The payment landscape is moving fast, driven by major technological changes, as well as digitally empowered customers. In a world where effort is less and less required, attracting customers is not sufficient anymore. Converting a visit – in a shop or on a web site – into a paying act has become a key battle for marketers.
The market’s adoption of new technologies – which at this stage can still be considered as nascient in some aspects – will depend on its impact on customer experience rather than technical performance. According to Walker Information, by 2020 customer experience will become more important than price and product in converting buyers. Starbucks’ payment success illustrates this trend well. Considered as the most successful mobile app for payment, Starbucks’ initiative was at the same time criticized for identified security flaws, therefore confirming the rule of “convenience over security”.
Let’s highlight three strong trends in this moving ecosystem.
For retailers, cashless and mobile payments are not options anymore
Are we moving towards cashless societies? In Europe, the rate of cash usage is predicted to decrease to 43% by 2018, mainly driven by Scandinavian countries. In this context, mobile payment will likely gain market shares, driven by NFC technologies and wallet services such as Apple or Android Pay, although it remains extremely complex to determine market evolutions for the next 5 to 10 years.
In this ecosystem, it is interesting to witness how startups are developing products pushing the envelope for big players. Mishipay for instance, develops a new technology enabling the buyer not to queue anymore to pay for items. The customer journey is quite simple: using a dedicated mobile app, the buyer scans the bar code, pays from his smartphone and leaves the shop.
Another evolution that illustrates customer behavioural changes lies in the fact that any merchant now needs to propose a digital payment solution. Failure to do so would mean potentially losing customers. In order to facilitate merchants’ conversion to digital, the French startup EasyTransac has developed a solution transforming any smartphone into a PoS terminal, through a mobile app. The merchant only has to scan the client’s credit card to get paid.
These two examples illustrate a clear ambition to simplify the payment experience. Some emerging initiatives even go one step further.
The time for gamification has come.
While speaking about payment experience, the general goal of merchants is to streamline the customer journey, with no major change in the ultimate action: the client simply buys a product or service.
However, some startups want to shake up the overall experience, going beyond the act of buying to work on a buyer’ motivations/incentives. MicroDon develops a solution that enables any buyer to give a few cents to a charity previously chosen by the merchant, any time an item is bought. This is possible both for web and retail payments, as the startup is integrated into most PoS softwares.
The eCommerce solution of the Swiss startup Cherry Checkout adds one more incentive. In addition to the possibility of making a donation, a buyer gets a chance to have a purchase refunded. We see here appearing trends mixing gamification (in this case gambling) and traditional payment.
Security remains however a key challenge that now needs to be addressed while taking into account user experience.
Could new technologies accommodate marketing and security needs?
It is clear that digital payments represent a playground for hackers. Some recent high profile breaches have led to higher attention being paid on fraud issues. While predictive analytics solutions are part of the answer, the emergence of wearables and biometry could have an even stronger impact.
As an illustration of the growing maturity of biometric solutions, Gartner estimates that 40% of smartphones will have a biometric sensor at the end of this year. The same study predicts that all payments will be based on biometrics in 2024.
If the trend is clear, a new technological battle is to plan. In fact, we sometimes forget that fingerprints are far from being the only biometric authentication solutions. Stahler has developed a vein recognition technology turning any finger into a potential credit or loyalty card, without any required PIN code. Meanwhile, the Swiss company Biowatch has developed a wearable bracelet that scans a user’s wrist veins for authentication. The fields of application are multiple, from payment to security access management.
Customization as a key vector of market adoption
While we identified many trends all along the payment value chain, customers and professionals have never had so many choices when it comes to payment. Customization appears as a key opportunity – benefiting from the increasing maturity of big data technologies -, to better understand customers’ expectations and offer them adapted solutions, depending on a profile or a context.
A study by Monetate showed that 94% of marketing professionals believe that “personalisation of the digital experience is critical to a business’s current and future success.”
Considering this need for customization – and thus for multiples product alternatives -, patience should be required from payments players, all the more as consumers will adopt new solutions once they will be largely implemented by merchants. Given the current learning curve, we can assume the commitment towards pushing innovation will be ultimately be rewarded by the market!
Written by Edouard Thibaut for the Early Metrics team.