The Transformation of Payments: A Flashpoint of Innovation

For any brand or company, the payment experience must be considered part of the sale. Think about the last time you went to a store and left because the line to pay was too long. Or the last time you went online to pay for something and the checkout process made you so uncomfortable that you just gave up. This shows how important the payment experience is to a brand.

Online paymentFor any brand or company, the payment experience must be considered part of the sale. Think about the last time you went to a store and left because the line to pay was too long. Or the last time you went online to pay for something and the checkout process made you so uncomfortable that you just gave up. This shows how important the payment experience is to a brand.

Technology in the payments field has gone through a huge transformation in the last three years. Let’s look at how this has transformed the lives of consumers.

1. Point-of-Sale (POS) Technology

POS technologies available to brands have exploded. Let’s take Square as an example. How does a consumer pay for a magician for their child’s birthday party without pulling out cash or writing a check? Square is the answer. This technology works with iOS and Android devices to accept payments anywhere by using an attachment for the mobile phone.

Other new POS devices include Poynt and Clover. These devices are able to accept EMV payments, gather data on the customer and provide personalized offers. The technology works outside the hardware, so it can be implemented by companies of all sizes — from Amazing-the-Magician to Zoe’s Fashion Bracelets.

2. Mobile Payments

Another key element of new payment technology is mobile payments. This includes mobile wallets available, like Apple Pay and Samsung Pay. According to a National Retail Federation (NRF) study conducted by Forrester® Research (The State of Retail Payments, 2016), 68 percent of retailers said they planned to implement at least one digital payment feature in the coming year.

But with new payment methods, we’re really looking for consumer adoption. According to a Synchrony Financial 2016 Digital Study, 81 percent of consumers surveyed were aware of mobile wallets, but only 9 percent said they plan to use the technology regularly.

Why isn’t mobile wallet usage taking off? After trying the mobile wallet one time, consumers indicated they just don’t perceive the need, and are not sure if it is safe and secure. Most are satisfied with the payment methods they currently use. But, the tide is turning toward increased mobile wallet usage.

According to the same Forrester study, 63 percent of retailers believe consumers will use mobile payments when more features become available. This includes coupons, offers and loyalty programs tied to the wallet. As a result of these increased value propositions, and the increased number of retailers who adopt the technology, the use of mobile wallets is likely to grow in the future.

3. Mobile App

Enabling payments right in the mobile app is an extremely convenient new innovation. A perfect example of this is Uber: When taking an Uber to the airport, the payment experience is almost non-existent. You just get out of the car and go catch your plane. Why is this significant? Think about other mobile apps that could use this seamless integration. Checking out makeup at your favorite cosmetics retailer? Get the eye shadow instantly.

Synchrony Financial has implemented this payment method with an app plug-in called SyPI. Once the customer is in the retailer’s mobile app, the entire purchase experience is executed directly within the app. No digging into your wallet for your credit card each time you want to buy something — no wondering if you have enough credit line for that new sweater. This technology is gaining traction with many brands who want to create a seamless purchase experience.

4. Person-to-Person (P-to-P) Mobile Payments

P-to-P mobile payments have been taking off in recent years. Your local babysitters don’t have the Square attachment to their smartphones? You can still pay them by using other mobile apps. Examples of these are Venmo, Popmoney and Square Cash. These apps allow the transfer of money to an individual from a person’s credit card or bank account.

Many banks have developed their own P-to-P technology to keep customers connected and engaged. As Millennials reduce their time spent interacting with banking institutions, innovative payment technologies are created to keep them engaged and loyal to the bank.

The payments field has gone through an explosion in technology. And with this advent of new technology are new start-ups that create even faster and more seamless experiences. With the rapid pace of change, the end of 2017 may look very different from today in the payment experience for both consumers and brands. Is your brand ready to take advantage of these new ways to grow your business and keep your customer engaged?

Note: The views expressed in this blog are those of the blogger and not necessarily of Synchrony Financial. All references to consumers and population refer to the survey respondents.

Why Don’t Millennials Use Cash?

When’s the last time you saw a Millennial pay with cash? Even convenience store purchases of less than $5 are paid with a debit card. Coffee in Starbucks is paid via cell phone. Money is exchanged between friends using PayPal and Venmo.

As I paid a dinner check, my Millennial daughter affectionately quipped, “You old people and your cash!”

My response was, “Everybody likes cash!” I was wrong of course, (and perhaps prejudiced by my South Philly roots, where some businesses are still “cash only” for one reason or another).

When’s the last time you saw a Millennial pay with cash? Even convenience store purchases of less than $5 are paid with a debit card. Coffee in Starbucks is paid via cell phone. Money is exchanged between friends using PayPal and Venmo.

Many of the Millennials I give birthday gifts to prefer gift cards to specific retailers, like Home Depot or Banana Republic, rather than cash that they can spend anywhere.

A survey by TD Bank of 1,300 Americans, reported in ABA Bank Marketing last month, found that 25 percent of Americans either currently use or have used a reloadable prepaid card in the past two to three years. But among Millennials (ages 18 to 34), this proportion jumps to 33 percent. According to FICO, more than one-third of Millennials are expected to use a mobile wallet in 2015. (Opens as a PDF)

Professor Bernardo Batiz-Lazo of Bangor University, Wales, speculates that Millennials’ predisposition for non-cash transactions could eventually result in the demise of ATMs. His blog post reprinted by Newstex last month states:

“Perhaps the biggest issue shaping ATMs in the near future will concern the choices of Millennials, those for whom the Internet, mobile phones and plastic cards are a fact of life, checks are unknown and cash is quaint. They challenge financial institutions and their business models to do more, faster because they have easier and faster access to better technology than offered by the banks’ legacy systems through the multitude of apps on their smartphones, wearables, tablets and elsewhere. Left to their own devices, Millennials could spell the end of the ATM by 2035 or thereafter.”

Now of course the use of electronic payment methods is not limited to just Millennials. Boomers and Silents are also moving away from cash transactions, but Millennials are certainly leading the charge. If your business requires a minimum purchase to use a card, you’re probably losing customers among the largest demographic group. Millennials represent 24.6 percent of the population vs. 23.3 percent for the Baby Boomers.

I’m waiting to see the first panhandler with a card reader. Let me know if you spot one.