By Ro Bhatia, LimeLight
The payments industry is transforming. Open technology and
regulations mean consumers have more options for payments and banking. Upstarts
are taking advantage and established players are spending to catch up. Here are
four trends that are revamping how the payments industry affects retailers and
consumers alike:
1. Payments Drive Digital Experiences For Brands (And Consumers)
Payments are no longer just infrastructure:
they are becoming a crucial digital experience factor. Brands big and small are
jumping on board. Order-ahead apps from brands like Starbucks (4% growth in sales and 14% growth in membership in Q1 2019), Kohl’s, Shake Shack and more are continuing to gain
traction. Installment payments are growing in adoption, with Square providing a
new Installments product to its partners in 2018. Rewards programs are being
given major focus from Amazon (Prime Reload gives Prime members 2% cash back
when loading money into an Amazon account) and a Visa and Uber partnership lets
riders earn rewards at local merchants when they ride with Uber — all delivered
seamlessly through their Visa card. P2P is taking off, driven by Gen Z and
Millennial adoption of Venmo (now owned by PayPal). Digital is shifting the
distribution model: payments now need to go where consumers expect them.
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2. Banking, Not Banks: Payments Become More Open
Issuing and acquiring banks have
been the sole providers of payments infrastructure and products for years.
Digital transformation has reshaped the industry, with banks being forced to
build APIs and connectors to the myriad of fintech companies and payment
options that consumers now expect. Partnerships and network effects are
important competitive advantages for banks in 2019. Last year, a group of banks
launched Zelle, a single API-enabled network of more than 30 partners to
deliver real-time payments (including P2P functionality) across thousands of banks and millions of consumers.
In Europe, the PSD2 (Revised Payment
Service Directive) was implemented in 2018, which mandated that banks provide
open access through APIs to their customer’s account information. This means
that bank customers will be able to use third-party providers to manage their
finances while still storing their money safely in their current bank account.
Banks will be forced to compete with the new crop of players taking advantage
of this open ecosystem.
3. More Contactless And Cardless Payments (Really,
This Time)
Since Apple Pay launched in 2014,
we’ve been hearing claims that the era of the card is over. But adoption was
slow, especially in the U.S. where many large retailers were slow to adopt EMV
and contactless tech at the POS. But now things are looking up — and not just for
Apple (which saw 135% YoY growth in Apple Pay users in 2018, fueled by the launch of P2P payments early that year).
Visa plans to issue more than 100 million contactless cards in
2019.
The ubiquity of smartphones,
combined with the rise in other connected devices and a more democratized
payments infrastructure, means consumers have more and more options to pay
without swiping a card.
The trend we’re watching in 2019 is
for the Chinese juggernauts (Alipay with 600 million users and WeChat Pay with 980
million) to expand substantially in the
U.S. and Canada. This could have major impacts on existing EMV and POS infrastructure
— because these apps use QR codes for their mobile payments.
4. B2B Payments Players Look To Expand
2018 saw a substantial increase in
M&A in the payments space as existing players look to build the platforms
required to compete. PayPal made four acquisitions (two fintech companies, one
predictive marketing company and one fraud prevention company) in 2018. CEO Dan
Schulman said PayPal plans to continue to spend more than $3 billion a year on acquisitions in pursuit of its goal of becoming a “one-stop solution for
global commerce.” Adobe acquired Magento for $1.68 billion, and a host of
activity is occurring in Europe as well.
Square and Stripe are expanding
beyond payments to provide the financial infrastructure to help their e-Commerce
and retail clients succeed. Stripe is testing a cash advance service that leverages the financial data on their platform, and Square
Capital delivers next-day loans of up to $100,000. Both platforms give the
ability to make paybacks using a fixed percentage of their daily sales. Stripe
already has a product suite to help businesses incorporate, fight fraud and
build analytics — and we can expect to see more of these holistic offerings
from other players.
Ro Bhatia, VP of Marketing at LimeLight is a results-driven business leader
with a diverse set of experiences working in the SMB, e-Commerce and SaaS spaces
where he has led successful strategic turnarounds, acquisitions, and is known
for his transformational and operational leadership. He has held leadership
roles at The Home Depot and Yahoo before LimeLight as well as eBay, VMware and
Google in varying capacities.
