Mobile payments have seen an incredible rise in 2021 and are expected to become the most popular way for Australians to pay by the end of the year. Wearables, especially in the smartwatch category, are also becoming a quick and easy option for customers to shop in store. The use of digital wallets continues to grow thanks to their simplicity, ease of use and convenience, particularly for online transactions.
Add to that the Buy Now Pay Later (BNPL) marketplace, coupled with several new checkout innovations in Australia, and you’ve got a future that’s almost unrecognisable from anything we’ve seen in the past ten years.
So, how will these ongoing changes affect retailers and what trends can we expect to emerge as we head into the new year? Here are five ways this latest breed of payment technology is going to shake up the industry in 2022.
More reforms and government intervention
Expect to see more intervention and reforms in 2022 as the federal government tries to control the onslaught of new digital payment technologies. As Treasurer Josh Frydenberg noted, if the government does not step in, “it will be Silicon Valley that determines the future of our payments system.”
With the expansion of alternate payment mechanisms such as Buy Now Pay Later (BNPL) and cryptocurrencies bringing a whole new layer of tech to the party, it is inevitable that there will be a need for regulation and policy protection in this area.
The key challenge for the government will be to find the balance between protecting consumers without placing the burden and cost of this responsibility on retailers or merchants.
Policymakers must also ensure that the level of intervention does not stifle innovation in the local market. The interests of Australian consumers and business should be at the forefront of any intervention.
Faster payment options available
Moving into the new year, further applications to the New Payments Platform (NPP) are set to increase speeds for retailers. NPP is a scheme that allows money to move between different financial institutions in real-time with transactions occurring between 15 seconds to 60 seconds (think Osko).
Fast transfers between financial institutions is a must for retailers in 2022. Gone are the days of waiting three days for a payment to clear – customers and businesses expect to move money around in the blink of an eye.
Faster payment options offer a much simpler process for retailers and provide many benefits including a reduction in administrative work, better automation and integration and easier reconciliation of transactions. They also have the added benefit of providing customers with refunds instantaneously.
The NPP delivers retailers a range of options for real time payments that were traditionally only possible through the use of credit cards. This is especially beneficial for businesses that require recurring and subscription payments.
While there are advantages to these new offerings, retailers need to carefully assess what is the right choice for them. The fee regime for these new payment types will be structured differently to their current systems requiring careful assessment to decide what is the best option for their business.
Technical delivery of these solutions should also be examined as the benefits could be outweighed by the cost of maintaining a new integration. A partner that can provide a single integration for multiple payment options will become the partner of choice for 2022 and beyond[1] .
Click to Pay
Customers expect seamless transactions and the goal for any retailer should be to remove all points of friction that could be a potential spot for a customer to fall off and abandon their cart.
The latest version of Click to Pay, also known as Secure Remote Checkout (SRC), will help eliminate this friction by removing the need to set up multiple accounts with different providers. It comes with even more features that customers can take advantage of, such as not needing to wait for a new credit card to arrive in the mail once expired, because SRC links directly to your bank and updates itself in real time when your credit card is replaced.
Click to Pay takes to the mass market an increased level of functionality that has previously been available across digital wallets but also does it in a way that is more commercially viable for retailers. IPSI is extremely excited to be working with the schemes to be an early adopter of this service offering.
Seamless payment transactions
Uber created an aspirational payment process that changed consumer behaviour forever. With other services like me&u now extending that seamless transaction to the hospitality industry, we are going to see more businesses and industries move to seamless payments in 2022.
Just like the switch from wired to wireless, the retail industry will see a shift from card present transactions to card not present transactions, with many businesses finding ways to introduce seamless payments via apps and other mobile technologies. What were previously innovative solutions by a small group of providers will become mainstream in 2022. Seamless omnichannel solutions will leverage advanced tokenisation and big data capabilities to deliver personalised customer experiences.
Educating staff on digital payment options
There will be a stratification of payment types in 2022 with debit and credit cards remaining the preferred type of payment for many, with younger generations opting for BNPL and an emerging group who will want to pay using emerging payment types and devices.
Regardless of how your customer wants to pay, staff need to understand the different approaches, and be armed with accurate information around each option.
It is also advisable that retailers have a trusted payment partner on hand to provide sound advice and guidance as new technologies continue to emerge. Not every new system is necessarily going to be the right fit, and competing interests will be at play between industry participants which may not optimise businesses’ cost savings or their customers’ experience.
What the future holds
There have been significant improvements in innovation in the way people use payments over the last five years, with Debit Cards, PayPal and BNPL becoming almost ubiquitous in consumers’ payment landscape. Now mainstream providers, schemes and banks are looking at ways that they can not only compete, but also improve upon the innovation that has previously been delivered by fintechs.
Going forward, the smart retailers will be the ones that embrace new levels of payment capabilities and match them with their desire to offer a unique customer experience.
Michael Donoghue is founder of payment fintech company IPSI.