The payments landscape is changing fast – and much of this fast-paced change is being driven by today’s digitally empowered consumers, whose expectations have been transformed by the smartphone and the services these supply.
This means that more than ever before, consumers expect payments to be fast, convenient and hassle-free.
And that’s set payment providers and other contenders in the payments ecosystem scrabbling to capture the hearts – and wallets - of today’s device-wielding consumers at the PoS. Which is why in 2015 we saw a plethora of mobile payment innovations, including the launch of Apple Pay and Samsung Pay, and the rollout of Google’s new Android Pay app.
No surprise when you consider how global retail payments hit a record high in 2015 – and are predicted to exceed the $13 trillion mark in 2016. Clearly, getting the payment proposition right for consumers as they shop in-store, online or on the move generates commercial returns. And with PoS transactions up 10 per cent in 2015, it’s a safe bet that consumer demand for card and digital payment technologies will continue unabated in the coming months.
So, here are my predictions on what’s going to dominate headlines in 2016:
Mobile commerce – we’re still waiting for mass uptake
This time last year the media whipped up a frenzy of anticipation, predicting that the launch of Apple Pay would generate a mobile commerce explosion in 2015. But after all the hype, what really happened?
Despite gaining some traction in regions like the US, there’s little evidence that consumers with an iPhone 6 device are choosing to use Apple Pay in preference to the other payment instruments available. Because, when you’ve got plenty of other payment options in your pocket, what’s the motivation to pay with your phone? And how does the mobile proposition play out in countries like Germany, where cash remains king at the PoS?
So, the Apple Pay launch showed us that not every new payment innovation scales or catches on as expected. And in 2016 we’re set to see yet more fragmentation in this space as yet more mobile payment and wallet solutions launch.
Security is key to building consumer adoption – and merchant confidence
The steady growth of contactless payment at the local convenience store and on public transport systems around the world demonstrates the growing consumer hunger for payment convenience. And the ubiquity of mobile devices – and the emergence of wearable tech – means at some point that the mass uptake of mobile payment is inevitable.
But the mobile phone represents a tempting attack vector for criminals. Recent high profile data breaches have left consumers highly sensitised to the issue of identity theft and fraud. For mobile payments to take off, consumers will need to be certain that their transactions, data and devices are secure – and that means that mechanisms need to be in place to deal with a variety of scenarios – including device loss/theft, and the use of public Wi-Fi. It also means that payment instruments need to be developed to take account of the fact that the desire of smartphone users to personalise their devices does not expose them to malware or privacy violations.
What’s more, merchants will also need to be confident the payment industry can deliver bullet-proof frameworks to protect against mobile payments fraud and create a secure and trusted relationship with customers.
Get ready for the connected home
In 2016 we’re set to see the Internet of Things fuel online transactions as smart home automation products increasingly go main stream. With the 2015 launch of Apple’s HomeKit, the vision of connected appliances taking on the management of our heating, domestic security and lighting is becoming a reality.
So, will having an Internet-connected fridge in your kitchen that’s integrated with your bank account or credit card represent a security risk? And how will that play out in terms of extending real-time payment services into the e-commerce and m-commerce arenas? Only time will tell.
Smart technologies will disrupt today’s payment culture, ushering in a future where digital commerce micro payments could potentially be initiated from multiple places – electricity meters, road sensors, car park number recognition systems, audio/visual systems. And that means consumers will need real-time visibility into fund transfers and receipts.
Digital currencies will come of age
They’ve been around for a while now, but transaction volumes for digital currencies like bitcoin are steadily rising. Today around 100,000 merchants and service providers accept bitcoin – a peer-to-peer digital currency that eliminates transaction fees for retailers and guarantees payment. Bitcoin is appealing from a consumer perspective too – they can store bitcoins in their digital wallet, use them as cross-border cash for global online payments, or make peer-to-peer payments. And all in the knowledge that their personal data is protected and stays private.
With central banks now exploring the use of cryptographically protected digital money and bitcoin transfers to enable cheap, relatively fast and secure inter-bank transfers, this may well be the year that digital currencies gain more widespread acceptance.
Consumers will make more – not less – payment choices
In the last few years we’ve seen a plethora of new payment innovations emerge – NFC, wallet, EMV cards, mobile payment apps. It seems like today’s consumers have never had so much choice when it comes to payment. But what’s also clear is that they will continue to make more and different choices about how to pay, depending on what the transaction is, and whether they’re conducting it in-person or online – and where in the world they live.
And that may explain why, in 2015, we saw the emergence of two distinct breeds of online retailers the first being smaller companies and new market entrants who typically look for a full service e-commerce platform that incorporates a web-shop, payment and logistics/fulfilment.
The second was larger more established players who look for as much diversity as possible, picking acquirers and vendors appropriate for each and every market and channel they operate within.
André Malinowski, Head of International Business at Computop
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