Like most things in the commerce space, payment options have seen a rapid evolution from cash and credit cards to digital wallets and cryptocurrency. Disrupted by new technologies, payments are becoming more embedded, standardized, and secure—reducing friction in the customer experience. In their Global Trends in Cards and Payments report, Infosys (Blue Acorn iCi’s parent company) analyzes industry trends to help guide companies through cards and payments decisions. Read the summary below or download the full report here.
Trend 1: Rapid Rise of Real-Time Payments
Real-time payments are networks that facilitate near-instantaneous money transfers between banks and banking systems. This means no waiting period between when a transaction leaves the payer’s account and becomes available in the receiver’s account. The adoption of real-time payments has risen globally, and the market is expected to grow between 50% and 80% by 2023. Fintech startups and legacy credit card companies now offer real-time payment services, including PayPal, American Express, and Venmo.
Trend 2: Real-Time Cross-Border Payments
Global trade and ecommerce are driving the demand for quick or real-time payments, both within and across borders. Real-time cross-border payments allows companies to request on-the-go payments, reducing credit risk and payment fraud. Global businesses would be able to offer suppliers and customers better invoicing terms and all business stakeholders can track the status of payments in near real-time.
Trend 3: Digital Payments
The increasing number of consumers using their phones to shop led to a fast adoption of mobile payments across the globe. From wearables to voice-based payments, such as Amazon’s Alexa voice command payments, there are many avenues for consumers to complete a transaction. Infosys expects voice-based payments to gain market share for low-value payments. Tapping into customer insights to understand their payment preferences will help you prioritize which payment technology to integrate into your ecosystem.
Trend 4: Distributed Ledger Technology for Loyalty Programs
Customer trust and loyalty are critical to the long-term success of any organization. However, conventional loyalty programs often suffer from low redemption rates, high operational costs, and competition from other loyalty programs in the market. Blockchain-powered loyalty programs allow customers to receive and redeem loyalty tokens in an interoperable manner. Merchants have access to a distributed ledger that hosts the loyalty program without being able to view each other’s transactions. If you decide to implement a blockchain based loyalty program, Infosys suggests being transparent with points calculation, conversion, and redemption processes throughout the customer journey to ensure long-term success.
Trend 5: POS Financing and Non-Card Lending
Installment purchasing, or buy now, pay later, started gaining popularity when the recession hit in 2008, and now 28% of shoppers prefer retailers that offer the option. Millennials and Gen Z are particularly drawn to POS financing options, such as Klarna or Affirm, due to their aversion to high interest rates on credit cards. When evaluating POS financing, you need to ensure the loan program features align with consumer needs in terms of ticket size, upfront or monthly fees, and loan duration. How finance providers make money varies—some firms monetize purchase transactions through merchant fees, while others monetize purchase transactions through interest levied on the consumer.
Trend 6: Escrow Services for Consumer Payments in Digital Commerce
Consumers often consider online purchases riskier than brick-and-mortar stores due to the risk of receiving the wrong product or never receiving the order. Escrow services help solve the issues of trust, fraud, and security between the online buyer and seller. With escrow services, a third party collects the money from the buyer for the online order and holds it on behalf of the seller. If the buyer is happy with the order, the third party pays the seller. This provides a system of guarantee in case the consumer is unhappy with the delivered order. In the case of a dissatisfied customer, escrow service providers will deny the seller the funds and return them to the buyer. As escrow becomes more integrated into online sales, consumers will be able to purchase high-value items, such as pre-owned vehicles, luxury goods, and construction equipment, online with the same ease as less expensive items.
Trend 7: Cryptocurrency in Cards
An increasing number of payment industry leaders and newcomers are launching innovative payment options, such as Bitcoin-backed debit cards and digitizing cross-border corporate payments using blockchain technology.
Infosys predicts that the global cryptocurrency market will grow at a 6.2% annual rate until 2024 to reach $1.4 billion.
For both B2B and B2C consumers, cryptocurrency offers a faster, simpler, and safer way to transact online. Paypal offers “Checkout with Crypto,” allowing brands to accept cryptocurrency at checkout through the user’s PayPal account, and companies like Overstock and Home Depot now accept cryptocurrency for online purchases.
These new trends and technologies in the cards and payments industry are transforming customer expectations. It’s up to brands and retailers to understand which payment options their target audiences are most likely to use, how to use the payment options to enhance the customer experience and improve loyalty, and how to differentiate themselves from the competition.
If you need help exploring or implementing payment options, reach out to our experts today.