Payments At The Edge: Dealing with Data in Digital Payments

The prospect of a global cashless economy is not too distant a reality. Global digital payments are predicted to increase on average by 10.9% reaching close to 726 billion transactions by 2020, according to the World Payments Report 2017. The world’s top cashless economy is currently Canada, with Sweden coming in at second and the UK at third (Forex Bonuses). Chinese cities are already emerging as early examples of cashless economies, with digital payments on mobile apps such as WeChat and Alipay taking precedent for mobile payment transactions. And Sub-Saharan Africa is a huge market for mobile payments — the GSMA reports that more than 40% of the adult population is using mobile money on an active basis in seven Sub-Saharan African countries.

The Global Interconnection Index, published by Equinix, predicts that by 2020 direct Interconnection to financial service providers, transacting and exchanging payments digitally, is expected to grow 38% among enterprises and 34% among service providers as they increasingly conduct digital commerce. As the amount of digital payments increases globally, the demand placed on digital commerce solutions such as electronic wallets, on security systems, and on network and cloud infrastructures is increasing. So, what measures do retailers, banks and digital commerce companies need to take to ensure they can handle and process the huge quantities of data that the digital payment revolution is creating? Where do the potential challenges lie?

Creating ecosystems at the digital edge

Increased data traffic needs to be managed effectively for the efficient transferring and processing of data, and to ensure latency issues don’t affect the customer experience. Digital commerce companies can improve the customer experience by hosting their data centres in close proximity to their partners and suppliers, to create an ecosystem where different companies can directly connect to one another. This allows companies to increase their speeds of data transfer as they bypass the public internet, and makes it easier to scale-up during spike periods for digital transactions.

As the below image shows, the global interconnection platform at Equinix provides this direct and secure physical and virtual interconnection between banks, retailers, consumers and all other players in the digital payment supply chain. Our position close to the digital edge – where the physical and virtual worlds come together – allows payment providers to connect to customers where they are, to deliver payments that are both fast and secure.

At Equinix’s Innovation Through Interconnection 2018 event, our Chief Product Officer (CPO) Brian Lillie will advise banks and retailers on how best to prepare for this data explosion, as digital payments change the way that businesses operate and interconnect. Brian’s discussion “Meet you at the Digital Edge” will explore how innovation is going to be critical to staying ahead at the digital edge, where the physical meets the virtual world.

Fail to prepare, prepare to fail

One consistent challenge for retailers is the increased data traffic during spike periods, such as at Christmas or at major sale events like Black Friday and Cyber Monday. If digital payment systems are working correctly, these are hugely lucrative milestones in the annual retail calendar.

This is something that Chinese firm Alibaba can vouch for. Last year during ‘Single’s Day’ on 11th November, the e-commerce giant took a staggering $14.3 billion in one day, making it the single biggest online shopping event in the world. And on Amazon Prime Day in 2017, a one-day only global shopping event exclusively for premium Amazon members, global sales for the firm surpassed $1 billion.

If managed badly, these spike periods can be an administrative nightmare and cause major problems for retailers. Companies who still use traditional legacy IT systems are struggling to cope with data congestion on the public internet, which results in sluggish load times for adverts and webpages, and affects the speed at which analytics tools can process consumer requests. Retailers who do not get this right will struggle to engage customers if their experience is hindered by slow loading websites. They may also be missing out on placing relevant ads and capturing new audiences.

Digital payments require real-time collaboration across various mobile networks, operators, financial institutions, card networks, retailers and fraud protection services – an incredibly complex process with many moving parts. With all these interlinked components needing to come together, digital commerce providers are having to rearchitect their traditional IT systems to leverage a solution that can manage the increase in data traffic and the need for greater collaboration.

Even well-established digital commerce providers face challenges, as the previously separate domains of electronic payments, mobile networks and the cloud are converging. But there are steps companies can use to significantly improve their customer experience – ensuring swift and secure electronic payments are the standard, regardless of how many transactions are taking place.

Architecting digital transformation

Equinix helps digital commerce companies architect an IT infrastructure that works for them. An example of this is Equinix customer FreedomPay – a digital commerce platform provider that was experiencing increased global demand and growth. It needed to transform and expand its IT infrastructure to capture and support new business in both the UK and Asia Pacific (APAC) region, and reinforce its business continuity infrastructure. It also needed to expand its storage capacity to the cloud while delivering a faster and more secure shopping experience.

By choosing to partner with Equinix, FreedomPay leveraged a colocation and interconnection provider that could position them near their business partners, while also offering consistent low latency connection between cloud, network and business services. Through the Equinix Performance Hub, FreedomPay could work with their partners to create an infrastructure with a global presence, allowing them to process payments close to where they are taking place. This played a pivotal role in helping FreedomPay to achieve their original plans for expansion, while also achieving a £1million saving in both capex and opex costs.

The future of digital payments

Digital commerce companies should start to prepare now for the increased demand of digital payments and the widespread emergence of Artificial Intelligence (AI) and data analytics, which will play a key role in shaping the future of the payments landscape. As more data is gathered on consumer spending habits, companies need to make sure they have the capability to analyse this data to gather useful insights into how they can optimise the services they offer.  With the amount of digital payments only set to increase, preparing for this expansion in advance will save time and money in the future.

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