Innovation

Four Payments Ideas That Had A Breakout 2019

ignition-2019

Ignition of a new technology or idea in payments and commerce is always something of a tricky balancing act because consumers need a really good reason to change their well-entrenched habits. When they get that good reason, it doesn’t always take that long for that switch to make that which was once status quo into history. But, novelty alone, as we’ve seen over and over and over again in the 2010s, won’t move the needle for enough consumers to matter.

There were a lot of novel ideas that garnered some headlines over the last decade — lots that crashed and burned entirely, others that crashed, burned and reemerged as something different with a fighting second chance, and a small handful that started off small, with a single use case or device or experience that paved the path for bigger innovation to come. We didn’t need more than two hands to count the ones we felt were change-the-world sort of innovations. Here are four on that list. We’ll keep you waiting on the other six.

Instant Payments 

By the numbers, it is hard to deny in the closing days of 2019 that instant payments, as observed by the PYMNTS Instant Payments Tracker, have hit their stride and are no longer a P2P payments tool for gig economy workers. According to the latest edition of the PYMNTS Disbursements Report, 64 percent of consumers know what an instant payment is.

And perhaps more exceptional than the awareness is actual use. In 2017 only 11 percent of consumers in a national study of the U.S. had received an instant payment at least once in the prior 12 months. In 2019 that number had nearly quadrupled to 42 percent.

Those numbers, Ingo Money CEO Drew Edwards told Karen Webster, are skewing a bit on the low side. The 58 percent of consumers who haven’t received an instant payment more likely than not simply haven’t been offered one yet.  When offered the choice, Edwards noted, between a check and a digital payment, and 9 out of 10 customers, based on Ingo client data, will pick the digital payment. And of the customers who choose digital, he noted 9 out of 10 will pick an instant payment if available. And the reason, Edwards noted, is pretty clear and simple — money now is better than money later.

“I think some things are obviously so much better when it comes to customer experience that ultimately when they are in the market, they are just going to change it. No one wants to pay for gas inside, no one is looking to stand in line for Chick-fil-A, and no one wants to wait on getting paid if they don’t have to,” Edwards said.

So what to watch for next?  Two things. The first, he noted, is choice, as instant payments aren’t really ubiquitous until the recipients of funds can actually choose the final destination of their funds for an instant payment. The second, he noted, is what will be built on top of instant payments — what innovations can come through for businesses paying each other, or payroll management, or large smokestack industries like insurance — when money can move instantly and securely from any one party to any other.

“We have a vision of the future coming really soon where our Disbursements Marketplace allows payment recipients to choose not only where they want to get paid in terms of what account, but also when exactly they want that payment to happen,” Edwards said. “In this environment, we will see issuers/banks/wallets developing incentives to influence these choices similar to what happens today with purchase rewards.”

The Connected Home

We have been talking about connected homes for the better part of the last decade — everything from appliances to televisions to light fixtures to door bells to security systems to voice-activated speakers makes it possible for the consumer’s home to be connected to the internet via an app and made smarter. Smarter in terms of energy efficiency, smarter in terms of security, smarter in terms of reliability and smarter in terms of having an ability to be connected to a voice assistant as the user interface.

In the final days of 2019, a consortium of companies that compete with each other bitterly in the market as the virtual assistant to rule them all announced that they had agreed to collaborate to create a single set of standards to power the connected-home ecosystem.

 The announcement involves a new working group led by the Zigbee Alliance whose Board member firms include IKEA, Samsung SmartThings and Silicon Labs, among others. This working group will use contributions from smart home technologies that are market-tested from Apple, Google, Amazon, the Zigbee Alliance and others to “accelerate the development of the protocol and deliver benefits to manufacturers and consumers faster.”

The standard will be built off of the Internet Protocol (IP) and will be open source to enable communication across smart home devices, mobile apps and cloud services.  The standard also hopes to define a specific set of IP-based networking technologies for device certification.

“Interoperability is a bit tricky, though I think it has to be done. I think this sets a standard that helps more innovation, more experimentation with the devices and a … forum to answer the questions about data privacy and how to manage it,” Flywire CEO Mike Massaro noted in a conversation with Karen Webster about the news.

The planned connectivity standard will complement technologies already in existence, and “working group members encourages device manufacturers to continue innovating using technologies available today,” per the announcement.

Massaro noted what the Team of Rivals in the connected home space is doing is in many ways reminiscent of the early evolution of the internet — which did not (as popular legend has it) spring up without the burden of regulations or standardization, but was made possible by the inclusion of various standards that made connecting the whole wide world over a single digital web possible.

The interesting thing to watch next, he noted, is once interoperable standards are in place, what innovations can be built over top. Today that data is not knowable — but given the range of things built off of those early internet collaborations, the bar is set high.

What is evident from the point of view of late 2019, however, is that a generation of Americans is talking regularly to artificial intelligence (AI) every day, which, Massaro noted, is “very cool, and very Jetsons.”

What they will expect of them tomorrow, he noted, is likely continued capability and connectedness.  The more consumers know that the devices they buy can smoothly and seamlessly interact, and do so in a secure environment, he noted, the more inclined they will be to use them for a wider variety of functions.

Those are functions within the smart home ecosystem — but also likely beyond it, particularly if consumers’ enthusiasm for voice commerce continues to grow and expand beyond the home environment.

One Day Delivery 

It’s been a good year for getting one’s eCommerce orders faster.  Amazon, as is its custom, kicked off the wave early in 2019 with the announcement that it would be investing $800 million in shortening the standard window for Prime deliveries from two days down to one.

“We have been offering, obviously, faster than two-day shipping for Prime members for years (one-day, same-day, even down to two-hour delivery for Prime Now), so we’re going to continue to offer same-day and Prime Now, morphing into — or evolving into — a free one-day offer,” Amazon Chief Financial Officer Brian Olsavsky noted during the Q1 earnings call in which one-day delivery was announced.  By early June Amazon had announced expansion of the program, opening it up to members with no minimum purchase amount and adding more than ten million products. Amazon further noted its intention to expand its delivery and that Prime Members will find more and more items that can be delivered in one day.

“Prime Free One Day is possible because we’ve been building our network for over 20 years, enabling us to create a world-class customer experience powered by incredible employees and great technology,” Amazon noted in the announcement of the expansion. “This allows Amazon to work smarter based on decades of process improvement and innovation, and to deliver orders faster and more efficiently.”

More efficiently we are not suited to judge. But as for faster? Well, as it turned out, Amazon wasn’t the only retailer ready to jump into single-day delivery in 2019.  After the announcement of its sped-up shipping time sent shares of both Walmart and Target tumbling, both found they didn’t want to be left behind.

Walmart was first in, announcing its intention to begin offering one-day shipping about a month after Amazon’s announcement, though it did tease its intention a day or two after Amazon’s announcement.

“One-day free shipping … without a membership fee. Now THAT would be groundbreaking. Stay tuned,” Walmart tweeted out.

Walmart started somewhat smaller than Amazon — 200,000 products mostly limited to Nevada and California — though Walmart’s eCommerce head did note the firm’s intention at the time to incrementally step up the program both in terms of participation and items offered. By late June Walmart announced its first expansion of one-day delivery for back-to-school shopping season.

And while Target didn’t quite make as big or dramatic a push into one-day as its larger rivals at Amazon and Walmart, it put a toe in for the holiday season, announcing an integration with Shipt that allows it to offer same-day shipping for some customers for a brief period in late November.

“Millions of guests love using the Target app to shop, save and get what they need quickly — and it’s a game-changer during the busy holiday season,” said Dawn Block, senior vice president of digital for Target. She added that offering same-day delivery makes holiday shopping easier and faster.

What will it all mean for 2020?  In this case, the prudent course will be to reserve judgement and wait to see the outcome of the Q4 holiday shopping rush — and what innovations in speed of goods delivery delivered for the retailers that offered it.

But we suspect speed was an advantage — one that particularly accrued to Amazon this season.  And we imagine it will drive the pace in 2020 to even faster limits.

Voice Commerce 

We at PYMNTS have been great advocates of voice as a commerce platform almost since the very first day we heard Alexa speak. It took some time for consumers to get comfortable with speaking to an inanimate cylinder on the kitchen counter, and develop the relationship with her, then Google, to trust her with more complicated tasks.

In the first couple of years, it was the bleeding-edge innovators who took a chance and dipped their toes in the voice commerce waters – building shopping lists and ordering groceries, ordering a pizza from Dominos, sending flowers to Mom via 1-800-Flowers.

And as payments goes, it hasn’t taken long for consumers to get even more comfortable using those devices and those voice assistants to help them discover and then buy. As of PYMNTS’ third annual How We Will Pay Study, (done in with collaboration Visa) the data clearly testified to the fact that consumers have a strong demand for voice-enabled commerce, regardless of which devices they purchase through. As of the study, a little under a third of consumers had used voice to transact. Considering that, as of 2019, about a third of consumers own a voice-activated device, that means — about five years after Alexa and the Amazon Echo made their first appearances on commercial markets — roughly 10 percent of all consumers have used a voice-activated device to buy something.

Moreover, the data shows the majority of those that have used voice apps for commerce tend to want to replicate the experience across channels and devices.  According to this study, voice commerce enthusiasts typically use not one but many devices, depending on the context of the moment. Shopping by voice is the draw — the device is a secondary consideration. And voice plus a device with a screen boosts those numbers even higher.

“Sure, that’s still just a sliver of all commerce, but it is growing rapidly as more skills expand the number of things that can be ordered using voice, and as the virtual assistants that are the intermediaries of those purchases get smarter in managing those requests,” Karen Webster noted in her commentary on voice’s emergence as connected commerce’s killer app.

And interestingly, as the data shows, using voice-enabled commerce tends to breed interest in other, more modified payments experiences.  Half of consumers who own voice-enabled devices say they would be interested in using apps that allow them to automatically pay for restaurant orders, and 46 percent would be interested in using apps that allow them to automatically pay for in-store purchases.

Also interesting is how quickly voice shows up as a critical player in commerce-adjacent activities that ultimately boost the net number of successful conversions. The How We Will Pay data bears that out — as do the headlines that started emerging in 2019.

Oreo, for example, created a “guess the mystery flavor” contest, which came with an accompanying Alexa skill for support. That skill allowed Alexa to offer clues about said mystery flavor when asked “What’s new with Oreo?” — and then use the opportunity to also throw in some news and information about the cookie brand, including special announcements. And, if the customer suddenly found themselves desperately craving Oreos ... well, Alexa could make sure they ended up on the grocery list.

Is it proof-positive that contextual commerce + voice-enabled tech is the next great commerce revolution?  Probably not.

But we do know a lot of smart speakers sold this holiday season. How many? Official counts aren’t out yet, but enough that the Alexa app dethroned Disney+ in the App Store for most downloaded app the day after Christmas, implying a lot of new Alexa devices were unwrapped under the tree on Wednesday.  And while Google’s Assistant didn’t top the list, it did make the top ten, indicating it also got a bit of traction this year.

We think that is a strong indication that consumers are embracing voice with a vengeance. And when it is growing up so fast — and picking up so many fans — the smart money is on keeping a close watch in 2020 and beyond.

But then, most of the things on this list also match that description. Will the connected home Team of Rivals hold together and create the solid foundation for the smart device-enabled future that has been increasingly forecast over the last few years? Will all payments be instant payments in the not-so-distant future? Will Voice be the killer app that contextual commerce has been seeking out? And is it even possible for eCommerce delivery to target faster than one-day shipping?

We don’t know — in fact, the only thing we are quite sure of is that nothing is so impossible as to be easily ruled out.

Which means next year, for all the igniting innovations, we will stick with doing what we know best: keeping you updated around the curves and ahead of the ignitions as they happen.

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NEW PYMNTS STUDY: LEVERAGING THE DIGITAL BANKING SHIFT – SEPTEMBER 2020  

The September 2020 Leveraging The Digital Banking Shift Study, PYMNTS examines consumers’ growing use of online and mobile tools to open and manage accounts as well as the factors that are paramount in building and maintaining trust in the current economic environment. The report is based on a survey of nearly 2,200 account-holding U.S. consumers.

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