The future of electronic payments
In the 1950s, when science fiction writers dreamed about the coming age of computers, they assumed that like everything else in their experience, computers would get ever larger as they got more powerful. Some predicted computers would be as big as small towns, maintained by thousands of workers.
Obviously, extrapolating from what you know isn’t always the best way to predict the future. It fails to account for the unexpected invention or idea that turns everything on its head.
When I and the leadership and staff at ETA think about the future of electronic payments, three things stand out clearly. All are the result of just that kind of “out of the blue” innovation. The first is mobility on the part of consumers and retailers alike; the second is concern about consumers’ personal privacy and data security; and the third is the emergence of non-traditional payment systems.
The electronic payments industry today is coming to grips with the idea that what was once our only product – credit and debit card processing – is quickly becoming just part of a much larger solution that not only enables electronic payment, but encourages and facilitates the sales that drive the payment transaction.
I’m sure you have seen dozens of articles here and elsewhere about mobile payments. The concept of consumers waving a smart phone at a point of sale terminal to pay for a purchase has caught the public’s attention, but mobility is much more than that. Just as mobile technology has freed all of us from the tether of a land line or a network cable, mobile commerce has made it possible for merchants and their customers to do business on the move in a multitude of ways.
Visionary retailers already are using mobile technology to stay connected to their customers wherever they are and no matter what they’re doing. They’re using mobile payments acceptance to bust lines and personalize customer service. They’re using mobile devices to provide customer demos, check inventory, send and redeem offers and complete sales in the aisle. That’s transforming the customer experience, and the ability to accept electronic payments is critical to a successful customer experience.
So far, only a handful of retailers are pushing the envelope, but those who encounter this level of service and convenience will begin to expect it everywhere they shop. Customers will be less willing to stand in line to pay for purchases, and more and more will want to pay by mobile device, or examine products in the store and order and pay online for home delivery.
If you currently accept card payments, get ready for EMV. Europe and Canada already are EMV compliant and credit card companies have made it a priority to have EMV in place by 2015 in the U.S. EMV is the protocol that is used on so-called smart cards, which have an embedded chip and are virtually impossible to counterfeit, making payment information more secure on the one hand and making fraud less likely, even if cardholder data is somehow compromised. But EMV will require that you upgrade or replace your present POS terminal.
But even as cards get more secure, technology has expanded retailers’ ability to collect extremely valuable data about consumer preferences and behavior and to combine that with purchase histories and spending patterns. Toss in the ability to mine and analyze that data, and you have perhaps the most powerful marketing system imaginable.
But with that power comes a tremendous potential for abuse. That potential has caught the attention of government legislators and regulators at every level, which is something that everyone in the retail industry and the payments industry will have to contend with, and probably soon.
There is every indication that the levels of data security and data privacy that electronic payments processors have lived with for many years will be a routine concern for every merchant who accepts electronic payments, has a loyalty or rewards program, or collects customer information at the point of sale. It may become very costly if personal data on customers is compromised, even if payment data isn’t involved.
Emergence of Non-Traditional Payment Systems
The emergence of new technologies will have a significant impact on the emergence of non-traditional payment services that doesn’t involve traditional debit or credit card accounts.
Consumers are going to see their choice of payment methods increase dramatically in the next few years, and both the retail and electronic payments industries will have to accommodate those choices. No one can predict which of the many alternative payment modes will succeed in capturing critical market share, but one thing is certain: cards are going to have competition.
Retailers may soon find themselves trying to figure out the most efficient way to convert such things as Facebook credits into cash and back again. They’ll no doubt encounter customers wanting to pay with PayPal and probably other things they’ve not yet heard of, like Dwolla, Obopay or Mocapay, just to name a few.
Not every alternative payment scheme will be right for every retailer. Until it all sorts out, the best advice is to know your customers and what they prefer to use when they pay – and expect that to change over time.
Electronic Transaction Association Members Can Help You Navigate Emerging Trends
Obviously retailers, especially the small and medium size merchants who are most numerous, won’t have the time or resources to figure it all out on their own. The ETA members who provide merchant services recognize that they have to become partners with their customers and technology providers. They know they cannot prosper unless their customer base grows both in numbers and alternative payment transactions. Your merchant service provider should be helping you navigate the future of payments rather than standing in the way.
In January, ETA announced the first class of 180 Certified Payments Professionals, a group of service providers who demonstrated, through an independently administered examination, that they have the knowledge, expertise and commitment to their profession to hold that designation. Over the next couple of years, more and more CPPs will join them and that will make finding an expert partner much easier.