2017: The Year Ahead in Payments

As we begin 2017, it’s an apt time to look at what’s in store for buyers, sellers, and everyone in between. It’s going to be an exciting time in payments, with five key areas making great strides in the year ahead. The concept of multichannel and omnichannel will continue to rise to ubiquity, as will truly friction-free commerce. There will be continued collaboration between legacy incumbents and young startups. The checkout process will become increasingly self-serve and “invisible” and finally, small businesses will follow in the footsteps of the Fortune 100, adopting technologies that will level the playing field of consumer buying experiences.

the year ahead in payments

Continued Evolution of Multichannel and OmniChannel

Multichannel means accepting payments through a variety of channels. eCommerce is burgeoning; worldwide retail eCommerce sales are expected to reach $1.915 trillion this year. But while eCommerce is thriving, many consumers still prefer a more tangible shopping experience, leading eCommerce businesses to open brick-and-mortar locations. This trend has been particularly popular with retail businesses – including Birchbox, Coastal Contacts, Amazon, ShoeMe, and Warby Parker to name a few.

As online companies expand into physical locations, eCommerce remains just as important – specifically mobile eCommerce, which is growing at an exponential rate. According to Gartner, revenue from mobile eCommerce will equal 50% of all digital commerce by 2017.

2017 won’t just be about the evolution of multichannel, but will also see a greater emphasis on omnichannel payment processing. Omnichannel means that channels are synonymous, unified, and integrated. The evolution of omnichannel is borne out of today’s consumer habits. The modern shopper moves fluidly across multiple channels and expects that journey to be seamless; eight out of 10 consumers now use a computer, smartphone, tablet, or in-store technology while shopping. As we move into 2017, more and more businesses will continue to blur online and offline to create a convenient and cohesive experience for the modern shopper

Friction-Free Future

Not just a buzzword, friction-free payments is the future. While there have been significant improvements, friction still exists at the point of checkout. In 2017, we’ll see that friction continue to diminish across all channels.

Decline in the use of cash is a large contributor to frictionless commerce. Society as a whole is using less of the physical monetary medium, and more businesses are adapting by accepting credit and debit cards. It’s predicted that by 2025, 75% of all transactions will be made without cash. Mobile payment applications and mobile banking are increasing in popularity, which is indicative of consumers’ willingness to use smart devices and cards.

Mobile payment companies are continuously finding ways to further eliminate friction from transactions. The advent of Apple Pay and other mobile wallets contributed to the growth in mobile payments overall, but EMV adoption is dismally low in the U.S. Merchant education and a push for Tap and Pay payments will aid the adoption of mobile payments in 2017.

Contextual commerce is the idea of meeting the consumer where and when they have interest and intent to purchase. Contextual commerce happens within a relevant environment, in context if you will – whether that’s a social media app, a recipe page, or even a news article. There are already iterations of it, but the idea of contextual commerce will continue to evolve.

Amazon is a pioneer in the pursuit of a frictionless future. The retail behemoth makes it extremely easy to purchase on Amazon. They have Amazon 1-click, Amazon Dash (for re-ordering), and they’ve just announced Amazon Go. A new grocery store concept of the grab-and-go variety, Amazon Go uses sensors and cameras to eradicate the checkout line altogether. The program is still in beta but has the ability to change the paradigm of traditional in-store shopping completely.

Continued Collaboration Between Incumbents and Startups

In 2017, legacy financial institutions and up-and-coming Fintechs will continue to collaborate to bring innovative payment technology to market. Investment in Fintech grew from $1.8 billion in 2010 to $19 billion in 2015. Fintech companies have often been described as disruptive, and while they certainly are, the word has carried negative connotations. They’re not disruptive in the sense that they are trying to usurp traditional banks; they are disruptive in that together with incumbent institutions, they will collaborate to change and improve the space. They are complementary rather than competitive.

Banks have capital, reputation, regulatory experience, and customer trust. Fintech startups possess the ability to build great customer experiences, are unencumbered by legacy processes, and have research capabilities that facilitate innovative and agile approaches. In 2017 and onwards, there will be record-setting acquisitions as legacy institution programs move out of pilot and into priority with the help of startups.

More Counterless and Self-Checkout

From theaters and hotels to airports and restaurants, businesses across the board are responding to changing consumer habits and adopting self-service checkout; the dynamic is changing between merchants and consumers. In a society where speed is paramount, self-checkout stations are becoming increasingly popular; by 2021, there will be 325,000 self-checkout units globally.

In addition to speed, modern consumers are also enjoying the privacy and control that self-checkouts provide. 55% used self-checkout because there was no line, 13% because they preferred to keep their transactions and financial information private, and 20% of millennials use self-service kiosks to avoid any sort of interaction with a cashier. The latter is a leading indicator of the trend towards more automation in the checkout experience.

While it’s currently not prevalent in smaller stores (yet), the number of self-checkouts will continue to increase in 2017 and beyond – especially as technologies emerge that mitigate the risks.

Small Businesses Will Adopt Big-Box Consumer Trends

Small businesses will continue to increase consumer engagement – and they’ll do this by adopting and adapting big-box consumer trends. Large corporations and companies have the resources to create new technologies in response to consumer trends. These technologies trickle down to small businesses with the help of intermediary startups.

Big-box consumer trends that small businesses will start to adopt in 2017:

    • Loyalty schemes
    • Same-day shipping
    • Mobile payments
    • Multichannel

In the coming year, smaller merchants will be able to offer the same experiences previously available only at Starbucks, Apple, Uber, and Amazon.

Beyond 2017, we’ll see more creative deployments of verification and authentication; however, wearable technology and cryptocurrency will take a backseat for the time being.

This is an excerpt of Payfirma’s latest white paper 2017: The Year Ahead in Payments. Click to read the full version here.