As a growing number of people adopt digital payment methods like Google Wallet and Android Pay, many experts are wondering if the era of paper money and credit cards is over.
Despite the fact that eWallets, payment apps and digital currencies still have a long way to go before they become mainstream, the speed of progress is fast and showing no signs of slowing down. A recent study conducted by Statistic Brain suggests that while only 32% of consumers in the USA have at some point used a digital wallet, 78% are aware that they exist. At first, this statistic might not seem that impressive. What it shows if compared to earlier figures is that the gap between adoption and awareness is rapidly shrinking.
So how are these innovations shaping commerce? And what do you need to know to make sure your business isn’t left behind?
Brands are Developing Their Own Payment Apps
One of the biggest drivers of the worldwide change in how we pay is the increasing popularity of mobile payment apps. Digital payments are safer for consumers and more cost-effective for retailers. Companies like Starbucks and Dunkin’ Donuts, for example, are now well-known for their branded apps.
For many brands, the opportunities are obvious. With their customers using a single, recognized platform in the form of an app, it’s possible to increase the reach and effectiveness of everything from loyalty reward programs to special offers. Branded payment apps also bypass the fees charged by intermediaries like PayPal and Stripe.
Furthermore, third-party software, often in the form of SaaS, is making it easy for small and medium enterprises to develop their own payment solutions. Previously, the development knowledge required to build technologies of this type meant they were a no-go for small businesses. Today, these traditional barriers are quickly falling away.
E-Payments are Becoming Simpler and More Efficient
Growth is also being spurred on by business leaders who, eager to remain competitive, are making sure that innovative digital payment options are available to their customers. Agile management structures, along with easy access to developers, mean that companies can respond quickly to competitors and customer needs.
Payment is widely experienced as the most laborious and uninteresting part of the customer journey. In conjunction with new technology, both brick-and-mortar and online retailers are attempting to solve this problem by streamlining payment process.
Online retailers like Amazon and Walmart, for example, allow customers to buy in a single click or easily switch between different payment options (corporate and personal cards, for instance). The ability to integrate with third-party payment providers and digital wallets like PayPal also increasingly becomes a norm.
Companies are Tackling Obstacles to Growth
The use of digital payment systems can benefit companies in a number of ways. Because of this, they are attempting to dismantle many obstacles that stand in the way of widespread adoption.
For example, there are still significant concerns about security. In Japan, two thirds of the population still believe cash to be the safest of all payment options. Businesses are responding by emphasizing their commitment to security whilst also clarifying the role of key features like authentication and encryption. Because the issues surrounding payment security are complex, a growing commitment to education can also be seen.
One significant way in that executives are attempting to allay fears about security is by introducing new technologies like voice recognition and biometric scanning. The fintech sector, now a major point of attraction for investment, is quickly responding to this growth in demand.
A general lack of appreciation for the customer-facing benefits of new digital payment methods over older technologies is another adoption obstacle. Many consumers, for example, are still unaware of the reward schemes that come hand-in-hand with mobile payment apps. Awareness initiatives on the part of commercial businesses attempt to overcome this issue.
Digital Currencies are Entering the Mainstream
Travel just a few years back, and mentioning the word bitcoin would have resulted in a roomful of blank stares. Now, everybody understand that you’re talking about digital currency. They might not understand exactly how it works, but it’s only a matter of time before that kind of knowledge becomes commonplace.
There’s still a long way to go for digital currencies, but their use is notable among millennials, who favor innovation. As currencies like bitcoin and their underlying technology – blockchain – become better understood and more widely utilized, the global commerce supply chain is seeking to cater to them.
Mobile Point of Sale Apps (mPOS) are Getting Ubiquitous
Mobile point of sale apps, which allow vendors to turn their smartphone or tablet into a card reader, were a significant innovation when they were introduced to the market.
Such business-facing developments like mPOS enable smaller companies to keep up with bigger digital payment trends. It’s one thing for giant retailers to adopt new technologies. But when independent high-street stores start to offer the same kind of payment choices, they tend to catch on in a much bigger way.
Alongside credit cards, mPOS apps can accept eWallet payments and digital currencies. What’s more, small business owners are strongly incentivized to offer them. Andrew Meola of Business Insider writes that, “BI Intelligence forecasts that there will be 27.7 million mPOS devices in circulation in the U.S. by 2021, up from just 3.2 million in 2014.”
Digital Wallets are Integrating with Third-party Software
Another trend worth noting is the push towards greater third-party integration. It’s not only that digital payment methods are becoming more widespread. It’s also about the fact that they can now be used in conjunction with a myriad of other software applications. It’s now possible to send a payment through GMail or hook up a mobile wallet with personal accounting software. This is occurring at both the consumer and industry levels.
Digital wallets, as exemplified by the original big player PayPal, are hugely important because they provide the basis for many other technologies, in particular what is known as contextual commerce, where payment options are built into everyday experiences. For example, consumers can buy products through social media or online content.
While the global shift to digital payment systems seems complex, it’s underpinned by only a few key innovations. These technologies, and the opportunities they carry with them, are available to businesses of all shapes and sizes. That said, mobile app development is now easier than ever to outsource.
The businesses that take the time to understand and use new payment methods, structuring their approach to take advantage of branded payment apps, digital currencies and efficient checkout options will see the greatest long-term benefits.