As consumers in European countries limit their cash spending and increasingly adapt to alternative payment methods, society appears to be heading towards a cashless future. Forward-thinking companies, looking to capitalise on online consumerism, have long established themselves in the digital realm, dictating e-commerce trends and stimulating industry innovation.
Technology is advancing at breakneck speeds. Devices or programs that were popular last month have already been replaced with better, faster, more immersive updates. Payment service providers monitor the industry closely, adapting products and services to meet demand. Electronic payments remain as relevant as ever, with merchants enlisting processing companies to assist in navigating the ever-changing e-commerce sphere.
International payment processing company ECommPay has compiled a list of the year’s biggest trends and challenges below.
Transaction volumes in the online payment market reached $1.47 trillion in 2014, growing to $1.7 trillion the following year and predicted to reach $2.7 trillion by 2019. The upward trajectory enjoyed by e-commerce payments is due in large part to the growing popularity of mobile commerce. m-commerce, as it is commonly known, took 40 per cent of the market share, rising to 60 per cent in countries with higher rates of mobile coverage.
Handheld devices have rapidly become indispensable to the modern consumer. Mobile phones and tablets can store vast quantities of information, tailored to user specifications through a number of carefully selected applications. ECommPay studies have found that roughly 30 per cent of all electronic transactions are made using handheld devices. Email marketing generates 26.7 per cent of total sales volume via mobile phones and 23.1 per cent via tablet, with personal computers trailing behind with 20.9 per cent of the market share.
Leading fashion retailers have been quick to adapt to consumer trends, introducing increasingly complex and powerful technology for mobile monetisation. New payment technologies, products, and solutions promise to improve the transparency and predictability of payments, reducing obstacles and increasing revenues.
Consumers are dependent on their mobile devices for everything from communication to transportation and research. As cash gives way to online payments, mobile applications have become the new arena for both online and in-store shopping.
Recent trends, such as multichannel shopping, which allows consumers to connect, browse, and engage with brands and retailers across a number of platforms, have provided the much-needed prompt for merchants to dedicate time and effort in constructing a seamless consumer experience.
Brand apps designed to study customer behaviour and purchase history, mining valuable data for targeted advertising leads, have flooded the market. Consumers create personal accounts, which store a variety of information and preferences, enabling the automation and personalisation of payments, which can be initiated anytime, anywhere, with virtually no geographic boundaries.
Similarly, payment service providers analyse client industries to develop the tools required to capitalise on consumer trends. The multichannel approach necessitates an omnichannel payment strategy to meet consumer demand for payments structured around their lives and specifications. Merchants implementing omnichannel payments receive a single solution for the various channels they employ, streamlining the payment process for customers.
Connecting additional channels into a unified payment gateway increases the risk of fraud and data breaches, driving payment service providers to increase investments into security and authentication measures. Losses incurred by banks and merchants reached $16.3 billion in 2014, with card-not-present (CDP) fraud accounting for the high percentage of damages.
To eliminate fraud, payment firms and merchants adopt a range of solutions, each of which has its own benefits and drawbacks, depending on company size, transaction volume, etc:
- PCI-DSS compliance significantly decreases the rate of security breaches.
- EMV implementation minimises fraud incidence, especially in card-not-present transactions.
- While chip-and-pin authentication improves the security of card-present transactions, solutions such as 3D Secure offer additional security features for card-not-present transactions, thereby reducing the risk of fraudulent transactions.
- End-to-end encryption and tokenisation processes provide additional protection during the transmission of sensitive data.
- Geolocation tracking and mobile secure location services provide customer information to fight fraud in real-time.
- Biometric features are at the beta stage, with MasterCard testing facial recognition technology to authorise transactions.
Alternative payment systems are a safer alternative to traditional payment methods. Blockchain, the leading digital currency, is growing at incredible rates, with more than $1.46 trillion in circulation as of June 2016. The permissionless, distributed database technology for managing and recording transactions could help banks optimise the payment process and cut costs.
Leading banks in the industry, such as Fidor in Germany, have announced collaboration with technology firms to harness blockchain technologies for the purposes of furthering their international trade, finance, and subsidiary payments. Citibank has taken a different approach, experimenting with the technology internally to develop a digital payments platform that could potentially be scaled to deliver cross-border payments.
Interest in blockchain technologies is shared across multiple stakeholders, including banks, non-banks, and fintech firms. Significantly reducing the time and costs associated with clearing, custody, and settlement, blockchain promises significant improvement and transparency in cash management processes.
The leading trends of 2016, from advanced security features to blockchain technologies to a streamlined consumer experience, have paved the way for future innovation. Though not all the trends outlined above are relevant for every payment service provider, familiarity with the newest technologies and solutions is a necessary condition for success in the payment market. Developing every aspect of the payment process across various e-commerce sectors and settings, payment services providers must keep abreast of the latest trends to anticipate changes and meet client requirements.
By Nikita Mishchenko, Head of Product Development, ECommPay