Results of 2018: what predictions have come true in the field of payments
The outgoing 2018 for payments and commerce turned out to be incredibly eventful.
Over the past 12 months, the popularity of using Internet devices in this area has grown.
Key players have taken a big step towards consolidating the payment ecosystem, simplifying the payment process and scaling.
Regulators in the US and other countries have introduced new rules for the provision of payment and financial services that threaten the structure and existence of technology giants.
Despite the abundance of news claiming that physical retail is alive and stays afloat, more and more consumers began to abandon traditional stores in favor of online shopping and fast delivery.
About a year ago, Karen Webster, a journalist for the PYMNTS news analytics publication and the author of this material, made several assumptions about what payments in 2018 could become. Then she highlighted several common themes that, in her opinion, were to determine the events of the coming year. In this material, she returns to her predictions and checks how accurate they are.
Prediction One: Influential Players Strengthen Their Positions Even More
Market participants who have reached a large size, had to expand their presence in the ecosystem and strengthen relationships with consumers. Why? Because payments and commerce are about scope.
But, unlike the practice of the past, when the big players made their way into the pockets of customers, this time the consumers had to decide for themselves who deserved their trust. And their choice will be made with the help of a growing number of Internet devices that connect to the network at any time and give access to operations both with the merchant or business, and in the online bank.
According to the forecast, in 2018, such Internet devices should have reduced the distance between the consumer and the business represented by stores, manufacturers or banks. But at the same time, they would increase the gap between the brands from which consumers made purchases and the payment methods with which the order was issued.
This would shift the balance of power in favor of players able to provide such access. And the greatest impact in 2018 according to the forecast would be gained not only by manufacturers of Internet devices, but also by software and payment platforms, which will simplify access to any platform on any operating system, any device and using any interface. Be it a keyboard, mouse, messages, voice or swipe.
And the decision on who would fall into this list was left to consumers.
Apparently, this prediction was correct.
Vivid supporting examples: Amazon, which dragged the attention of consumers and influenced their habits; PayPal’s growing share of online wallets; the steps Walmart is taking to grow its customer base online and offline; the ubiquity of the practice of shopping with the help of voice assistants, in particular, Alexa. Also noteworthy is the beginning of the implementation of the Secure Remote Commerce (SRC) standard in card networks, which regulates the safe and efficient process of placing guest orders in stores, which account for up to 75% of all online orders.
Forecast the second: the first thing is commerce, and only then Internet devices. The advantage of players like Amazon over players like Apple
In 2018, Apple reached a trillionth capitalization , and after the position in sales of smartphones the company fell so much that Apple decided not to publish information about the number of sold devices. This was followed by a fall in capitalization below $ 1 trillion and a further decline below Microsoft.
This year, Apple Pay as a means of contactless payment again could not boast of clear results, despite the company's claims about the growth of the user base of this tool and its global expansion to countries where payment terminals are in demand mainly from owners of contactless plastic cards.
Not the best results the company has shown in the promotion of voice devices, despite the launch of Siri, thanks to which the company previously led the segment, and the shift in focus on the sale of voice solutions within existing basic services, such as health applications.
Much time has passed since the release of the iPhone and the birth of the App Store, and the attitude towards the company has changed.
Experts predicted Apple's status as an influential new player in the payments world. However, this did not happen. Yes, the company's operating systems and devices allowed consumers to make purchases using smartphones anytime and anywhere. But attempts to control access to consumers through various payers were unsuccessful, either online or offline.
Instead, in 2018, really high speed gained another phenomenon.
This is Alexa's voice assistant, available in the whole fleet of devices: from glasses and thermostats to light and plumbing control systems, cars, as well as own Echo devices. All of them allow consumers to make purchases, wherever they are. Merchants from small family stores to giants like Nike and Gap are available on Amazon from any device that consumers choose to choose.
One of the largest applications for merchants in the Apple ecosystem - Amazon - using the Prime program has increased the base of loyal customers who are ready to switch to using other devices and make purchases using the built-in Alexa. Amazon can now conduct consumer purchases through its site at any time thanks to Amazon Pay’s own payment method, available regardless of the customer’s device.
Players like Apple, building ecosystems around devices, are now more than ever at risk of losing positions and control over consumers, because in 2018 there were many ways to access merchant offers and services, including using smartphones of various brands. Commerce-oriented players in general will rely on the convenient use of thousands of different devices and influence how and where consumers buy and pay for orders. And device-oriented players with closed ecosystems can only hope that their next device will take off and attract enough willing to use it.
Internet devices contribute to the development of commerce, but only if they generally have a commercial system to which you can connect. In 2018, this area went out of control of Apple and passed to other players.
Prediction three: intention, not context. Google’s approach is better than Facebook’s
For Facebook, 2018 was so hard that the company probably wants to forget it as soon as possible.
The social network was shaken by scandals about fake news circulating on the social network, alleged Russian interference in the US elections with the help of platform tools and a massive leak of user data. On their background, Facebook faced a decline in trust and a decrease in advertising profits due to the outflow of visitors and advertisers. Now it seems that Facebook’s ambitions of becoming a commercial ecosystem have become even less realistic than before.
Facebook over the years in a large commercial game is trying to use a huge resource of time spent by users inside its closed system.
The number of options for making purchases on Facebook and Instagram has increased, the Marketplace, a competitor to Cragslist, has been launched, as well as the opportunity to purchase tickets to movies and concerts on the Facebook site. But any commerce within the closed platform of the company looks like a pleasant addition to the main business - mobile advertising.
And so far there is no reason to believe that consumers who have come to a social network will want to use all these shopping opportunities.
This year there has been an increase in opportunities in the contextual commerce segment.. Platforms have integrated payments into their applications aimed at converting the search for products into sales at any sites where users intend to buy. And it was Google that tried its best to close the “intention-purchase” loop, taking advantage of the fact that inquiries about products often reflect the user's intention to buy them.
The company has expanded the line of devices that contribute to the transformation of their voice assistant into a seller, and also opened an ecosystem for retailers who want to integrate voice capabilities into their sales.
In 2018, the players turned out to be more successful, who managed to turn the intention of consumers into purchases, and not those who tried to first convince users that their platform was suitable for shopping.
Prediction Four: Universal Card Network Solutions Better than Niche Alternative Payment Methods
As commerce moves to digital space, consumers increasingly want to use the same method of payment in any place and on any device. In the digital world, as in the physical world, this means the need to introduce card products that are available worldwide.
With the growing popularity of Internet devices and the increase in ordering options, it becomes difficult for alternative payment brands to gain enough scale to match consumer preferences.
It's all about the difficulties that arise in the process of making a purchase, and the need to eliminate them. Difficulties arise when you require entering additional information, adding additional steps or unavailability of any payment method on a particular device. Eliminating them means creating some kind of universal solution.
Therefore, in 2018 there was no launch and take-off of niche payment solutions.
It should be noted the launch of Venmo. However, the scale of this service is provided by a large PayPal network, as well as MasterCard support when paying with a plastic MasterCard Venmo card.
Fifth Prediction: Powerful Chinese Companies Will Forward
By the beginning of 2018, the ecosystems that control access to more than a billion users of their payment method have grown so much that it became impossible not to take them into account. Like their measures to develop convenient mechanisms for accepting payments or creating worldwide compatible networks for mobile transfers.
In 2018, Alipay expanded its presence in key markets so that Chinese consumers can use their usual methods of payment outside their homeland. At the same time, the company relied on previous experience with First Data and Verifone, cooperation with digital payment services like Paytm, GCash and Openpay, as well as investing in them in the markets of other countries, such as the Philippines, India, Japan and Latin America. In the same year, Ant Financial opened its platform for Chinese banks to help them expand opportunities in the field of digital financial services. Thus, the company strengthened its own activities in China and beyond.
Also in 2018, the WeChat Pay payment system joined forces with key market players to expand into the markets of Malaysia and Japan, and set the stage for penetration into the United States. Such a move by Tencent is due to the investment of more than three billion dollars over the past seven years in the purchase of assets in 40 US companies, for example, Snap.
However, the year 2018 was not very successful for large Chinese companies either domestically (when the Chinese government hit Tencent gaming platform) or outside of it (when the US government did not allow Alipay deal with MoneyGram ).
Prediction Six: Remote payments displace physical points of sale. The advantage of remote payment methods over contactless
PYMNTS analysts believed that in 2018 in the United States, NFC payments in physical points of sale were unlikely to become predominant. And they almost guessed it.
Launched four years ago, the technology of mobile wallets, which has been a priority for contactless payments at points of sale, is stalled in one place.
In 2018, the largest bank card issuer in the US, Chase, decided to convert its Visa cards to contactless ones, planning to use them at points of sale from 2019.
At the same time, according to the survey, consumers admitted that they love contactless payments for the speed of transactions, and the innovative company Mobeewave released an application that turned every phone with NFC chips into a contactless POS device, which could further increase the interest of Americans in the contactless method.
This suggests the failure of mobile wallets as the main technology of contactless payments in stores, and also points out the importance of paying with a bank card at physical points of sale. In the future, if there are contactless chips on the cards and with an increase in the number of sellers that support NFC, there will be several ways to use the usual payment methods when shopping in stores.
But this state of affairs assumes that consumers will pay in stores, as now, with the help of cards and a cash terminal. However, the future of payment in physical outlets looks different.
There was no great interest in contactless payment methods in physical stores, as the need for cash terminals did not disappear. However, many people prefer to pay for purchases with the most contactless of the existing methods - remotely. When consumers place an order through the app, they pay for the goods online. Thus, there is no need for payment in the store itself, cash desks and queues lose their relevance, and ordering becomes contactless in the literal sense of the word.
In 2018, this method of payment caused great enthusiasm. Buyers are increasingly using mobile devices, even while in the store. And sellers encourage this method of payment to avoid queues and allow the consumer to place an order. Sellers want their customers to make out and pay for orders online, and pick up goods in the store, because the physical presence of the buyer is better than empty outlets and low sales.
Analysts believe that over time, remote payments will force out payment in stores, and the method of buying and payment will change remotely. In early 2018, it was assumed that the stores would function as showrooms and centers for the issuance of goods. The latest PYMNTS research in this area confirms this view, especially when you consider that technologically advanced buyers aged 30 to 40 years put the convenience of making a purchase above the cost of the product and even the range.
Prediction Seven: Innovation will be born on the periphery. Will win a gradual development, not a revolutionary breakthrough
If payment technologies are becoming larger and larger, and the giants continue to grow, small companies need only two ways: to leave the market or to use their assets provided by large conglomerates to develop their own innovations.
Observers have suggested that the huge opportunities in 2018 will open up to those who can realize the creative potential of innovators through the use of assets created by powerful companies. And not with the goal of creating a payment and business ecosystem from scratch, but developing innovative ideas for expanding and improving the services provided to users.
In 2018, payment systems and trade were optimized step by step, and the innovators used the API and the SDK to implement their ideas as soon as possible.
Forecast Eighth: a bet on smart, not just quick decisions
Fast payments are relevant since the May 2015 US Federal Reserve System set up an accelerated payments task force to study this issue .
In 2018, the target group was reorganized. The new composition is currently exploring the role of the Fed (that is, regulation) in accelerating quick payments, possibly even at the order of regulatory bodies.
In the meantime, payments are made faster than ever.
With the help of existing network methods - ACH and debit payment systems - transfers between individuals and legal entities are carried out at a breakneck pace. One-day ACH-transfers are common everywhere, and they are offered to be carried out on weekends and holidays too. Fast payments using debit cards and financial platforms allow you to deposit funds into consumer bank accounts in real time. At the same time, new options become available, such as making credit, insurance payments, payments on airline vouchers, instant payment of wages on one-time and short-term contracts, as well as when working with medium and small trade enterprises.
As can be seen, in 2018, the work of the Fed or the target group was not required for instant transfers.
As for B2B, in 2018, global compatible networks tried to facilitate real-time flow of funds and reconcile digital assets (including information) between banks and cross-border companies. In addition, SWIFT used connections from 11,000 banks to provide real-time cross-border settlement.
Banks that need to work together to make the service work as it should seem to like this idea too, although they are considering alternatives to instant payments. Banks have a business model to secure such payments and there is no need to invest billions in a network that will spread only over many years. Corporations demand speed, but in the first place for banks are secure payments. And reliability is most important.
In an ideal world, one could abandon everything that exists and start from scratch using the tools available today. But the world is not perfect, and payments on a global scale are a tricky business. Banks and networks that want to make instant payments to anyone, are quite capable of doing so. Only a business model is needed to implement this idea.
In this regard, the end of 2018 is no different from its beginning.
Prediction 9: Take care not of direct access applications, but of access itself
If the future of commerce and payments is behind voice services, then skills, not applications, will contribute to the development of developers' interest.
Everything is logical. In 2018, consumers are not immediately obsessed with applications, downloading them indiscriminately (games are not taken into account). And applications for trade and shopping have always occupied approximately the same position. According to App Annie, consumers spend on shopping apps just 50 minutes a month.
Total users spend on mobile devices for about five hours a day. And it turns out that the application for shopping takes an average of 1.7 minutes (50/30).
Most of this time is spent in several major applications, the first and second places among which are occupied by Amazon and Walmart.com. These solutions give consumers access to millions of product items in one place, and finding the right things is so much easier than opening one application after another in search of the desired product.
And if consumers no longer spend time searching for and downloading new applications instead of already installed, then developers have no reason to create them. In early 2018, PYMNTS researchers suggested that developers would pay attention to other ecosystems so as not to get bored (and continue to make money).
These are voice services.
By the end of 2018, there are about 50,000 skills in the Alexa voice assistant ecosystem, compared to 25,000 in 2017. Developers run where the ball flies, and not where they hit it.
When using voice technology, the user generally does not need to download anything. No need to even specify in which store he wants to shop. Trading using a voice assistant and the ecosystem it creates gives preference to goods and services, rather than shopping.
Thanks to the skills in the voice ecosystem, bridges are built between the modern digital environment and network-connected devices that consumers use to access the ecosystem and make purchases. And also a springboard is created for brands that want to have a direct relationship with the consumer, without applications and intermediaries-sellers.
Thanks to the advanced skills of voice systems, power in the digital environment belongs no longer to app stores and retailers, but to network-connected devices that give consumers access to new ecosystems. This is how a new powerful trading center is created, which consumers will be able to control by the power of their voice.
This "transfer of power" accelerated in 2018 and will continue next year.
At the beginning of the year, the PYMNTS portal shared its vision of the dynamic world of payments and trade, taking into account the complexity of this world and the reality of the interaction of consumers and businesses with new payment methods, as well as with new access points for making these purchases. 2018 was really exciting. The foundations for innovation are laid, which will appear next year, when the progress achieved in the outgoing year is gathering momentum.