10 Payment Trends to Watch in 2016 as a Business Owner
This past year the payment industry saw remarkable advances in technology that have made transferring funds and accepting payments incredibly easy – think of the convenience of Apple and Samsung. As we get ready to welcome 2016, we can expect these payment trends to become even more common and efficient.
But, there’s some other interesting payment trends that we all need to be aware of for the coming year. And, here’s 10 payment trends that deserve special mention.
1. Mobile and Frictionless Payments
It’s no secret that consumers are using their smartphones to shop. Just look at the busy holiday season where 83% of mobile shoppers used their phones to complete their holiday shopping. Even more interesting in the study conducted by GPShopper found that “75% of mobile shoppers have the app of their favorite retailer on their phones.”
Companies like Apple, Samsung, Google, and Facebook are well aware of this trend and have been releasing payment services that give their customers the ability to pay directly from their smartphones.
2. Subscription Services
Earlier this year Tim Ray, CEO and Founder of Carnivore Club, argued that subscription services will rule the eCommerce world. We’ve seen this trend growing in popularity for the last couple of years with companies like Dollar Shave Club. What’s interesting is that traditional companies like Microsoft and Adobe are also embracing the subscription model and have found success.
The main reason why this trend should have some traction is that Millennials favor subscription since they offer different pricing models and are connected across multiple devices.
3. Adoption of EMV
On October 1, 2015 retailers in the U.S. had to make the shift to EMV. EMV, which stands for “Europay, MasterCard, and Visa,” are the new credit cards that contain microprocessor chips inside. This technology is supposedly going to make it harder for hackers to steal information.
While not every retailer has the made switch, gas stations can make the transition later, and not every card use has received a card with a chip in it, MasterCard claims it’s at 63 percent and will expand to 98 percent by the end of 2017.
4. Blockchain Payment Trends
Blockchain, the technology that’s behind Bitcoin, has become a hot topic in 2015. If you aren’t familiar with the blockchain, it allows people to “participate in “trustless” transactions, eliminating the need for an intermediary between buyers and sellers.”
As mentioned in the Harvard Business Review, the “cryptography team at Blockstream recently launched its first prototype “sidechain,” which functions as a separate ledger with its own code.” This project has the potential to convert the blockchain into a universal platform that could be used when signatures or authenticity is required.
The blockchain disrupts the entire financial industry.
5. Wearable Tech
Smartphones have already proven that people are tired of carrying around credit cards. People would prefer to make frictionless transaction. Wearable tech is the next evolution. Thanks to the Apple Watch and Samsung Gear S2 that we released in 2015, using wearable to complete the payment process is here. And, it’s only going to get bigger.
Besides smartwatches, there are wearables like the Jawbone UP4, bPay Band, and the Lyle & Scott bPay jacket, that stores your credit or debit card information. When you checkout, just swipe your wearable.
6. Big Data
Expect to see customers receive even more deals and discounts thanks to predictive analytics.
Businesses will also be able to send these offers to its customers mobile wallets. In fact, customers actually prefer this method. According to Thomas Husson, a Forrester Research Inc. analyst, in the Wall Street Journal “Having access to loyalty program points and rewards within a mobile wallet is the number one feature they are interested in.” With brands like Kohl’s and Starbucks having success in this area, expect more businesses to jump on board.
7. Beacons and Sensors
The explosion of big data isn’t the only way that customers will start receiving specials promotions. Thanks to beacons and sensors, businesses can target customers when they’re in their area with flash sales. Another possibility is that customers can pay for a purchase in advance, like ordering and paying for a pizza while on the subway.
Expect beacons and sensors to become a bigger player in the payment industry.
8. Financial Inclusion
Did you know that more than 2 billion adults in the world, which is approximately 38% of the population, do not use any sort of formal financial institution? There is an influx of affordable smartphones and access to the internet. More and more people will have the opportunity to use mobile devices to send and receive money.
This is an area that the Bill & Melinda Gates Foundation is focusing on and is already in effect in Pakistan, India, Kenya, Uganda, and Nigeria.
9. Infrastructure Updates
This year there was a lot of discussion regarding the need for faster payments. Here in the U.S. the the Federal Reserve and NACHA have been working to speed up their payment systems. Merrill Lynch, however, discovered that only 7 percent of its commercial customers responded that this would improve payment efficiency. More importantly than having real-time payments in place, is making sure that payments are smarter.
According to Ather Williams, head of global transaction services, Bank of America Merrill Lynch, said that “In the U.S., we still have an abundance of checks, 70 percent of which are written by businesses.” He added, that getting money before it can be applied isn’t valuable.
Even though there is an infrastructure in place for fast payments, Williams believes that that’s not enough and there will be a need for smarter payments. That will begin when the metaphorical railroad that currently connects the traditional and mobile banking worlds are updated. In short, there will be a need for government compliance to replace this outdated infrastructure.
10. Data Breaches Will Still Occur, But Payment Breaches May Not Be So Bad
Not to be a downer here, but don’t expect to see data breaches go on the decline in 2016. Within the next year, Experian is predicting that:
- The EMV Chip and PIN liability shift will not stop payment breaches.
- Big healthcare hacks will make the headlines but small breaches will cause the most damage.
- Cyber conflicts between countries will leave consumers and businesses as collateral damage.
- Hacktivism will make a comeback.
Experian believes that payment breaches will decline “as retailers transition and card-not-present fraud possibly increases.” Besides updating technology, businesses should also be training employees. Human error will remain one of the biggest security threats.