We’re more than one year into the pandemic, and the potential impact on businesses of all sizes is becoming clearer as consumer spending, a major driver of payments revenue, has slowed down significantly.
To preserve liquidity and support their customers, many businesses are relaxing or deferring customers’ payment obligations. In 2020, cash payments declined by 50% in the UK, according to Pitchbook. And as social distancing continues to keep customers at home, there’s no surprise that only a small amount of payments are made in person, and even then, cash usage is discouraged due to health and hygiene reasons.
70% of UK consumers are indicating that contactless payment options are important to them, says Shopify. This is supported by data from Barclaycard, which shows that 88.6% of all eligible payments in the UK were contactless in 2020.
Fuelled by the rise of eCommerce, the adoption of digital payments has driven merchants to adopt new payment methods as alternatives to the classic credit and debit cards. Here are the newest digital payments methods savvy businesses are tapping into:
Social payments have been growing in popularity, especially with young consumers. Such payments use QR codes (which have made a comeback since the pandemic) and swipe-ups associated with purchases on social media networks like Instagram, Twitter or Facebook Messenger. The latter went as far as combining social payments with QR codes to allow users to send or request money with Facebook Pay.
Payments as a Service (PaaS) joins software as a service (SaaS) and global payment systems. PaaS providers use cutting-edge cloud-based platforms to provide specialised services, such as card issuing, payments clearing, cross-border payments and eCommerce gateways. Prepaid debit cards, global bank transfers and eWallets are payment methods under the PaaS model. Higher volumes of transactions at relatively low cost are the critical incentive for adopting PaaS, together with the attractive cost-saving model of renting the payments technology instead of buying it or building it yourself. A payment method that gained popularity during the pandemic is cryptocurrency, which is a great facilitator of quick and accessible cross-border payments. Companies like RippleNet partnered with international banks and money service businesses to transfer money globally supported by their own cryptocurrency – XRP.
BaaS is most known in payments as Banking as a Service. BaaS now includes the concept of Open Banking and offers complete banking processes (such as payments or credit) as a service through modern API-driven platforms. Any company can embed financial services into their customer experience by partnering with a BaaS provider, essentially fulfilling the role of a bank without being a bank.
With BaaS, merchants can accept direct bank transfers as a payment method, which are a fraction of the cost of a standard card transaction, don’t cause chargebacks, and happen in real-time. This next step forward is taken by companies like Token, which allow real-time account-to-account (A2A) payments straight from apps or websites.
Have you heard of invisible commerce before? Chances are you have already used it without knowing. In simple terms, invisible commerce is the action of completing a commercial transaction without proactive interaction from the customer. Queue-less and cashier-less checkouts are relatable examples of invisible commerce, where methods like facial recognition are used to trigger payments.
Here are the top technologies to enable payments for invisible commerce:
1) Biometrics – fingerprints, voice and facial recognition are already used by wallets like Google, Apple and Samsung Pay. Together with eye scans and other unique biometric data, they will soon be the preferred way in which customers verify their identity and authenticate payments. Card issuers are slowly following suit with biometric cards. For the merchants, biometrics meet the security requirements as they comply with the Strong Customer Authentication (SCA) regulation under PSD2 (EU Payment Services Directive). For customers, biometrics are convenient as they provide a frictionless payment experience.
2) Tokenisation – this is another technology being rapidly adopted by merchants, as it allows them to store customer payment details to enable a faster checkout in the future. These details need to be kept secure – tokenisation enables that by using software to replace the customer’s sensitive details with unique strings of randomly generated numbers called a token. This can be used by merchants to identify customers without compromising their details and protecting them from fraud. Partnering with a payment gateway provider like TRU Security will help you use tokenisation to streamline your online payments processes.
3) Sensors and Cameras – the technology has advanced to support a seamless customer experience – sensors and cameras are being used more and more as payment methods. Retailers like Amazon use them to determine what customers buy from their stores by testing what products are removed or put back on the shelves while automatically managing a virtual basket when customers enter and exit the store. There is no need for customers to queue at checkout – everything is done automatically at their convenience.
4) Machine Learning and AI – are mainly used for transaction monitoring and fraud management. Virtual assistants that use natural language processing, deep insight tools and cognitive engines can do tasks that are presently handled by humans, such as payment processing over the phone. Another very common use of AI payments is driven by IOT (Internet of Things) devices consumers use to pay for goods and services: a wearable device such a smartwatch or band, your car’s or fridge’s dashboard, or a voice-activated device like Alexa.
5) 5G payments – driven by the pandemic, mobile payments have become the go-to for ride-hailing services, food delivery, and entertainment experiences. 5G will accelerate payments related to access to digital experiences on your smartphone screen that involve AR or VR. 5G could also support the use of IOT, where autonomous devices initiate transactions on their own – for example, to order groceries or pay for parking and on a larger scale being involved in supporting machine-to-machine payments for frequent transactions.
To adapt to the future shopping experience, businesses need to get ahead of the game and embrace technology. Allowing your customers to pay seamlessly and securely cannot be an afterthought. This is why you’ll need a payments partner with the right blend of expertise, innovation, and responsiveness to help you meet your unique business goals.