Top 10 Payments Trends to Watch in 2016
2015 has come and gone and the growing payments industry has impacted global commerce in increasingly notable ways. Now that we’ve rung in 2016, let’s take a look at ten trends that are poised to shake up the commerce status quo in the year to come!
1. U.S. EMV chip migration gaining steam
The official U.S. deadline for accepting chip card transactions (October 1, 2015) has passed, but many merchants have missed that deadline due to a relative lack of technical specifications, the up-front cost of implementing the necessary technological infrastructure, or a seeming willingness to shoulder fines for non-compliance in the short term. Nevertheless, the growing EMVCo standard is becoming ubiquitous worldwide and the costs of accepting the technology will decrease with time.
2. Mobile wallet use for payments growing
The entrance of Apple into the mobile wallets space with Apple Pay has helped bring the use of mobile wallets into the mainstream. The improved checkout experience, ability to link wallets to rewards programs, and ease-of-use with enabled devices is driving widespread merchant adoption. Tokenization of sensitive data will improve consumer confidence and increase the proliferation of such mobile payment offerings.
3. Concurrent rise of NFC tech
The advent of Near-Field Communication (NFC) technology several years ago has enabled today’s explosion of mobile payments. Contactless payment via a simple tap of near-ubiquitous devices such as smartphones (and more frequently, smartwatches such as the NFC-enabled Apple Watch) will increasingly be seen by consumers as a preferred experience compared to carrying and providing separate physical payment mediums such as cash, checks, or even credit cards.
Alternative technologies such as the QR-code reliant CurrentC mobile payment option spearheaded by the Merchant Customer Exchange appears to be dead in the water due to the need to use a smart device’s camera and provide sensitive banking information for ACH debits.
4. Blockchain awareness increasing
Blockchain (or distributed public ledger) technology underlies Bitcoin’s functionality, but has sprawling applications beyond this particular currency (and indeed currency as a whole). Blockchain transactions are publicly documented, very secure, and process more quickly than traditional electronic payments options.
Senior vice president and director of IBM Research Arvind Krishna commented on blockchain’s potential for success in the financial industry and wider business world:
“Blockchain-based systems could help radically improve whole industries, beginning with banking and insurance. But its impact could be much broader. It could make a difference whenever valuable assets are transferred from one party to another and whenever you need to know for certain that a piece of digital information — anything from electronic artwork to the terms of a business agreement — is unique and unchangeable by any party without the agreement of all parties.”
5. Responsive web design
Responsive web design should finally hit the financial services sector en masse in 2016, which means banks will be able to update their solutions more frequently across all platforms. With a single set of code, whether for PC, phone, tablet, phablet (that smart phone-tablet hybrid) or other mobile device, web development costs will be streamlined and customer experience will improve dramatically. Banks will likely promote their mobile payment options in a noticeable fashion, driving increased customer adoption.
6. Improvements in card-present data security may direct fraud activity to CNP
As EMV-based and mobile consumer payments continue to grow, simple magnetic stripcard transactions are in decline. This could very well lead to additional focus from fraudsters in the online, Card Not Present space. Another large breach in sensitive customer information such as the recent Target and Home Depot hacks could forestall, even if only temporarily, the adoption of more agile, mobile, software-based solutions.
7. Opportunities for proactive marketing and promotions abound
With access to an integrated system of multiple channels, there are increasing opportunities for businesses in the payments industry to tap into customer data and create analytics that can support ever more sophisticated marketing efforts and merchant rewards programs. These programs are being offered by a growing mix of local and national retailers, and their success in “big data” age will be determined by how well they are integrated with the consumer’s journey to the sale.
The customer’s location (whether in-store, on their desktop or laptop, or using a smartphone or tablet), recent purchase history, browsing habits, conversion rate, response to marketing efforts, and type of payment option used some of the many data points that payments providers can help retailers evaluate to make rewards programs and promotions more relevant to individual consumers. In physical stores, for example, could be targeted via mobile devices for offers tailored to their data. Both consumers and businesses stand to benefit from these advances.
8. Consumer payment preferences more important than ever for merchants to heed
As new payment methods and even new currencies evolve and proliferate, consumers will be in charge. More than ever before, merchants will have to let their customers pay the way they want to pay or risk losing their business. Providing the right combination of payment options for particular customer demographics will be crucial, and merchants will have to find ways of responding to shifting preferences quickly. Technologies and currencies will continue to change, but responsiveness to customers’ preferences will determine merchants’ success in navigating the evolving payments landscape. This increasing merchant responsiveness to consumer preferences has been a major driver of Pay By Group adoption by businesses.
9. Apple & Square explore foreign markets while Alipay & Ingenico examine U.S.
As U.S. companies like Apple and Square plant the seeds for expansion for their mobile payment offerings in other countries, overseas players such as Alipay, Ingenico and many others are becoming more focused on entering the U.S. market and other foreign turf. This makes for an interesting cross-pollination situation that could develop in a number of unexpected ways.
10. Same-day electronic payments launch in the U.S.
U.S. banks, represented by NACHA ‒ The Electronic Payments Association, have approved a proposal to allow consumers and businesses to send same-day electronic payments among the nation’s financial institutions, according to the industry organization that developed the idea. With current best-case scenarios most ACH payments are settled on the next business day at the very earliest. Businesses and consumers, however, could benefit from same-day processing in many cases.
This NACHA rule change will enable ACH Originators that desire same-day processing the option to send same-day ACH transactions to accounts at any receiving financial institution (RDFI). The Rule includes a “Same Day Fee” of $0.052 on each same day ACH transaction so that RDFIs would recover, on average, their costs for enabling and supporting Same Day ACH.
All 12,000 or so banks and credit unions in the United States will be required to accept the same-day payments on behalf of their customers. The same-day system is scheduled to be implemented in three phases. Phase One begins September 23rd 2016 and allows same-day ACH credits. Phase Two rolls out September 15th 2017 and enables same-day debits for payments to businesses and utilities. Phase Three begins March 16th 2018 and completes the rollout with same-day debits to consumers; in other words, same-day peer-to-peer ACH payments will be a reality. This is a big one, and will be the subject of its own future post. See you then!