At the dawn of the new millennium, consumers had only a few payment methods to choose from – cash, check or cards – and only a small fraction used them anywhere other than a brick-and-mortar storefront. Back then, authenticating the consumer was mostly what happened when the store’s sales associate turned over the card and looked at the signature on the back – and then maybe asked for a second form of identification if the card wasn’t signed. Conversations about payment technology were mostly around the latest and greatest POS terminals and what flavor of cards and rewards issuers were launching.
Seventeen years later, a lot has changed.
Payments happens online, inside of apps and, increasingly, via a growing portfolio of connected devices, in addition to physical stores. Voice-activated speakers, wearables and ecosystems, like messaging and social networks, are emerging as important commerce channels that the hyper-connected consumer now uses to access and pay for the things they want to buy.
Consumers’ credentials are digital as well as physical – and the way that consumers present those credentials to pay are different, too. There are wallets and buy buttons and accounts on file at merchants, which customers use to pay online. Technologies like QR codes and NFC are available for use in some physical stores. The combination of AI and data makes the payment experience better for the consumer and the merchant, on a number of dimensions – from authentication to personalizing offers and rewards.
All of this represents the focus of a new report, published by Visa: Visa’s Innovations For A Cashless World. Shiv Singh, Visa’s senior vice president of innovation, told Karen Webster that the genesis of the report was to assemble the data and research that was once only available to Visa’s internal teams, and to publish it for the first time as a point of view to share with the broad payments and commerce ecosystem. Singh told Webster that the report represents data from all sides – issuing, merchants, acquirers, startups – since that is the ecosystem that is individually and collectively changing the direction of payments.
The report is centered around five key trends and seven research insights that Singh said Visa believes will shape the next 18 to 24 months – the trends that he believes the ecosystem needs to pay attention to and then act on. “No plans for payments on Mars,” Singh joked, adding that the aim is to focus on the things that are close enough to likely happen, but far enough away for the ecosystem to embrace.
So, what does Visa say is on the horizon?
Context Is Everything In Commerce
One of the sharper global trends that is now easily observable, Singh told Webster, is the explosion of the payments and commerce functions now embedded in messaging applications.
Whether that is paying for goods or making peer-to-peer payments, the use of the messaging environment is suddenly scaling up fast, to the point that embedding payments is now hardly thought of as a value-added feature at this point.
“If you look at millennials and the Generation Z members behind them – they are growing up as consumers where messaging is really their first interface,” said Singh. “They come to the table with the presumption that messaging environments will come preset with payments in them.”
That is most true in China, where in the span of a year, WePay and Alibaba’s mobile payments platforms have overtaken Union Pay. But the trend lines are moving fast, because messaging-based payments are, on some level, about helping consumers buy in the contexts where they already are. Singh said that although messaging platforms are increasingly embedding payments, platforms that began with a payments focus are also starting to consider integrating messaging into their platforms.
And while there is still perfecting going on – particularly in the U.S. – the writing, Singh noted, was on the wall last Thanksgiving/Black Friday, when mobile became the new center of transaction, and Alibaba’s Singles’ Day, the biggest global shopping day of the year, was driven 90 percent by mobile.
“This is only going to get bigger and bigger,” Singh told Webster. “That is kind of a no-brainer.”
Software Ate The World, And Now Everyone Is A POS
Marc Andreessen was right, Singh told Webster – software really did eat the world. Cash registers and stationary points of sale aren’t disappearing, but they are diminishing, because the reality of software-driven, point-of-sale systems is that they don’t need to be limited to any one location in a store – and consumers have no great historical love of waiting in line.
“We can look at Uber, or how Starbucks now takes 20 percent of its orders through mobile order-ahead,” Singh noted. “Can you imagine going to an Apple store and lining up at a cash register to pay? No, of course not. And now we have Amazon rolling out Amazon Go – it really is only a matter of time before that experience is part of Whole Foods as well.”
Singh acknowledged that there are many ways of enabling the notion of “points of sale everywhere,” and that it remains an important work in process. But as consumers are getting more familiar with interacting with their smartphones to do more things, merchants now have a number of new endpoints and opportunities to rethink their models.
Those new models, Singh said, will make more and more of the payments experience invisible, the eponymous Uber example of invisible payments – since, in many cases, consumers now consider the notion of invisible payments just part of the expected experience.
“These are actually the things that will drive cash out of the ecosystem – that consumers have easier and better digitized options, both for eCommerce and face to face,” Singh said.
The Power Of Trust In Moving From Cardholder to Account Holder
As cards have become tokenized credentials registered inside of apps, wallets and merchant sites, Singh said there’s also been a subtle shift in how consumers now think about their relationships with those products. They think of themselves as account holders, not cardholders, as more of these digital credentials can be registered and used across a number of devices and form factors.
“We are seeing an evolution where it is less about where Visa cards are accepted, but rather how they are accepted,” said Singh. That might mean QR codes, or mobile accounts, or even cards – but the consumer isn’t just thinking so much about the card, but about how their secure, digitized, cloud-based account profile can be used.”
That shift is powered, in large part, by trust.
Consumers, Singh said, trust their banks and card networks, because every day they put them in control of their money – and then trust that money will be easily accessible, whenever they want it.
A track record of providing that service for decades, Singh told Webster, now translates into how consumers want to move into the digital era. They are well on their way to rethinking the center of their commerce universe in terms of accounts rather than cards – and they seem to like the idea much better when their trusted financial services partners are enabling that shift.
The Rise Of APIs And The Improved Consumer Experience
Consumers may trust their banks, but that doesn’t mean they aren’t still open to new, streamlined, improved experiences that make payments commerce easy and seamless.
Singh said that in the banking and merchant ecosystems, there is an increased recognition that in order to create and deliver those new customer experiences, they need to tap into a pool of innovators who have created something that can enhance or complement what they are already doing. The reality, he remarked, is that no one – neither merchant nor bank, regardless of their size – has all the capabilities and tools they need in-house to deliver all those experiences. And when they don’t have them, they don’t always have to be the ones to develop them.
APIs, Singh noted, is the way that consumers can get those experiences, and the way banks can enable it – by simplifying the integrations with the innovators they trust and want to partner with to deliver those new experiences.
The Beauty Of The Blockchain
Bitcoin may get all the headlines, but Singh believes that distributed ledger technology could be the real star of the show. As he told Webster, the truth is that most of Visa’s clients are keen to better understand the potential of the blockchain, whether it is to tackle B2B cross-border payments or to better manage data and contracts.
The blockchain ecosystem is growing rapidly, Singh observed – and across many industries outside of financial services, a number of compelling use cases are emerging, with shipping and logistics topping the list.
It’s an area that Visa is exploring as well: using private, permissioned networks that leverage existing secure and compliant rails that digitize the assets issuers put into the market today. In Visa’s case, that has meant a collaboration with Chain, and the initial launch of its B2B Connect solution a few weeks ago as a starting point.
The technology is powerful, Singh told Webster, and an area to which he says anyone in the payments and commerce industry must pay “immense attention.”
The Bigger Picture
In two decades, global payments have gone from being a very homogenized product to being incredibly varied and region-specific.
Some markets – particularly ones like Canada, the U.K., Poland and Australia, where contactless payments have been common for a while – are locked and loaded when it comes to adopting the next round of payments innovations. Some nations – like India, since demonetization – look very mobile and digital on paper, but the reality on the ground is quite different.
“India remains a very cash-based economy,” said Singh. “People trust it, and it always works.”
But relative to other places, it’s a tougher go in the U.S. – in part, Webster suggested, because Visa and the card networks have made our existing system so reliable, secure, ubiquitous and easy to use that it takes a lot more than just “going digital” to get them to care.
Challenge taken, Singh noted – so stay tuned. As consumers’ expectations rise and seamless digital payments experiences are expected to be the rule and not the exception, Visa and its network of issuers, merchants, acquirers and innovations will be working overtime to make sure they are everywhere the consumer wants them to be.