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6 Fascinating Trends in Mobile Payments
When you think of the year of 2020, trends in mobile payments may not be the first topic that comes to mind. But while the world has been gripped with changes due to the coronavirus, e-commerce and brick-and-mortar businesses have been forced to quickly adapt to the shift in consumer habits — and this includes how shoppers pay for their products through their mobile device.
We’ve seen explosive growth with many e-commerce sites. Direct-to-consumer shopping is continuing to grow YOY. We’ve seen extreme growth in certain product categories — such as food and groceries, and home and garden. And with all these changes, it’s unclear whether shopper’s patterns will return to their pre-COVID habits.
These impacts have helped push mobile payments to a new level.
Mobile payments are a form of contactless payment for a shopper, even at a brick and mortar retailer. It’s a digital payment made through a mobile device. It offers fast and secure transactions without the use of checks or credit cards. Not only can it be used while shopping, but it makes peer-to-peer payments (like when you owe money to a friend) virtually effortless.
Mobile payments were first introduced in 2014 when Apple Pay was brought to the market. Suddenly a shopper could pay for a purchase through their smartphone without having to use a plastic card. And although it’s a relatively young technological idea, it’s become clear the convenience and simplicity of this payment method is here to stay.
The Demand for Mobile Payments
Prior to COVID-19, the demand for merchants to make mobile payments accessible to all was already increasing. In the United States alone, mobile payments are projected to reach $161 billion by 2021. Globally, the mobile payment market reached over $3 billion in 2019 and is expected to grow to $12 billion by 2024.
Another interesting fact is where the demand for mobile payments is occurring – and not occurring as much – in certain markets. As of 2019, the Asian Pacific users were leading the charge for this digital payment system, with 46% of the total usage. Followed by Latin America with 34%, North America accounted for 16% and Europe was slightly less with 14% usage.
While Apple may have been the first to introduce the new payment technology, major companies have recognized the demand. Companies such as AliPay, PayPal, Amazon and Mastercard are a handful of large companies using artificial intelligence and creating new options for mobile payments. With so many powerful companies investing in mobile payment technology, the ability to pay with a mobile device is within reach for the average consumer.
What are the trends we are seeing as a result for this unique form of digital payments? Let’s take a closer look at 6 mobile payment trends that are likely here for the long haul.
1. Mobile Wallets
A mobile wallet is an app that allows users to link their debit or credit card so you can pay for items digitally. In order for your shopper to activate their mobile wallet, they have to download an app on their mobile device and link an authorized debit or credit card. The card information is stored securely and there are additional security measures the shopper must take. Common security measures are the use of facial recognition or thumbprint authorization.
The main technology behind the use of mobile wallets is called NFC, or near field communication. In simple terms, near field communication works by allowing two devices that are “near” to one another (within a few centimeters, to exchange information and data. As long as the two devices are compatible, then NFC can work with your smartphone and a POS (point-of-sale) terminal.
With more people using smartphones than ever before, the growth in the use of a mobile wallet is expected to continue. But are there other reasons shoppers are starting to adopt the use of a mobile wallet?
For U.S. shoppers, according to a recent Speedpay Pulse report, 55% of shoppers feel like mobile wallets offer the fastest pay option. Another reason the method is preferred is because of the convenience it offers. Other reasons for adopting a mobile wallet include using the latest technology and shoppers feel the transaction is secure and reliable.
As shoppers continue to become more comfortable with the use of mobile wallets, the convenience and security of using mobile wallets is expected to continue to drive demand.
2. Contactless Payments
As the name implies, contactless payments means the shopper can pay without any physical contact with the merchant’s point-of-sale system. Contactless payments are used from mobile devices, making it the ultimate in convenience for the shopper.
The most popular examples of contactless payments are Apple Pay, Google Pay and Samsung Pay. Each of these methods has different technology and might be used a slightly different way. For instance, the Apple Pay can be used once your fingerprint is scanned (and verified) to open up the payment. You then hold your device up to the scanner and it takes the payment. Google Pay requires you to use an app to make a payment.
Contactless payments can also be made through credit cards. Some cards now include technology that allows the shopper to pay for an item by simply waving or tapping the card above a card reader. This is referred to as a contactless payment card.
One of the biggest advantages to contactless payments, besides the convenience, is the security. This form of payment is more secure than a physical debit or credit card because the information can’t be copied from the magnetic stripe on the card. The data used for a contactless payment is highly encrypted and constantly changing, making it harder for hackers to clone.
The card payment information isn’t stored on the smartphone. The user can actually delete the card the contactless payment is tied to if they happen to lose the physical card.
The coronavirus seems to have excelled the use of contactless payments, especially in the United States. A recent survey from Mastercard, found 51% of Americans are now using some form of contactless payment. The cleanliness of not using a touchpad is one factor driving this demand up, even though Americans have been slower to adapt to contactless technology overall.
3. MPOS Technology
Another trend seen is the use of MPOS, or mobile point-of-sale technology. These units, used by merchants mainly, are the dedicated wireless devices that replicate a traditional sale terminal or cash register. This allows the merchant to “set up shop” almost anywhere and accept a card payment from a shopper.
This advanced technology allows merchants to operate wire free and accept payments from anywhere. The MPOS can work with either a tablet or a smartphone, which is one reason why it’s appeal is continuing to rise. Not only does this technology allow the merchant to operate from anywhere, it can also sync the payment data to their in-store systems if needed.
Studies show shoppers are gravitating towards – and expecting – more self-service checkout options such as MPOS. As much as 73% of shoppers want advanced technology for more checkout choices.
Think of the countless number of businesses that can benefit from the use of MPOS technology. Not only do bigger retailers such as Apple already use it, but the local merchant can benefit as well. Merchants such as:
- Food truck operators
- Farmer’s market vendors
- Craft fair participants
- Coffee cart operators
- Ice cream cart owners
- Home repair service companies
- Trade show participants
- Hair salon owners
- The list goes on and on….
Another benefit of the MPOS for merchants is the ability to start with only one unit and then scale up as demand increases. For instance, if a home service provider only has one MPOS to start their business with, as the demand for services increases and more servicers are hired, then an additional MPOS can be purchased to meet demand.
The MPOS offers convenience for both the shopper and the merchant, which can ultimately lead to higher customer satisfaction and increased sales. The merchant can benefit even more by offering a quick solution for payment right where the shopper is making their purchasing decision.
4. Social Shopping
It’s safe to say people love their smartphones. Americans alone spend an average of 5.4 hours per day scrolling. Globally, smartphone users are spending an average of 2 hours and 24 minutes on social media. What does this mean for merchants? If a merchant can meet a shopper right where they are – such as with social media – then it’s possible to snag more sales.
Social shopping refers to the use of social media for shoppers to gain information on products, such as reviews and descriptions, and also as a method of purchasing. Think of it as where e-commerce and social media intersect. And social shopping is a trend that can only continue to increase.
An example of social shopping is when a shopper uses Facebook to show their friends a purchase or a product the shopper likes. Another example is when a shopper scours through social media posts to read a product review.
How a Merchant Can Influence Social Shopping
As a merchant, you can influence how much social shopping is taking place with your brand or site. First, you can find out what shoppers are saying about your products and service. You simply search to see what people are saying on the different social media platforms. You can also search via a search engine like Google.
Another impact a merchant can have on social shopping is to up their own social media game. Create Facebook stories, go live on Instagram, make TikTok videos if necessary. The more you can be on social media as an e-commerce owner, the more you and your shoppers can converse together.
You can also use social media to help with customer service, and great customer service is a way to increase shopper loyalty. By offering services such as Facebook messenger chats, you make it easier for shoppers to ask questions. Keep in mind that as convenient as this is for shoppers, it’s important for merchants to respond quickly. One survey found 42% of consumers expect answers within 60 minutes of posting a question on social media.
Lastly, make sure your e-commerce site easily converts to mobile. This will help as your shoppers are navigating through the social media sites for questions about your product and possibly a place to purchase.
5. Biometric Authentication
As if a scene from a science-fiction novel, biometric authentication is one of the futuristic methods used to authenticate a contactless payment. It’s also becoming a more widely used method for transaction security.
Biometric authentication is the use of someone’s biometric features to authenticate the use of a device. A biometric feature is a physical or biological characteristic that distinguishes an individual from someone else – like a thumbprint. A trend among mobile payments is the use of biometric authentication, instead of relying on a PIN or password, to access a device and make a contactless payment.
While fingerprints are still the primary example of biometric authentication, facial recognition is also increasing as smartphone cameras continue to improve their technology. Voice identification is another technology used to unlock contactless payment options.
Biometrics have been used more with in-person contactless payments, but mobile transactions are beginning to adopt this technology for verification.
Not sure if your shoppers must use this technology anytime soon for their payments? According to the Mobile Payment Authentication & Data Security 2019-2024 study, biometric authentication is expected to surge over 1000% by the year 2024. So much so, it’s expected to be used in over $2.5 trillion worth of transactions. Over $228 billion in transactions in 2019 used this technology for mobile payments.
As advanced as this technology is and as much as it’s contributing to more secure transactions, some shoppers have experienced frustration with the methods such as facial recognition. But as technology continues to improve for this and as shoppers continue to rely on fast and secure transactions in mobile payments, it’s likely the growth will continue.
6. Flexible Payment Options for Shoppers
The key driver in all the trends with mobile payments is offering the shopper the fastest, most convenient and secure payment option possible. This trend is also seen in buy now, pay later (BNPL) options for payments. Shoppers not only want flexibility with how they pay for a transaction, but also how they budget for these mobile transactions. A buy now, pay later such as Splitit, gives the shopper the ultimate choice in payment flexibility.
A BNPL solution like Splitit can be offered by merchants as an option for shoppers when checking out. This allows the shopper to break the total purchase price into smaller monthly payments. In addition to helping the shopper budget for this item, it can be used seamlessly on a mobile device.
Specifically with the use of Splitit, a shopper only has to have the available credit on their credit card to be able to split up the payments. Once the credit card information is entered, the shopper can choose which time frame works best for their budget, such as 6 monthly payments or 12. And since the payment is tied to the shopper’s existing card, there’s no need for additional credit checks or an application.
Final Thoughts on Trends in Mobile Payments
The digital world may be changing at a rapid pace, but it’s important for e-commerce and brick and mortar merchants to stay up on the latest trends in payments. Not only do contactless payments and mobile wallets offer your shoppers more convenience, but it helps create a seamless shopping experience. If your store is equipped to handle the latest in secure shopping and wireless payments, then you can bet your shoppers will keep coming back.
If you’re interested in learning how Splitit can help enhance your shopper’s experience with payments, contact us today for a free demo.