In a rewired world where digital rules, what do payments look like in a connected economy?
We are now fully enmeshed in the connected economy, which is also being propelled forward by a pandemic that has caused dramatic shifts in payment behaviors. Connected devices are ubiquitous as is consumer appetite for all things digital. As emerging technology and digital payments technology continue to steal center stage, commerce can now occur anytime and anywhere.
We’ve heard of the “phygital” — the convergence of physical and digital experiences — movement for years. Things are now more heavily weighted on the digital side of experiences as people shop, work, work out, eat, and pay on digital platforms. This has shifted the need for payments to focus on digital-first experiences and reshape how transactions happen. Payments serve as the backbone to the digital experiences across industries, especially as other business models emerge to satiate consumers’ and businesses’ digital desires.
Physical Fades to “As-Needed” Only
Digital-first is the mantra of 2021, and the idea that organizations need to focus on omnichannel experiences is moot. Consumers and businesses now expect an integrated experience, led by digital, and people will not engage with businesses — payments providers or others — that aren’t operating on this standard. In other words, there is no longer a line between digital and physical.
This trend has been happening for a while, though it was certainly accelerated by the pandemic, which pushed people to digital channels for everything from ordering food to shopping and more. What started as a necessity has now become a preference as people have become enamored with the convenience of digital options. One study found that more than 8 out of 10 consumers say they will maintain their newfound digital habits moving forward.
The new reality is that digital experiences have become the default experience, with physical experiences and interactions happening on an “as-needed” basis. Businesses, for example, that have largely shifted to remote work, no longer have the desire to process paper invoices or checks.
Consumers are diving headfirst into subscription services for everything from food to entertainment to healthcare. People are comfortable with digital touchpoints where physical touchpoints were once standard. Payments must rise to the occasion and view digital payments not as a novelty but as a standard.
One-Stop Intermediaries Flourish
Given the surge toward digital, it’s no surprise that consumers are largely managing their financial lives through their smartphones. Many people tap a myriad of apps to keep tabs on their financial situation, including banking apps, digital wallets, payment apps, and other apps with embedded payment options.
The ability to navigate between apps to paint a holistic financial picture will soon be made more seamless by intermediaries who can provide a more streamlined and cohesive experience while removing friction. These intermediaries will connect information and services across financial apps, simplifying financial management for consumers.
These “one-stop-shops” will be fueled by payments, enabling consumers one place to interface with all of their financial service providers. This will support consumer choice while simplifying it, aided by artificial intelligence (AI) and value-added services that are highly personalized and tailored to each individual. These will be truly connected ecosystems that are easily accessible and highly innovative.
Consumers Want Their Time Back
The digital-first evolution is driven by the convenience factor: people are drawn to the easiest, shortest path between Point A and Point B. Time is an important component of convenience, making it critical for payments providers to focus not only on making things easier but making them faster, too.
As individuals get a taste of what it’s like to have some of their time back (remote work has eliminated lengthy commutes and delivery has made shopping a breeze), they are not keen on giving it up. That said, they are willing to pay more to retain the time savings along with the convenience of having things delivered straight to their door.
An economy predicated on convenience affords businesses and payments companies various paths to new revenue. The amount that people are willing to pay on delivery fees alone is evidence of that. From Instacart to Amazon to DoorDash, consumers are increasingly tapping into the convenience of delivery and enjoying the time savings that accompany it. Amazon is a prime example of this as members pay $119 each year to access free shipping and a nearly endless catalog of products that they can buy online.
This convenience factor translates into payments and the time it takes to move money. Payors are willing to pay premiums to move money faster to recipients and payees are willing to do the same to have faster access to funds. These behaviors are accelerating the drive toward instant payments while also monetizing payments based on the time factor.
We are now living in a digitally-driven and connected economy that will lay the foundation for how payments will occur now and in the future.