How we pay for goods and services is constantly changing, with futuristic-sounding technologies increasingly becoming the norm. But which payment systems are the true game changers?
As we start the new year, it seemed the perfect time to round up the latest views and predictions on a range of payment technologies.
Virtual Reality or VR is a fairly common concept in education and training (think flight simulation and surgical training) as well as entertainment and gaming. Now with headsets backed by big names like Sony and Facebook, VR is starting to tap into its mass market potential.
According to figures from statistics aggregator Statista, revenue from sales of VR hardware and software hit $2.3 billion in 2015 and was expected to reach $3.8 billion by the end of 2016. Experts see the fact that Chinese e-commerce group Alibaba is investing in Virtual Reality for shopping and payments as a sure sign that VR could become the next big thing in payment technology.
October last year saw Alibaba demonstrate a payment service allowing virtual reality shoppers to pay for goods by nodding their heads. VR Pay means shoppers don’t have to take off their VR goggles when it comes to paying. They can just look or nod instead.
Imagine being able to go into a shop, take the products you want and leave, no checkouts and no queues. That’s what Amazon Go is promising.
Amazon’s Just Walk Out technology automatically detects when products are taken off or returned to the shelves and keeps track of them in a virtual shopping cart. Shortly after leaving the store, customers are charged via their Amazon account and sent an e-receipt.
All the customer needs is a smartphone and the Amazon Go app.
The first, and currently only, Amazon Go store is located in Seattle and it’s only open to Amazon employees who are part of their beta testing programme. Amazon plans to open the store to the public early this year, with more US stores to follow and Australia next on the roll-out list.
Tokenization & Biometrics
Tokenization – the process of replacing sensitive data with surrogate values – is now the established method of securing mobile payments, but biometrics are increasingly coming to the fore.
AndroidPay already supports fingerprinting and facial recognition but there are concerns about the security of fingerprint technologies. In a bid to stay ahead of fraudsters, ever-more complex biometric methods are being explored. These include voice and iris recognition, heartbeat analysis and vein mapping.
It seems that consumers are keen to adopt biometric security. According to a study by VISA in 2016, over two-thirds of European consumers are interested in using biometric identification.
Meanwhile, MasterCard has unveiled plans to verify purchases by asking shoppers to pay with a selfie. For this system to work, a photo must be uploaded which is converted into a binary string using facial recognition authentication technology. The user can simply take a quick selfie which is compared to their photo for authentication.
Wearable Payment Devices
VISA piloted NFC payment rings at the Rio Olympics, but if making payments with a fashion accessory still feels far-fetched, think again.
Gartner predicts that in the next two years 50% of consumers will pay using smartphones or wearable devices. Goldman Sachs believes $20 billion worth of connected wearable devices will be sold this year and research by Tractica estimates transaction volume through wearable payment devices will reach $500 billion annually by 2020.
The major players in the wearable payments market are currently manufacturers of smartphones and wearable fitness devices but it may not be long before wearable payments take on a more flexible form. PayCapsule Flex is a flat, washable payment device that resembles a clothing label and can be sewn onto fabric. Another company, oti, has developed PayEnable, a tiny payment card that can be integrated into bracelets, belts, cufflinks and buttons.
While companies continue to experiment and innovate with wearable technology, it remains a way off becoming mainstream. But as the wearables market matures, it will surely become a commonplace way to make payments.
Contactless and NFC
When contactless was first introduced, there were questions about whether the public would take to tapping to pay. At the end of 2016, the numbers told us that the answer is a resounding yes. In the UK, anyway.
The Co-op announced in April that Near Field Communication (NFC) contactless payments in their stores had topped almost 11 million transactions a month, up 1.4 million or 15% on the previous period. According to The Guardian, one in six card purchases on the high street are now contactless.
The UK Cards Association reported that £260.7 million was spent in contactless payments in August 2016, an increase of 8.4% on the previous month.
Interestingly, Co-op data also shows that shoppers still opt for chip and PIN for transactions over £10, even though the limit for contactless in the UK has been raised to £30. So perhaps shoppers still have concerns about security when it comes to contactless on larger value purchases?
As contactless infrastructure matures, expect continued growth in NFC contactless payments in 2017 and beyond.
Mobile Payments and Mobile Wallets
The mobile wallets market is maturing but it hasn’t yet achieved mainstream adoption. That is predicted to change within the next few years.
Business Insider UK estimates the number of in-store mobile payment users will reach 150 million by the end of 2020, representing 56% of the consumer population in that year.
Mobile wallets offer enhanced security – card details are not given at the point of payment - fast checkout and scope for a range of loyalty benefits. It’s a combination that experts predict will eventually push mobile wallets ahead of contactless card payments, and convince merchants and shoppers to fully embrace the technology.
The biggest barrier is consumer loyalty to traditional payment methods but as more loyalty programmes and added benefits such as P2P payments are integrated into mobile wallets, and the technology becomes more mainstream, usage is expected to surge.
Peer-to-Peer or Person-to-Person Payments (P2P)
In theory, peer-to-peer payment apps make sending money to individuals using a phone as quick and easy as sending a text.
In reality, the sender and receiver have to be signed up to the same payment app for the transfer to work. There are lots of different apps on the market and no clear market leader, which is something of a barrier to adopting the technology. There is no point signing up to an app that none of your friends are using.
There are other issues holding P2P back. Notifications of transactions are sent straight away but the transactions themselves can take up to three business days to go through. Some providers charge a fee per transaction and some P2P systems have been subject to hacks and scams
For all these reasons, P2P payments have so far mostly been embraced by tech-savvy young people. The jury is still out on whether they will be adopted more widely in 2017 and beyond.
Mobile Proximity & Beacons
Despite predictions that first-party GPS and beacon technology would become the fastest growing area of mobile ad spending in 2016, beacons are still not a recognisable part of the mainstream everyday shopping experience.
A beacon is a super-small computer with a long battery life that transmits location information to mobile devices. If the owner of the device has installed the sender’s app, and opted into receiving messages, they can be sent real-time, relevant and contextualised messages and deals.
A study by Research Now found that 72% of consumers agree that receiving a relevant offer on their mobile device while shopping in-store influences their chance of making a purchase.
2017 could be the year that beacons gain real traction in the retail market.
Point of Sale Systems
As all these different technologies jostle for pole position in the market, it’s likely to be ease of use and security that determine which endure and which will fall behind.
For many of these payment technologies, the Point of Sale terminal is still a vital part of the mix. Demand remains high for mPOS and NFC-enabled terminals, and EMV compatibility.
Here at Tailwind, we expect 2017 to be our busiest year yet. At the end of 2016, we launched our Tablet Stand, and this year we have more new products in the pipeline. We will continue to provide the most secure and best possible POS stands and mounting solutions to all our customers, no matter how payment technologies continue to evolve.