Banks and governments are trying to encourage smaller entrepreneurs to switch to bank accounts or not even accept cash anymore but their interference is likely unnecessary. People are already abandoning cash and now they’re even moving away from cards to mobilepay.
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Fintech is making an impact
FinTech is a contraction of finance and technology. Concretely, the term includes all innovative financial products and services that speed up, modernize and simplify the way we pay or deal with money.
FinTech has had a large impact on the way in which we, as a customer or user, deal with money. Banks are also undergoing major changes as a result. FinTech is often driven by young start-ups that come up with highly innovative ideas.
For example, Bunq or N26 have become two fully digital banks. These neo-banks are typically more convenient and less costly than traditional banks, which have begun to suffer from the onslaught of competition. Now traditional banks, such as KBC, are trying to modernize their operations and offer their own mobile applications where you can conduct transactions and access your finances 24/7.
Plastic as an argument for changing to contactless payments
Every year, some 12.7 million tonnes of plastic waste disappear into our oceans. This has catastrophic consequences for the environment and marine life. Plastic credit cards contribute to part of the pollution. At the moment, bank cards are replaced every few years. You throw your old one in the bin and there you have the new one. So it’s not very environmentally friendly.
In the meantime, payments with smartphones are taking over. The days of credit cards seem to be numbered. With the arrival of PayPal, Apple Pay, Android Pay or Payconiq, we are paying more and more with our smartphones. According to a study by Juniper, 90% of Europeans still prefer contactless payment with card over a digital wallet. That’s in part because banks themselves continue to promote the use of a card.
Radical approach for Apple or Payconiq
Apple or Payconiq are two fine examples of organizations that take a radically different approach. Apple has the advantage of offering both hardware and software and can thus build an ecosystem around one device: the iPhone. With Apple Pay, users can already pay at any ATM or in webshops. Startup developers are busy creating new payment apps and companies like Google, Amazon, and Bunq are interested in these disruptive technologies. The development of a solid ICT infrastructure contributes to the integration of a good digital platform for payments. And there is where Payconiq intervenes.
Payconiq is the Belgian banking sector’s answer to these FinTech startups. A collaboration between the largest banks led to a platform for iOS and Android that allows everyone to easily link their bank account. Payconiq was promoted to small entrepreneurs but is now also expanding into online webshops and wants to break through throughout Europe. The banking sector can, therefore, learn a lot from FinTech. Unfortunately, platforms like Payconiq or Apple Pay are too often used as an addition to regular bank card.
The security problem presented by contactless payments
Both contactless payments and payments with a smartphone or smartwatch have one big dilemma: security. We often read stories of people who have been robbed by criminals who can use special devices to simply withdraw money from a contactless card. Fortunately, these situations rarely occur and the reports are often not even correct. Yet safety is a valid concern to think about. Our smartphones now have at least one way to store biometric data. These can be facial recognition or fingerprint recognition. These biometric data represent a new challenge for making payments secure. They also make you vulnerable to people with bad intentions.
FinTech start-ups, therefore, face three major challenges: data protection, cybersecurity, and competition. In terms of competition, there are already many players on the market. However, FinTech is not a new phenomenon. Since the last banking crisis and the collapse of many large banks, innovative organizations have been trying to avoid a crisis of that magnitude. Cybersecurity and data protection are the most important factors that companies and users should take into account. Banks like Bunq or Monzo that do internet banking, use the cloud as a way to offer their payment applications on a cross-platform basis. These applications must be safe enough to persuade people and get them into the digital payment story.
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First published in TECH PULSE PREMIUM, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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