From digital commerce to omnichannel commerce, the tides continue to turn in the payments space. The key for retailers and financial institutions alike will be to hone in on consumer preferences and make payment options as smart as possible.
The recent Global Mobile Payment Market notes that the mobile payments market is on track to grow at a CAGR of 30.07% between now and 2027, reaching $15.75 Tn by 2027. People with mobile devices (83.72%) outnumber those that have a bank account (81%), making this explosive growth understandable.
Digital payments have been on a sharp uptick, though traditional banking providers are lagging behind. While traditional payment methods in the west have deeper roots than they have in places like China, where emerging payment options sweep through like wildfire—challengers are quickly gaining traction. Both banks and credit unions need to consider these trends as disruption continues to shake things up in payments.
A number of trends have popped up over the past several years, namely person-to-person (P2P) payments, mobile wallets, and faster payments. Incumbents must have an eye toward the future and take the necessary steps to face upcoming challenges.
Omnichannel Payments on the Map
Omnichannel is no longer a buzzword but a way of making payments. Consumers have adapted to device-enabled payments, which allow them to pay via whatever channel is most convenient at any given time and place. These payment options will continue to expand alongside the Internet of Things (IoT), as more devices become equipped for commerce.
Younger generations are leading the charge with online payments, specifically via social channels. Compared to the average consumer, 71% of Gen Z livestream watchers spent on shopping through social channels, especially on Instagram and Snapchat. For all generations, the top three places consumers make purchases are Amazon, E-commerce stores, and branded stores. Each caters to something different, whether it be convenience, variety, or the ability to touch a physical product before purchase.
Digital Payments Mean Smart Payments
The reality is that digital payments are meant to make consumers’ lives easier. Digital payments are “smart” in a way that they meet consumers where they are and enable payments to occur at their convenience. There are several ways the digital payment experience is improving—and will continue to improve—in the future:
Contextual payments – This is perhaps the clearest example of meeting the consumer where they are. This method allows consumers to bypass direct interaction with a merchant in favor of purchasing directly within the channel or platform where they are already. Uber is one example, where consumers pay from the app rather than dealing directly with the driver to complete a transaction. Social buy buttons are another example where consumers can purchase from their favorite retailers without leaving Facebook or whatever social channel they are browsing on.
Loyalty Apps – Loyalty apps get consumer buy-in by offering rewards in exchange for taking the desired action. Starbucks is a good example; its app awards points per dollar spent and also offers members special perks. The app also has an exceptional user experience, enabling members to order/pay ahead and even create Spotify playlists.
Biometrics for Security – Biometric authentication has played a significant role in increasing consumer interest in emerging payment technologies. The assurance that sensitive data is secured by one’s unique fingerprint or facial characteristics has led to an increase in mobile wallets and payment adoption. As part of a multifactor authentication strategy, it adds peace of mind to every digital transaction.
As E-commerce, M-commerce, P2P, and other payment methods continue to grow, retailers and financial institutions will need to keep pace with dynamic consumer preferences to see success. Mobile payments will sharply increase, and all payment types will continue to get smarter, merging convenience, security, and ease of use. Payments strategies need to be smart, too. Businesses and banks both need to consider the needs of consumers and how to best meet them in a streamlined, secure way.
Want to know how Opus can help you shape the future of payment technology? Get in touch with us now.