with cashless payment transactions offering seamless integration, onboarding, and setup. We offer multiple payment modes, in-app payments, paylink generation, a powerful dashboard, robust security, and so much more. Our solutions are tailored to offer you the best of the latest payment advancements.

Get started with Payby today to experience it.

Online payments have become the norm for nearly all types of transactions.

While signing up for new products and services has become quick and easy, it has also opened doors to several security threats - for both businesses and consumers.

The key to maintaining security without adding friction is digital identity verification.

From verifying new users during onboarding to securing access during login, digital identity verification plays a critical role in protecting online payments.

In this post, we’ll explore the role of digital identity verification in safeguarding transactions.

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What is digital identity verification?

Digital identity verification in online payments is the alternative to any manual KYC process such as scanning and uploading documents. It ensures a safe log into a new system, preventing attempted fraud.

Additionally, payments are faster and more secure with this technology.

Digital verification picks up data intelligence to verify or identify fraudulent identities before providing access. This data intelligence may comprise all or some data points from sources such as IP addresses, email addresses, biometric authentication, and more. All data points are compiled to verify a user and the risk level of a signup or online payment. 

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Role of digital identity verification in preventing payment frauds

Digital identity has a big role to play in fraud prevention while ensuring compliance with regulations that come attached to certain processes, such as KYC (know your customer). This includes: 

Fraud prevention

Digital identity verification is not just limited to verifying access. It takes a step ahead to block fraudulent transactions in real-time. 

Be it fraudsters trying to impersonate someone by committing identity theft or trying to make fraudulent transactions, digital identity technologies such as facial recognition, fingerprint scanning), two-factor authentication (2FA), and more can detect fraud and act immediately to bar any and every fraudulent activity. AI and ML, on the other hand, detect and report suspicious purchase and login behaviors. 

Compliance benefits

KYC in payments and AML (Anti-Money Laundering) are some of the regulations that businesses must follow. Compliance is needed to ensure no harboring of illegal activity such as terrorist financing, and failure to comply comes with severe penalties, fines, and reputational damage.

Digital identity verification helps avoid such compliance risks and ensures businesses are compliant with all the regulations. They do so via identity checks, customer data verification, and audits.

Customer experience

The right technology can help you offer a seamless customer experience that builds trust among your customers. Most of the verification methods, like biometrics, 2FA, MFA, and so on, are pretty easy and quick. 

All the layers of security (hassle-free steps) build up a sense of trust among your customers, prompting them to trust your business with their sensitive personal and financial data. 

Financial security

The lack of identity checks on digital platforms gives way to fraudulent transactions. They are followed by chargebacks that translate to financial loss to your organization. Chargebacks are a major blow to businesses because resolving them is a lengthy process, and they lead to loss of business and hefty fees. 

Having a digital identity verification system can shield you from the negative impact of chargebacks. 

Technologies used in digital identity verification for online payments

Several technologies enable the process of digital or online identity verification, and here are the ones currently in use across industries:

Biometrics

Human characteristics such as facial, voice, fingerprint, and iris are unique to every individual. This technology uses such biometric standards to verify a customer’s identity while making an online purchase. Biometrics is the most popular choice because of its ease of use and high accuracy, which puts fraudsters at bay. 

Two-factor authentication and multi-factor authentication

Also known as 2FA and MFA, this technology uses 2 or more layers of security to process a transaction, sign up, and log in. Some examples of these security layers are SMS-based OTP, app-based approvals, hardware tokens, and more.

Blockchain technology

Blockchain technology, aka decentralized public ledger, with its encrypted properties, is a great option for digital identity verification. Blockchain for identity verification uses techniques such as self-sovereign identity and distributed digital identity management to make verification faster and safer. It is very difficult to tamper with an individual’s identity data stored as a unique record on the network.

AI and ML

Artificial intelligence and machine learning technologies have the unique ability to read between the lines of user behavior. Their pattern recognition ability helps find any abnormalities in user behavior and flags potential risks.

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Challenges in setting up digital identity verification for online payments

Businesses getting started with digital verification in payments may encounter some of the following challenges:

Privacy

Digital verification technologies store and use customer data to verify identity, which is a concern for customers. Customers are worried about their data, as breaches and misuse are possibilities.

Businesses must find and adopt technologies that sit at the intersection of data security and privacy. 

Customer experience

An extra layer of security is an additional step of hassle for customers, which can be a point of friction for businesses looking to acquire new customers. Rigorous verification measures can lead to a tampered customer experience and a high abandonment rate.

The catch is to find and choose technologies that offer seamless sign-up, log-in, and transaction processes with top-notch security.

Integration 

Existing businesses with an established payment system may face technical integration difficulties with new technology. Most identity verification technologies come with a wide array of integrations, but there sure are certain limitations you may encounter.

Find your business a digital verification technology that seamlessly blends into your existing system and tech stack.

Price

Price is one of the major blockers to successfully implementing a digital identity verification system. There are certain financial and operational costs attached to the implementation of advanced digital identity verification technologies that you should be wary of. 

Scale-up

You want a system that works now and when you scale up your business. So, keep track of all the technical limitations of adopting digital identity verification.

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What are some examples of industries using digital identity verification for payments?

Here are some of the practical implementations of digital identity verification we have witnessed across major sectors:

BFSI

The banking and financial services industry has witnessed widespread adoption of digital verification technologies. Multi-factor authentication and biometric verification are used to verify and process online payments and financial transactions. AI-driven fraud detection is deployed to reduce the risk of fraud and unauthorized transactions.

E-commerce

The retail industry uses this technology to facilitate easy and seamless online purchases that are secure. With security at its core, the industry is one of the early adopters of digital identity verification, where each purchase is subject to an identity check.

Healthcare

The healthcare industry handles personal customer data that’s sensitive and critical. This technology contributes to the healthcare industry by protecting sensitive patient data and ensuring secure payments for telemedicine services.

Travel and Hospitality

Digital identity verification has shaped the current online booking, payments, and loyalty programs for travel and hospitality brands. They have leveraged the technology to make the entire booking process easy, seamless, and safe.

Cryptocurrency

This hot and happening industry has massively adopted blockchain technology to benefit from the use of decentralized digital identity systems that provide secure transactions and facilitate appropriate access.

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Conclusion

Digital identity verification is a major shift from all the workload that came with manual identity verification, providing major security and ease of use. Along with easy access control, this technology also provides fraud control, prevention, and regulatory compliance. PayBy provides all of this and more.

Our innovative payment solution offers robust fraud detection and prevention. It does so by leveraging AI-based fraud monitoring, 3D secure authentication, and transaction risk analysis, offering enhanced verification. There’s more - seamless integration with leading CMS, smart POS, easy scalability, customization, and so on.

Get started with PayBy today and try it yourself.

Metaverse is defined as spatial computing in which individuals can seamlessly work, socialize, and play in a virtually interconnected universe.

Using complex technologies like augmented and virtual reality, the Metaverse can generate digital replicas or digital twins that can be used in simulations before they are actually implemented in the real world.

It has the potential to redefine how businesses operate today. For example, businesses can try digital twins and deploy avatars before actually starting operations in a new domain or country.

Similarly, Metaverse can be integrated into the digital payment system. For example, you can buy real estate, purchase digital goods, or access available services in the Metaverse. As there is a steady shift towards cryptocurrencies, efficient eWallet systems need to be designed for the Metaverse.

In this article, we'll explore the future of digital payments in Metaverse and how you can integrate them into your business.

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The growth of Metaverse

Experts say that Metaverse has a bright future. In fact, the UAE Metaverse market is projected to grow at a CAGR of 28% between 2023 and 2028.

The Bank for International Settlements (BIS) has also acknowledged that Metaverse has a strong potential in cross-border and domestic services like e-commerce and payments.

 The penetration of Metaverse in digital payments looks promising, with the largest gains expected from gaming and e-commerce, USD 200 billion and USD 150 billion, respectively.

Here are some key areas to watch out for:

The surge in e-commerce transactions 

As e-commerce popularity grows, customers are increasingly demanding multiple payment methods. Digital payments help streamline the purchasing process, allowing customers a positive shopping experience and encouraging them to buy more.

Technology's constant innovation accelerates this shift and changes consumer preference for digital payment solutions.

Mobile payment adoption

In 2023, 10.07 million people in the UAE had internet connectivity, while 9.69 million people had mobile phones out of a population of 10.17 million. This rise in smartphone adoption is making mobile payment a popular payment solution.

Technologies like Apple Pay, Google Wallet, and other such apps leverage near-field communication and QR codes to facilitate faster payments.

For example, by partnering with Payby, any merchant can offer mobile payment options.

Integration to payment gateways

Businesses must integrate with a robust payment gateway to offer a streamlined digital transaction experience. With a robust payment gateway, consumers can pay through various payment options, such as digital wallets, bank transfers, credit/debit cards, etc.

By partnering with PayBy, merchants can easily integrate with a robust payment gateway and offer a smooth transaction experience.

Security and fraud prevention

Advanced security features like encryption, tokenization, and biometric authentication are paramount in adding a layer of security to any digital payment.

Payment providers and platforms like PayBy are continuously investing in different security measures to build consumer trust and minimize the risk of theft.

Popularity of cryptocurrency payments

Although cryptocurrencies like Bitcoin and Ethereum are still in their early stages, their popularity is growing, signifying a shift towards a decentralized payment system.

Globalization of payment systems

Digital commerce needs a payment system that can support cross-border transactions. Thus, payment platforms that can handle multiple currencies and smooth cross-border transactions are gaining importance to both merchants and consumers.

Clearly, a lot of innovation is happening and will happen in the future to streamline it.

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Payment and Metaverse: The benefits 

Payments in Metaverse currently occur both through centralized and decentralized ways. However, a recent survey by PayPal reveals that users prefer multiple payment methods. In fact, the survey revealed that 80% of the respondents purchase Metaverse tokens using their PayPal account. Debit cards follow next.

The study also confirms that there's a strong connection between the adoption of Metaverse and decentralized finance (DeFi) users. For example, 80% of the Metaverse users are already using cryptocurrency.

Benefits of payments in Metaverse

• Since there are no geographical boundaries, cross-border payments become easy.
• It opens up the scope for innovations where service providers and creators can develop new experience-based products.
• Since Metaverse allows users to make payments in a virtual environment, customers can purchase virtually any virtual goods, services, and experiences, giving users a convenient service experience.
• It opens up the scope for financial inclusion, including the underserved and unbanked.
• Metaverse offers a fluid user experience where users can purchase goods and real estate, attend virtual events, and much more. Metaverse ensures an engaging user experience. 
• Businesses that operate within the Metaverse system have other revenue streams opened up. For example, they can generate revenue from services, virtual products, experiences, virtual storefronts, premium content offerings, and other innovative revenue opportunities. 
• Since Metaverse often uses digital tokens and cryptocurrencies, it lowers transaction fees, making the entire payment processing time faster and with better security. Further, tokenization can enable the creation of unique digital assets like NFTs, making the transaction more secure and valuable. 
• Metaverse allows microtransactions, a common feature that allows making small and frequent purchases of virtual items. This feature is useful for businesses as it allows them to constantly engage with their users and keep the revenue stream flowing. 
• The blockchain technology that powers the payment in Metaverse provides better security and transparency, thus preventing fraud. Furthermore, the decentralized nature of blockchain reduces the risk of unauthorized transactions, which ensures that every transaction is secured and verified. 
• With Metaverse, you can develop customizable payment solutions that meet the unique needs of the virtual environment. For example, it allows you to include features like programmable transactions, automated payments for virtual subscriptions, virtual wallet integrations, etc.

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Challenges of payments in Metaverse

While digital payments and Metaverse offer many benefits, they also have some challenges. Let's look at some of these.

Security and fraud prevention

Due to payments' digital nature, ensuring the security of every transaction within the Metaverse is challenging. Digital payments can expose the user to threats and cyberattacks. Thus, offering user protection is essential for maintaining trust and security.

Regulation and compliance 

Metaverse is a complex system that operates within a stringent regulatory landscape. Each jurisdiction has its regulatory guidelines for data protection, digital currencies, and online transactions, so you must ensure that all these compliance guidelines are followed during a cross-border transaction.

Integrating with the existing financial system

Since Metaverse payment systems work on different principles, it's challenging to integrate with the existing payment system.

Financial institutions must develop complex processes to close the gap between virtual and real-world currencies, ensure that currency conversions meet compliance, and interoperate with existing payment infrastructure.

Volatility of cryptocurrencies

Cryptocurrencies are known for their price volatility. However, most transactions in Metaverse occur through cryptocurrencies. Price fluctuations in cryptocurrency can affect the stability of transactions, which can impact digital currency transactions.

Digital divide and accessibility

The Metaverse is not equally accessible and creates a digital divide among users. Issues such as internet accessibility, technology literacy, and device compatibility create this digital divide, which restricts equal participation in virtual payments.

Legal and tax implications

The legal and tax implications of digital payment in Metaverse can be complex. Merchants and consumers must navigate these regulations to stay compliant with the tax laws and legal requirements related to the income generated in Metaverse.

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Digital payments and Metaverse: What does the future look like?

Digital payments in Metaverse have immense potential to transform the payment industry.

However, a lot of work must be done before the world embraces it. Innovation needs to happen to secure theft and cyberattacks, while financial institutions need to educate and spread awareness among users and businesses for better adoption.

Governments and regulatory bodies across geographies must come together to streamline the regulatory guidelines and make it easy for everyone to adopt digital payments in the Metaverse.

When all of these factors are considered, the digital payments system in the Metaverse is poised for a revolution.

Want to stay ahead of the curve in digital payments and the impact of metaverse?

‍Get started with PayBy today.

Lately, we have noticed a trend in the payment industry, especially in the post-COVID period: the steady and fast growth of digital payment systems worldwide. Businesses across industries are embracing this new way of payment as customer demand grows.

However, with the fast adoption of digital payments, data breaches and theft are becoming prime concerns. In a survey, 4 in 10 UAE customers reported experiencing fraud attempts, and this trend continues. Identity theft is another area of concern.

Does this mean customers and businesses should avoid digital payments? Or is there any other way out?

The good news is that today, we have strong security measures, such as tokenization, in place that make digital payments secure.

In this article, we’ll explore the role of tokenization in securing digital payments and how businesses can use it in their payment systems.

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What is tokenization in payments?

Payment tokenization is a security measure that replaces sensitive transaction information with a unique random set of characters known as a ‘token.’

A token is a unique combination of a card, token requestor, and device. For example, sensitive payment information like credit card numbers is replaced with a random digital identifier or token number.

Tokens work in any form of online transaction, such as website payment, QR codes, in-app payment, point-of-sale transaction, etc., and ensure the data is kept safe during any online transaction. Thus, the token keeps the actual card number safe and ensures it cannot be accessed, used, or stored.

Unlike data encryption, which can be reversed, tokenization is irreversible and cannot be decrypted.

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Types of tokens in digital payments

Tokens are of two types - single-use tokens and multi-use tokens. 

Single-use tokens

As the name suggests, a single-use token is used only once. Once used, tokens become redundant. Thus, once the payment is over, they are of no use. So, even if hackers access it, they can’t cause any harm.

Multi-use tokens

Multi-use tokens are useful in recurring transactions. They have multi-use validity, so every time a transaction needs to happen, the token can be retrieved, and the payment can be processed without revealing sensitive information. For example, subscription-based businesses use multi-use tokens.

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Benefits of tokenization

Tokenization has many benefits. Some of these include:

Payment safety

Tokenization helps protect sensitive transaction information, thus preventing data breaches. Because it doesn't involve mathematical operations, tokenization requires fewer resources than data encryption. Third-party service providers like PayBy can easily perform tokenization.

Payment convenience

Tokenization securely stores your credit/debit card information on websites, mobile wallets, or e-commerce apps. This makes your payment experience convenient without worrying about payment security.

Innovation of new solution

Tokenization facilitates the innovation of new payment solutions, such as mobile wallets, cryptocurrencies, and one-wallet payments, thus improving consumer convenience and payment safety.

Reducing the risk of breach

Tokenization has significantly reduced data breaches because tokens are random numbers that cannot be used to retrieve the original credit card number without the key.

Staying compliant

Tokenization helps merchants stay PCI DSS compliant. With tokens, they don't need to store or process sensitive card details; they only need to secure the token and the key. This, in turn, helps save costs in compliance audits.

Scalability and flexibility

Since the tokenization platform can be adapted to any online payment method, it can help you scale up your journey.

Improves brand reputation

By leveraging tokenization in your payment system, you demonstrate your concern about data theft and security, which improves your brand reputation.

Build customer trust

One of the greatest fears of online consumers is data theft. You can earn their trust by offering secure payment options that can build trust and improve sales. Tokenization can help you achieve that goal.

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How payment tokenization works

The core principle of tokenization is changing sensitive payment information to a non-sensitive equivalent that can be stored and transmitted safely without exposing the actual data. Here’s how payment tokenization works.

Data collection

In this first step, data collection happens when a consumer enters their payment information to make a transaction.

Tokenization request

If the business’s payment system uses a third-party tokenization vendor, it will send the sensitive data to the secure tokenization service. However, tokenization happens automatically if the business uses a tokenization-enabled solution like PayBy.

Token generation

The token generation happens in the next step, which combines encryption, algorithms, and secure storage. Together, they generate a unique token, which is a random string of characters and numbers that represent the original data without actually leaving it.

Token storage

The next step is token storage. Here, the merchant's payment system stores the token information while the sensitive card details are stored in a secure token vault designed to protect the data from unauthorized access.

Token usage

When a merchant needs to process a transaction, a token is sent to the payment processor or tokenization service. The token is then securely mapped back to the original data. Thus the transaction is completed without exposing sensitive data at any time.

Token reusability

Token reusability is a feature that enables stored token information to be used for recurring transactions. This is handy for paying subscriptions or repeated purchases on an e-commerce site. It eases the payment process, enhances the user experience, and keeps it secure throughout.

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Who can use tokenization?

Tokenization is useful for any business. For example, e-commerce merchants can facilitate safe transactions by securing customer information.

Tokenization is also useful in brick-and-mortar shops when using a point-of-sale system or mobile payment. In such transactions, tokenization offers an extra layer of protection to keep customer information safe.

Merchants with subscription-based business models can use tokenization to keep customer information safe by storing the token details and mapping them back every time a transaction needs to occur.

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How can I implement payment tokenization?

You can implement payment tokenization with PayBy. PayBy offers a robust fraud detection and prevention mechanism integrated into the payment gateway, like tokenization. It also offers AI-based fraud monitoring, 3D secure authentication, and transaction risk analysis to ensure all payment transactions are secured and no sensitive information is breached. 

PayBy is licensed by the Central Bank of the UAE and has received the highest financial service approvals to conduct Stored Value Facility (SVF) and Retail Payment Services (RPS) operations. It is also trusted by some of the UAE's leading brands. 

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We all are aware that the global temperature is rising. While the earth’s climate has been changing since it was formed, the current warming is happening at an accelerated rate that has never been seen in the past 10,000 years.

Hence, sustainability has become a critical focus for many as it can reduce the effects of climate change. So, every industry is now developing various ways to become sustainable, minimize carbon footprints, and conserve energy.

The payment industry is no different.

In fact, it’s one area where sustainability has made significant improvements in the last few years. As the traditional payment method impacts the environment, more and more businesses and consumers are opting for green payment solutions.

This article will explore how digital payment systems contribute to sustainability and how you can join this movement. But before that, let’s quickly understand how the traditional payment method impacts the environment.

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Impact of the traditional payment method on the environment

Traditional payment methods involve bills and coins, which involve physical bill production. This requires high energy consumption at data centers, chemical usage, and paper pulp production. Traditional payment methods also include various credit and debit cards, creating a lot of plastic waste.

• Extraction of resources like copper, nickel, zinc, etc, that are used in coin production
• Harvesting and cutting down of trees along with chemicals for bill production 
• All the currency production units have a heavy consumption of energy
• Traditional currencies use significant amounts of water for metal refining, printing, paper production, etc. 
• Heavy amounts of plastic and chemicals used for card production

Needless to say, traditional payment methods heavily impact the environment.

The solution?

Green payments.

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What are green payments?

Green payments are a sustainable and effective method to reduce carbon footprint. Over the years, some great eco-friendly innovations have been made that can significantly reduce environmental impact.

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Benefits of green payments

Green payments have many benefits that contribute positively to sustainability:

Environmental impact

Green payments significantly reduce carbon emissions and consume less energy and resources than traditional payment methods. Since notes, coins, and cards are not printed and transported, green payments are sustainable.

Cost savings

As you save energy and reduce waste, you also save costs in the long run. So, if you are still contemplating switching to green payments, this is your cue!

Compliance regulations

Global climate change is a serious concern, and many organizations, including various governments, are taking active measures to promote sustainability. For example, the UAE aims for net-zero emissions and sustainable practices.

It launched the UAE Energy Strategy 2050 to reduce emissions and contribute to renewable energy. As a part of this program, it also launched the UAE Green Agenda 2030 to transition to a green economy. Switching to green payments can help you adhere to compliance regulations and guidelines. 

Build a positive image

Finally, by building a culture of sustainability, brands can make a positive image for themselves and attract customers who care about the environment. 

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Key innovations for sustainability in payments

As sustainability is becoming a primary concern worldwide, we can experience various innovations that reduce wastage, promote energy conservation, and minimize carbon emissions.

The payment industry is not far behind, and we can witness some key innovations in this field. In fact, 49% of small and medium business owners in the UAE already offer green payment options as a growing customer demand. This will only see an uptick in the current months.  

Digital wallet and contactless payments

With digital wallets and contactless payments, we have significantly reduced the use of credit/debit cards, thus reducing plastic waste. This has also reduced the need for paper receipts while streamlining the entire payment cycle. 

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Mobile payments

Mobile payment is another key solution for sustainable payment that’s gaining popularity. As smartphone and internet usage is on the rise (In 2023, 10.07 million people in the UAE had internet connectivity while 9.69 million people had mobile phones out of a population of 10.17 million), mobile payments are becoming a common way of payment.

They significantly reduce carbon emissions, tree cuttings, and paper waste and decrease energy consumption. Mobile wallets like Apple Pay, Google Pay, and Samsung Pay are accelerating consumer adoption of sustainable payment methods.

Mobile payment is not limited to smartphones but can be integrated into various payment solutions, including the web, smartwatches, and wearables like fitness trackers and rings, offering consumers more choices to make payments sustainably. 

QR code payments

QR code-based payments are another green payment method that is gaining traction, particularly in Asia. Generating a QR code is easy with platforms like PayBy. All you need to do is create a merchant account, access the QR code generation feature, and you’re ready to accept payments from customers in a sustainable way!

Biometric authentication

Biometric authentication is a revolutionary green technology that promotes sustainability in the payment solution. With biometric authentication, you can significantly reduce the use of credit and debit cards, which in turn reduces plastic waste and the consumption of raw materials and energy needed for their manufacture. For example, by partnering with PayBy, you can easily enable customer biometric verification.

Blockchain and cryptocurrency

Blockchain is a decentralized and transparent payment technology that can process payment without any intermediaries' intervention. It's fast, efficient, and, above all, a sustainable digital solution. It reduces transaction costs and significantly reduces carbon footprints.

Cryptocurrencies are considered environmentally friendly because they don't need to be printed and can operate within renewable energy-backed networks.

Cloud-based payment system

Cloud-based systems are energy efficient compared to traditional data centers as they share computing resources. This enables efficient server capacity utilization, thus reducing energy consumption and carbon emissions. Additionally, they offer scalability and flexibility, which further encourage businesses to adopt cloud-based payment systems.

Green data center

Payment processing consumes substantial energy. So, companies are focusing on investing in renewable energy sources for their green data center. 

Eco-friendly payment cards

Many banks and financial institutions are now developing eco-friendly payment cards made from recycled materials and biodegradable plastics.

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Future of green payments

As new green technologies emerge and regulatory guidelines become stringent, businesses and consumers can expect to adopt green payments more widely.

For example, as the Internet of Things (IoT) advances, it will be crucial to enable more devices to interconnect for a smoother payment ecosystem, minimize carbon emissions, and reduce energy consumption.

International organizations like the World Bank and the United Nations have played key advisory roles and emphasized climate concerns. The annual sessions of the Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change show that green payments are now a global agenda.

The government established the Network for Greening the Financial System (NGFS), a global association that promotes sustainable payment solutions.

As more customers adopt sustainable payments, more businesses will offer green payment solutions and vice versa. In the coming days, we can expect more sustainable payment usage in healthcare, education, government services, etc.

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Adopting sustainable payment solutions with PayBy

If you’re concerned about protecting the environment and want to adopt green payment solutions, partnering with PayBy can be a great idea.

With solutions like PayBy, you can integrate green payment methods with a virtual account and digital wallet or a payment gateway, direct pay, QR code payments, etc.

PayBy is licensed by the Central Bank of the UAE and has received the highest financial service approvals to conduct Stored Value Facility (SVF) and Retail Payment Services (RPS) operations. It is also trusted by some of the leading brands in the UAE. 

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The 'low touch' contactless payment mode surged during the pandemic. Since then, its growing popularity has increased worldwide, including in the UAE.

Statista mentions that the total transaction value in the digital payments market is projected to reach US$29.75bn in 2024 in the UAE. Seeing its growth, it can be said safely that contactless payments are here to stay and will rule the market in the coming years.

This article will show how contactless payments shape the retail industry.

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What are contactless payments

Contactless payment is a modern method in which customers don't need cash or a swipe card. Instead, they can tap or wave their card in front of an e-card reader or use a digital payment wallet on their smartphones to make a payment.

To make this innovative payment solution successful, complex technologies like Radio Frequency Identification (RFID) and near-field communication (NFC) exchange information between your card or phone app, bank account, and the merchant's reader.

As this data can only be exchanged within a range of around 4 cm, there is no scope for accidental reading by unauthorized nearby card readers.

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What are the benefits for consumers and retailers

Contactless payments are fast and reliable. This benefits both consumers and retailers in the following ways: 

Benefits of contactless payments for retailers

1. Better operational efficiency: The tap-to-pay feature is fast and efficient and doesn't require an additional workforce. It reduces the time the retailer would have spent counting cash or swiping the card in the machine.

2. Improved customer experience: With tap-to-pay, consumers no longer need to wait in long queues. They can simply tap and pay and complete a transaction. When retailers achieve such operational efficiencies, customers have a smoother shopping experience, improving overall customer satisfaction.

For example, by integrating PayBy into your payment solution, you can offer multiple contactless payment options like an online payment gateway, QR code payments, or a pay link that customers can access from their smartphones.

3. Increased sales: When you offer the convenience of contactless payment and a smooth shopping experience, customers are more likely to buy from you. This can improve overall sales.

4. No extra cost: Providing a contactless payment option doesn't require any extra processing charges. Additionally, it reduces operational costs, as you can reduce the risk and cost of an extra workforce for cash handling and processing.

5. Fraud protection: Contactless payments use complex technologies like encryption and tokenization to prevent hacking and fraud. A better security system ensures no fraud chargebacks, which are more common with magnetic swipe cards.

6. Improved efficiency: As contactless payment can streamline the entire payment process, your staff can focus on other tasks, thus improving overall operational efficiency.

7. Access to data: Contactless payment systems are often integrated with different digital payment platforms. This gives retailers easy access to customers' financial behavior and preferences, which can help them make data-driven business decisions.

8. Build customer loyalty: Tech-savvy customers always appreciate businesses that leverage technology and incorporate convenience into their operations. By implementing a contactless payment processing system, you can nurture the emotions of tech-savvy consumers, turning them into loyal customers. 

9. Future-ready: Digital and mobile payment systems are evolving rapidly. Retailers who have already embraced contactless payments are ahead of the curve ready to embrace the new era of digital payment.

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Benefits of contactless payments for consumers

1. It’s fast: Contactless payment is faster than traditional payment methods. Customers find it convenient and fast, especially for small everyday purchases.

2. Easy to use: With contactless payment, customers don't need to remember their PIN or sign a receipt. They just need to tap their card to make a payment. Quite easy, isn't it?

3. Better security: As mentioned, contactless payments use strong security technologies like encryption and tokenization, which reduce the risk of unauthorized access, fraud, and theft.

4. Flexibility of payment: Contactless payment ensures you don't need to carry bulky wallets loaded with cash and numerous cards for your errands. You’re sorted with your payment needs if you have an NFC-enabled smartphone.

5. No more ATM trips: As contactless payments are no cash, you need not make multiple ATM visits. This can subsequently eliminate the risk of loss or theft at ATMs.

6. Rewards and loyalty points: Many banks offer loyalty points, discounts, and cashback offers when you use contactless payments.

7. Better accessibility: Contactless payments are more accessible to consumers with disabilities. Since they require fewer physical interactions, they’re more accessible than traditional payment methods like counting notes or entering a PIN on a device.

8. Budget management: If your contactless payment system is integrated with a digital wallet, you can track all the transactions in real-time. This helps manage your budget and monitor your spending habits.

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Contactless payments - Trends and adoption

As mobile payments and various digital solutions influence customer behavior and payment patterns, the adoption rate for contactless payments is growing among retailers.

In UAE, 49% of small and medium business owners already offer contactless payment options as a growing customer demand. This will only see an uptick in the current months.

Let’s look at some of the recent adoption trends for contactless payment.

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1. Integration with mobile wallets

Mobile or digital wallets allow users to pay through their mobiles or the web. Mobile wallets like Apple Pay, Google Pay, and Samsung Pay have accelerated consumer adoption of contactless payment.

A survey shows that more than half of consumers are still using contactless payment even after the pandemic, indicating it is here to stay.

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2. Not just limited to cards

Contactless technology is not just limited to tap-to-pay. It has a broad scope of expansion beyond cards.

For example, it can be integrated into various payment solutions, including mobile, web, smartwatches, and wearables like fitness trackers and rings, offering more choices to consumers to make payments.

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3. QR code payments

QR code-based contactless payments are gaining traction, particularly in Asia, where NFC infrastructure is yet to be developed. Generating a QR code is easy with platforms like PayBy. All you need to do is create a merchant account, access the QR code generation feature, and you’re ready to accept payments from customers.

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4. Biometric authentication

While customers may have some initial inhibitions about the security aspect of contactless payment, enhanced security features like biometric authentication assure customers.

Customers can conveniently safeguard every transaction through fingerprint scanning, tokenization with biometrics, facial recognition, voice recognition, etc.

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5. Contactless ATMs

Banks are also driving contactless payments by deploying various contactless ATMs. Customers can withdraw cash using cell phones and contactless cards without touching the ATM.

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The future of contactless payments

As new technologies continue to emerge and new security measures come into effect, we can expect to see a greater adoption of contactless payments.

For example, with enhanced security features, future contactless payment systems will have more advanced security measures, and we can expect to see the use of blockchain technology and multi-factor authentication.

As the Internet of Things (IoT) advances, it will play a crucial role in enabling more devices to interconnect for a smoother payment ecosystem.

With the introduction of artificial intelligence and machine learning, we can expect to see more personalized payment experiences. The AI-driven insights will help payment solutions offer more customized products in the coming days.

As customers adopt contactless payments more, customer demand for smoother transactions will rise beyond retail. In the coming days, we can expect more contactless payment usage in healthcare, education, government services, etc.

In the future, contactless payments will see greater adoption as the world shifts towards more sustainable payment solutions that reduce environmental impact.

Contactless payments could also integrate with AR and VR technologies in the future, enabling new and immersive shopping experiences where payments are made seamlessly within virtual environments.

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Get started with contactless payments

No matter how good your products are, how you make shopping a convenient experience for your customers can differentiate you from your competitors.

With solutions like PayBy, you can integrate contactless payments with a virtual account and digital wallet, or a payment gateway, direct pay, QR code payments, etc., and stay on top of the current payment trends.

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