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Understanding Payments Transformation

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedNov 20212 min read

The bottom line of any business is simple: you receive payments in exchange for goods or services. However, the way in which those payments are received is transforming as we move further and further into the technological age. In addition, many countries are moving completely towards becoming cashless societies, and this is expected to become the norm across the globe. The digital transformation in payments has allowed for instant and convenient purchases, which can be made with a variety of different payment methods such as debit cards, prepaid cards, direct debit and online banking services.

Along with this global payments transformation, there are a number of new concerns and topics that organisations should address. For example, security and fraud protection become increasingly important as nearly all transactions are now carried out digitally. Keep reading to find out more about the digital transformation in payments and what this means for your business.

What is the global payments transformation?

Throughout human history, payments have been exchanged for products and services. However, the form of these payments has shifted dramatically over the course of time, in a process that can be referred to as payments transformation. While in the past purchases may have been carried out in exchange for real cash or other goods, nowadays nearly all transactions are instantaneous and digital thanks to advanced processing technology and business solutions.

With this in mind, companies should have a plan to transform payment plans. As consumers become more and more empowered to participate in financial services thanks to their accessibility through technology, businesses should adopt new technologies to keep up with these shifting trends. For example, real-time global payments enable both businesses and consumers to make payments instantly through third-party software that interfaces with bank systems.

The digital transformation in payments and security

One of the biggest implications of payments transformation is the increased need for sophisticated security systems. In response to the changing face of online payments, new regulations are being introduced that will affect the way that banks and organisations operate.

Firstly, the global finance industry will shift to using ISO-20022 payments. Put simply, this is an international standard payment format that supports High-Value, Low-Value and Retail Real-Time Payments. This is an efficient way to accept and make payments, with a high level of security that protects against the possibility of fraud.

In addition, there is a trend of tokenisation that is becoming more popular for all forms of digital payment. Essentially, this refers to replacing sensitive data such as account information and personal details with tokens that cannot be traced. These tokens can also be made specific to certain transactions, and can therefore be used to restrict the kind of payments that can be made. For example, it can ensure that bills are only sent to services companies.

How are emerging markets driving the payments transformation?

You might have heard that emerging markets are driving the payments transformation, but what does this mean, exactly? Well, the term ‘emerging markets’ refers to the economies of developing nations that are participating in the global economy as the country grows. Given that these nations are home to about 85% of the world’s population, it’s not surprising that they are having far-reaching effects on the nature of payments.

The emerging markets often have less access to actual bank accounts and tend to favour electronic transactions, and banks are shifting their behaviour to accommodate this. For example, they are beginning to prioritise virtual card wallets as mobile money rather than requiring the use of a bank account to make payments.

We can help

GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.