Invisible payments are proliferating and welcomed, especially as more Gen-Z enters the economy. Amazon Go showed us what is possible, but what does the future hold?
Invisible payments are no longer for the future, and the pandemic has been the driving force that brought them to fruition sooner rather than later. With invisible payments, transactions have become as frictionless as possible, removing the physical elements of payment (e.g., cash, payment cards, wearables, etc.) and adding speed and convenience. Amazon Go garnered some press for its initial take on invisible payments, where partially-automated stores enabled customers to grab their items and go sans checkout. Self-service is quicker and less stressful than dealing with human cashiers, according to a study that found 66% of consumers prefer it. Retailers have already started making the transition to processing payments easily and automatically behind the scenes. They have come to the realization that customers want new checkout experiences with the same benefits of speed and convenience as a part of their online shopping journeys.
Consumers have always sought frictionless payment experiences, though the pandemic yielded a more dramatic shift in sentiment toward any payment experience that is fast and contactless. Ecommerce sites continue to streamline checkout experiences, and merchants are improving omnichannel experiences as customers choose to place mobile orders ahead of time and pick them up in-store later. It is anticipated that this trend will persist.
The predicted rise in omnichannel retail has been specifically suited for customers, allowing them the option to make payments at their own convenience, irrespective of location or time. A recent survey found that roughly 150 million US adults prefer ordering their groceries online and picking them up later. Not only does this constitute almost half of the US population, but retail e-commerce is expected to grow even more in the foreseeable future. As a result, more and more customers prefer the convenience of contactless payment options despite being physically present in the store, leading organizations to initiate omnichannel retail options for customer convenience.
Meeting consumer preferences and providing a streamlined, frictionless, and invisible payments experience will continue to be invaluable for payments providers, banks, merchants, and other financial institutions. In fact, Juniper Research predicts that invisible payments will account for $10 trillion globally by 2027. While consumers are certainly interested, the back-end mechanics of invisible payments are complex and require payments companies to overcome some barriers before widespread adoption.
While invisible payments sound desirable, the truth is that many people still rely on cash. The use of cash may have undergone some volatile spikes; however, experts say that it is holding steady within the payment ecosystem. A significant portion of the population prefers an integrated strategy over fully switching to cashless options, with specific segments, such as the underbanked and the elderly, having 14% of the population still preferring cash payments exclusively. The key will be to roll out invisible payments just like other payment methods: steadily while offering alternative options for those not quite ready to make the switch.
Regulators are also keeping a close eye on the evolution of payment methods, especially as the need to secure sensitive data and guard against fraud becomes a top priority in the digital channel. Financial fraud and user security are therefore two of the main challenges faced by the FinTech industry, as approximately $51 million is spent annually by FinTech companies on fraud prevention. Effective preventative strategies that include fraud detection and risk assessment have, however, been identified to prevent this issue of fraud.
BBVA was one of the first to announce its open banking business and launch the testing of invisible payments in 2018. In spite of the pandemic’s stagnant profits, BBVA was able to grow its customer base by bringing on more than 11 million new clients in 2022. They anticipate that this growth will increase exponentially. BBVA has gone above and beyond to hire the best cybersecurity experts and upskill a significant portion of the workforce to acquire fundamental cybersecurity skills; by 2022, they had trained close to 60,000 employees globally.
Service integration is the major innovation trend we are currently observing, replacing technologies that are dispersed in terms of their payment and ancillary service capabilities. In particular, this applies to cross-border payments, where businesses should seek out providers who offer more services than just this one. Acceptance of international payments ought to be the bare minimum. In order to give users an enhanced experience before, during, and after their payment, payments companies should be emphasize on technologies that enable customers to complete a transaction inside an app rather than on a plastic card or NFC touchpoint. With the payment serving as just the first touchpoint, this type of mobile-first strategy will be essential for building seamless, connected experiences for new markets.
Customers continue to explore the wide range of payment options available to them, carefully considering their preferences while adapting to the volatile economic landscape caused by the global pandemic and economic recession. This is particularly prominent in the IT and financial sectors. Still, invisible payment methods will continue to be developed and tested with the end goal of improving customer experiences, especially for everyday purchases. While the reality of “completely invisible payments” has set in, it will be a while before they fully become a part of the payment ecosystem.
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