The Rise of the Payments Facilitator – Embracing new forms of Payment
Consumers today expect the way they pay for products and services to be effortless, instant and secure. Rising consumer expectations combined with exponential advances in technology, particularly mobile devices, are driving profound changes in the banking and financial services sector as a whole.
Technology has brought a range of benefits to consumers and merchants alike. Whereas the market was once dominated by just a few banks and a handful of payment companies, now there are more like 500 companies providing all manner of payment solutions, some of which are extremely niche. The entrance of more agile companies to the market, new payment technologies and the lowering of processing charges have revolutionized the industry.
Furthermore, all this change is creating a perfect storm where we could see a significant shift towards a new type of provider, a facilitator for payment services. This new Payments Facilitator would offer acquiring, a payment gateway and a whole range of value added services. What’s more, many of these new forms of payment enable the merchant or retailer to build an ongoing relationship with the end user customer through communications and offers that are as much about the next purchase as they are about the one that has just occurred.
The future is here – the top trends to watch out for
For consumers, progress has led to an array of choice and faster payments, that are not based on a credit or debit card scheme. Here, we throw the spotlight on certain trends that are having the maximum impact on consumer choice and flexibility. The emphasis is on increased choice rather than replacement payment methods, making the new world of payments an inclusive one.
Mobile contactless payments – contactless payments have been around for some time, simple to use and saving time at the checkout. The next step forward reflects the trend for all things mobile and we’re going to see increasing numbers of consumers using ApplePay, AndroidPay and SamsungPay, to name but a few, to store their card details and pay for their goods with a simple tap of the phone. What is not widely known is that the usual £30 card limit need not apply to mobile transactions because the customer has provided enhanced authentication and the device additional levels of security protection. As a result, mobile contactless payments are expected to grow and grow, further reducing the number of cash transactions.
Real-time payments - there was a time when consumers were restricted to using a card like Visa or Mastercard to make payments in-store or online and waiting several days for funds to be transferred. All this is changing however because mobile and Internet devices, alongside banking apps, now offer a practical alternative to card transactions and can additionally transfer funds instantly.. Despite this, traditional payment methods like cheques will never go away. A few years ago, the UK announced plans to kill them off and created a PR disaster because it alienated older age groups, charities and those with disabilities. Therefore now the introduction of new payment methods is all about adding greater choice for different consumer groups and environments to serve the maximum number of clients and meet their individual preferences.
Alternative Payment Options – these alternatives to cards cover a wide variety of options from PayPal to Klarna (Sofort) and AliPay. Payments direct from bank accounts are generally more popular in parts of Europe where the attitude to credit is more conservative. AliPay has become an important new payment option for many merchants thanks to the growing number of Chinese travelling internationally and their increased economic spend.
Blockchain – in the longer term, expect to see more of Blockchain especially in the corporate payments world. Better known as the technology that underpins Bitcoin, the worldwide cryptocurrency, Blockchain can act as a powerful and secure ledger that records every step of a transaction and transfer of ownership. But the right use case still needs to be found before we are likely to see wide scale adoption for consumer payments.
Person-to-person – all part of the move towards digitising payments and made possible by the PayM central infrastructure and bank interoperability. Consumers are currently using the person-to-person method to transfer funds in real-time to trusted recipients such as friends, family and known suppliers. Although it’s largely a loss leader for the banks because consumers are not directly paying to transfer funds it’s quickly gaining traction and, for banks, it’s cheaper than processing cheques.
Self-service - self-service payment kiosks and other unattended devices are starting to take the place of traditional cashier tills in certain environments. Customers in pubs or restaurants can even order their food and drink, have it delivered to their table and pay for it using their mobile device then simply walk out the door. One example is Italian favourite Carluccios who are using QKR! App from Mastercard to make this a reality. The latest intuitive and smart POS technology allow changes to be introduced more quickly. Improving business efficiencies and customer satisfaction in one go.
At first glance, it would be easy to believe that all this frenetic activity and increased competition are merely squeezing profits and confusing consumers. The reverse is actually true. Consumer demand for technology and a pervading ‘always-on’ culture means transaction volumes are rising dramatically creating business advantage for the sector whilst meeting consumer expectations at the same time.
With so many options, merchants may wonder how this will affect them, and indeed, how to access these new services so that they are able to offer more flexible choices to their customers. The new style Payments Facilitators are set to provide a one-stop-shop that will provide access to these new services as well as supporting more traditional methods of payment, and be able to provide international and cross border payments with lower fees.
The future is bright, its flexible, its better service for merchants and their customers, and charges will continue to fall.
Adina Ahmed, Director, Anderson Zaks www.andersonzaks.com
Mark McMurtie, Independent payments consultant and Director of Payments Consultancy Limited www.payments-consultancy.com