If you like change and have an interest in payments you’re going to like 2019.
While predicting the future can be a dicey proposition, it seems safe to say that the pace of change in the payments world is poised to continue accelerating as we enter the last year of this decade. With that in mind, following is some of what you can expect in the course of the next year—and beyond.
MORE MOBILE PAYMENTS
A recent United Nations Conference report predicted that more payments will be made with mobile technology than with credit cards in 2019.
More specifically, a new Juniper Research study titled Mobile Wallets: Service Provider Analysis, Market Opportunities & Forecasts 2018-22 predicts that “nearly 2.1 billion consumers worldwide will use a mobile wallet to make a payment or send money in 2019, up by nearly 30 percent on the 1.6 billion recorded at the end of 2017.”
While mobile payments haven’t become as popular in the U.S. as many other developed countries, it appears that the barriers that held back progress are disappearing. For one, mobile wallets are becoming increasingly commonplace, largely because of the inclusion of mobile wallets like Apple Pay® and Samsung Pay® in the most popular smartphones.
At the same time, contactless payment devices that are enabled by Near Field Communication (NFC) are becoming much more common as retailers find good reasons to update their payment processing technology—to become EMV®-compliant, perhaps, or to help drive new business and encourage additional purchases.
MORE MOBILE POINT OF SALE (MPOS) DEVICES
An increasing number of retailers are starting to embrace the promise of mobile point of sale (mPOS) devices, which allow cashiers to double as salespeople and make a sale from anywhere in or near a place of business.
While issues with battery life and the threat of theft have held back widespread adoption to date, the most recent research suggests that the mPOS device market will grow to 27.7 million devices by the time 2020 rolls around, which would amount to more than 8.5 times the size of the market in 2014.
BIOMETRICS GOES MAINSTREAM
Similarly, biometrics continues to gain traction, in part due to ever-present concerns about improving security and in part due to the desire to replace the PIN and password with something better.
Many people are already familiar with biometrics, thanks to the Apple® fingerprint scanner that unlocks iPhones® and Apple Pay. But in the near future, biometrics won’t be limited to fingerprint authentication and facial recognition technology. Behavioral measurements (like keystroke dynamics or signature dynamics) will likely supplement physiological biometrics and traits might be used in combination with each other.
In the very near term, though, you could see traditional authentication methods (password or PIN) used in combination with a biometric solution (like a fingerprint) as a bridge to a biometric-centric future.
PEER-TO-PEER (P2P) PAYMENTS EVOLVE FURTHER
As for the rise of peer-to-peer (or person-to-person) payments, those also seem destined to become increasingly commonplace as services like Venmo and Zelle seek to broaden their services and their appeal.
E-Marketer suggests that total transaction value for P2P mobile payments already exceeds $167 billion per year, but that it will reach $341 billion by 2022, with Zelle expected to surpass Venmo in terms of number of users—27.4 million to 22.9 million—sometime this year.
“Both Zelle and Venmo are looking for future areas of expansion and new ways to acquire customers,” notes Pymnts.com, reminding readers that “Zelle recently found a spot with helping the quicker distribution of insurance checks and other corporate disbursements. [And] Venmo … recently announced that it is getting into payment cards,” with the goal being to help users spend their balances in more places.”
ALTERNATIVE FINANCING: THE FUTURE OF LENDING?
Last but not least, a pronounced hesitancy among banks to lend money in the wake of the financial crisis of 2008 opened the door to those innovators willing and able to provide “alternative financing,” which refers to lending options that exist apart from traditional banks.
While some may equate alternative financing with high interest rates, this is not necessarily the case.
There are now dozens of companies aiming to become big players in this space, addressing all manner of different markets & verticals and offering everything from small business loans to “new purchase financing,” the latter of which might be described as a modern-day version of layaway.
Some companies, like Afterpay (Australia) and Klarna (Sweden) have achieved spectacular success in their home countries and are seeking to duplicate that success in the U.S.
For example, Afterpay aims to appeal to millennials by offering a way to pay for purchases in interest-free installments, earning most of its revenue by charging retailers 4-6% to offer the service. According to Forbes, retailers are motivated to sign on because Afterpay allows users to make purchases that are “meaningfully” larger than they would make otherwise.
That helps explain why Afterpay has signed on a reported 15,000 retailers and has two million customers. It also points to adding alternative financing to the list of ways to sell more to existing customers.