December 27 — The state of payments is constantly evolving, and this past year has brought several major trends that will impact the direction of the industry for years to come. These major developments also point to the trends we anticipate will be the biggest drivers in payments for 2019.
Whether it’s the ongoing refinement of EMV to quicken transaction speeds, the continual shift from hardware to software-based payments infrastructure or the rapid adoption of intelligent retail and the unattended space, the payments industry is constantly adapting to consumer demands, regulatory pressures, security concerns and the need to eliminate inefficiencies from the system.
Looking Back at 2018
Multi-channel EMV adoption requires an omnichannel approach to payments
The number of options consumers have to make payments has increased significantly in the past few years. There are the in-person options using cards (debit, credit and prepaid), mobile wallets, or wearables. For card-not-present transactions, consumers can opt for P2P payments (PayPal, Venmo) web-based eCommerce portals, eWallet transactions, ACH transactions or eChecks. As retailers and financial institutions have worked to apply EMV security standards to these channels, the importance of a true omnichannel payments infrastructure has increased.
True payments omnichannel is more than a consistent consumer interface. It requires the back-end process to be streamlined so that every payment option used is processed, protected and reconciled in the same fashion. It should not matter whether the payment is made via a mobile device or an EMV chip-based debit card. Payments providers are wasting time and money by patching together disparate solutions to handle every different payment source.
Shifting payments upgrades to an app-based software model
The rapid need for upgrading payments terminals and websites to accept these different payment options has also put pressure on retailers to constantly upgrade their payments hardware. Hardware companies have been significantly reducing prices to entice merchants to buy in order to keep up with the demands of the back-end technology. This has opened a door for payments software companies that are able to provide software updates more quickly, helping keep existing hardware systems compliant and useful longer. The shift to a more software-based upgrade process also helps retailers avoid the aggravation and expense of constantly changing their POS system.
The rise of unattended retail
Unattended retail is poised to make the leap from soft drinks and snacks to multi-layered and profitable market segment, retailing items like frozen yogurt, electronics, makeup, school supplies and over-the-counter medicines. A market report by ResearchAndMarkets.com projects unattended retail to grow to $34 billion by 2023. An example is the expansion of products available at large airports, which include small electronics, travel accessories and jewelry.
Consumers are increasingly accepting of more automation and cashier-less transactions. According to PYMNTS’ October Unattended Retail Tracker, 53 percent of British, male customers prefer self-service checkout lanes, and 16 percent of all consumers claim the availability of self-checkout is a driving factor for which grocery stores they shop in.
As unattended retail options expand into higher end products, the payments infrastructure has adopted to accept credit, debit and contactless payment options that provide the highest level of security available to any point of sale. Much like traditional POS hardware is relying on payments software upgrades to keep up with compliance, security and EMV requirements, unattended kiosks are working feverishly to enable the acceptance of all payments without requiring a complex, time and cost-intensive EMV certification process.
Looking Ahead to 2019
The rise of intelligent retail
The growth of unattended retail in 2018 points the way toward the next evolution of retail. Until recently, little had changed from an innovation standpoint in the unattended sector, but new technology and concepts from the AI and IoT spaces has driven the whole sector forward.
As unattended retail outlets have moved upscale, the technology driving these experiences is also driving a new wave of “intelligent retail.” AI software driving intelligent retail outlets can customize the customer experience to present stronger purchasing options. For example, an unattended makeup center can remember a customer’s preferences for color and use photo technologies to suggest new products that would fit their skin tone and style preferences.
The increasing number of household items connected to the internet also promises a rapid evolution of intelligent retail. Even something as simple of a refrigerator can become an intelligent retail outlet if it uses sensors to automatically order food that is running low and manage deliveries from nearby retail outlets.
In all of these cases, the aim is not to update the traditional unattended sector but to drive these solutions into new sectors of the market where they have not been used before.
Growth of contactless payments in the U.S.
Another natural extension of the widespread adoption of mobile wallets and acceptance of EMV in the U.S. is that contactless cards will be one of the fastest growing payments channels next year. Visa predicts that 100 million contactless cards will be issued in the U.S. in 2019. Already widely used in Europe and Asia, consumers on those continents have shown that consumers will embrace contactless cards, providing benefits for banks and retailers. Consulting group A.T. Kearney assessed the transition experience in six U.S.-type markets that rolled out major contactless programs, and it found that these countries experienced a 20 percent to 30 percent lift in the number of payment-card transactions in the 3 years following the acceleration of contactless.
So what’s next? Now that 2018 is coming to a close, it is time to switch focus to the opportunities of the new year. All sectors within the payments industry will see change, and in order to compete and remain relevant, they will have to adapt and adjust. Merchants, hardware providers, processors, payments innovators and financial institutions will all have to work together to thrive at the end of the decade and prepare to succeed in the ’20s.
These insights are drawn from a report by Will Byrne, CEO of Worldnet, a provider of cloud management platform for omnichannel payments solutions to a base of international corporate clients in North America and Europe. Worldnet provides partners with a fully-hosted “payments as a service” solution, incorporating a range of pre-certified EMV applications for POS, mPOS, mobile, tablet and eCommerce payments.