5 trends transforming commerce

A new report identifies uniquely global industry trends changing the face of commerce, ranging from how the point of sale is transforming to cashless economies to the growing prevalence of the Internet of Things.

This article is excerpted from Visa’s first-annual Innovations for a Cashless World: Consumer Desire and the Future of Paymentsreport, which provides an outlook and predictions for FinTech in 2018. This is the first in a four-part series highlighting the report. Download the full report here.

Trend #1: From card to Cloud

We’re quickly moving toward a world where seamless digital payments work securely, anywhere, on any device.

Innovation in commerce has always been about reducing friction and providing a better consumer experience. As consumer technology evolves, payment security and convenience must evolve with it.

Consumers spend approximately 11 hours online every day, enjoying the power of “instantism” at their fingertips (Nielsen, June 2016). When they can find anything they need within seconds, the payment experience slips into the background and becomes part of the overall experience—rather than an additional step they need to seek out and complete.

In this new world, think of consumer credit not in terms of cards, but in terms of accounts. The question is no longer where Visa is accepted, but how it’s accepted: via any device, meeting consumers in their existing digital hangouts.

Usage of online and mobile-only banks has increased 7pp (percentage points) since 2016.

QR codes are everywhere

Visa has enabled the growth of merchant-presented QR code payments in 15 countries around the world with its innovative mobile payments solution, mVisa, which allows consumers to pay for goods and services by scanning a QR code on a smartphone or entering a merchant number into their feature phones.

Payment goes straight from the consumer’s Visa account into the merchant’s account and provides near real-time notification to both parties. mVisa is completely interoperable, bringing the same convenience, security and reliability provided by the trusted Visa brand.

And now, for merchants eager to harness the power of QR code payments, the Visa Ready Program has adopted interoperable QR standards to develop tools and capabilities that help ease generation and deployment of QR codes and merchant numbers by banks, processors, and merchant aggregators. Once enrolled, merchants can accept payments from any country or bank, knowing that Visa will efficiently process transactions in accordance with Visa's security standards.

Trend #2: Everything as a point-of-sale

Software and services turn almost any locale or any device into a potential POS.

Today, the line between face-to-face and remote payment environments has become so blurred in some markets, it essentially no longer exists.

The era of single-purpose transaction terminals is coming to a close. Software turns any locale, any device, into a point of sale. A transaction can now take place at any point in a shop-and-buy time line; it can be physical or digital. What this means is that the point of sale is challenged to do more than process transactions.

Everyday transactions by payment channel chart. See Everyday transactions image description for more details.

Everyday Transactions, by Payment ChannelA.1

This bar chart shows results from a global survey that asked consumers which channel and/or payment technology they used to pay for each of their last 10 transactions at the time surveyed. Consumers were provided with 11 distinct options. In-Store, Other Online, Buy Button, Other Mobile Payment, P2P Transfer, Mobile Messenger Apps, Other In-App Payments, QR Codes, Smart Home Device, Wearables/Contactless, or Other.

The graph highlights their responses, segmented by each of 4 distinct consumer demographic segments, Global (all consumers in the survey), Leading Edge Consumers (“LEC” are a proprietary, behavioral segment based on a consumer’s propensity to be an early adopter, passionate enthusiast, and influential), Generation Z (respondents ages 14-17 years who own and use a smartphone and tablet or computer), and Millennials (respondents aged 18-34 at the time of the survey, who also own a smartphone, have a savings or checking account, own/use a tablet or computer and own a debit or credit card). Consumers surveyed could choose only one option for each of the last 10 transactions, so the graph shows the percentage of respondents that selected each respective payment technology choice.

Percent of last 10 transactions, by channel and, respectively, for each of the 4 segments – Global, LEC, Gen Z, Millennials

  • In-Store: 40%, 29%, 37%, 34%
  • Other Online, 20%, 17%, 17%, 17%
  • Buy Button, 11%, 15%, 13%, 13%
  • Other Mobile Payment, 9.5%, 13%, 9.5%, 9.5%
  • P2P Transfer, 8%, 13%, 8%, 9.5%
  • Mobile Messenger Apps, 8%, 7%, 8%, 8%
  • Other In-App Payments, 4%, 5%, 4%, 5%
  • QR Codes, 4%, 4%, 4%, 5%
  • Smart Home Device, 2%, 3.5%, 3.5%, 2%
  • Wearables/Contactless, 1%, 2%, 3%, 2%
  • or Other <1%, <1%, 2%, <1%

Retailers around the world are also demanding more of their POS to support their daily business operations, beyond single-purpose payments capabilities. New form factors—like multifunction devices running on open platforms—present new opportunities to displace cash.

The new POS is more than just a place for checkout—it’s a launch pad to offers that can build relationships and reward customer loyalty.

Rewarding consumers, seamlessly

Uber riders in participating markets can now earn credits for shopping and dining under the Visa Local Offers with Uber rewards program. Riders with an issued Visa card on file in the Uber app, and upon signing up, receive Uber Credits that can be applied toward future Uber rides. Riders can use the same Visa card on file with Uber to shop or dine at any of more than 5,000 qualifying merchants, and the credits are triggered automatically. As credits add up in the Uber app, riders can redeem their Uber credits on their next ride or save them for later—an effortless way to claim their rewards.

Trend #3: Paying in messaging platforms

Messaging platforms enable e-commerce, peer-to-peer payment and more.

Popular messaging platforms like WeChat, Facebook Messenger, WhatsApp, and Line reach billions of people—and give them a new commerce ecosystem. Many platforms allow consumers to make a purchase without leaving the app they’re in—and do so as easily as sending a text message.

A messaging app is a natural fit with e-commerce: It’s personalized. It has your contacts. By leveraging social data, it can provide rich context and recommendations. And it runs on a broad spectrum of hardware.

Trended usage and interest in P2P payments. See trended usage image description for more details.

This graph highlights the results from a global survey where consumers were asked about their interest in and usage of P2P payments as a method for completing transactions. The graph shows the results from the 2016 survey on the left, and compares it with the 2017 results on the right. The center of the graph also highlights the percentage difference (aka ‘Gap”) between Interest and Usage in each of the two years.

2016 results show that 34% of respondents expressed an interest in P2P payments, and 16% said that they had made a P2P payment, a gap of 18%. IN 2017, 33% of respondents expressed an interest in using P2P payments, and 20% said they had completed a P2P payments, a gap of 13%.

With interest growing in peer-to-peer (P2P) payments, messaging apps offer an easy way to meet demand. P2P payments still too often rely on analog processes, even as online and in-store payments become more electronic and seamless.

There are benefits for merchants as well: They can use messaging platforms to display inventory, manage shopping experiences and engage with consumers by offering augmented support. When driving loyal buying behavior, these features can be just as important as the payment itself.

Frictionless, real-time payments

With an experience that’s moving closer to what consumers are used to on messaging platforms, Visa Direct is improving the speed, convenience and security of sending and receiving payments among people, governments and businesses. The platform enables P2P payments between more than 200 million Visa debit cards in the US, including payments to non-Visa branded debit cards. In the future, PayPal and Venmo will also leverage the Visa Direct network to enable real-time funds transfers. Funds can be transferred directly into the customer’s bank account linked to a debit card—a convenience that can also be seen as more secure by the consumer. Real-time authentication enables the sender and the receiver to instantly validate the status of the payment. Using Visa Direct can also enable the next generation of payments for shared economy platforms such as Uber, Lyft, Airbnb, and TaskRabbit, getting money into the bank accounts of service producers instantly, regardless of where they bank, via their debit cards.

Trend #4: Transactions without borders

Distributed ledgers can ease the transformation to low-friction, digital cash payments.

A shared, networked digital ledger, also known as a "blockchain," can record transactions as they occur. The transaction data is shared but not copied, making it a useful platform for new kinds of currencies and payments.

First employed to support Bitcoin and other cryptocurrencies, blockchain technology will be expanded if consumers accept it, and if it can generate value on a larger scale. The use cases for blockchain will span commercial, as well as consumer, applications.

The distributed ledger protocol provides a secure, borderless mechanism on which to build complex transactions and value exchanges. With central banks seemingly poised to start issuing digitally minted currencies, distributed ledgers will help accelerate the shift to a cashless future.

Two-thirds of companies surveyed by Juniper Research said that they expected blockchain technology to be integrated into their systems by the end of 2018.

B2B beyond borders

Visa recently partnered with Chain, a blockchain enterprise company, to develop Visa B2B Connect, a new near real time transaction system designed for the exchange of high-value international payments between participating banks, on behalf of their corporate clients. Managed by Visa end to end, Visa B2B Connect will facilitate a consistent process to manage settlement through Visa’s standard practices.

With Visa B2B Connect, Visa aims to significantly improve the way international B2B payments are made today by offering clear costs, improved delivery time, and visibility into the transaction process—ultimately reducing the investment and resources required by banks and their corporate clients to send and receive business payments.

Banks and their corporate clients receive near real-time notification and finality of payment. Signed and cryptographically linked transactions are designed to ensure an immutable system of record. And all parties in the network are known participants on a permissioned private blockchain architecture, operated by Visa.

Trend #5: The API Economy

APIs make it possible to plug into and build from others' innovations.

APIs (application programming interfaces) are the digital world’s connective tissue. They’re the standard by which companies exchange data and build smart, seamless, omni-channel experiences customers demand.

Now, it’s no longer necessary to aspire to own the entire value chain. Companies can focus on one link in the chain, and plug into existing APIs to create the bigger picture. Multiple building blocks combine to act as a single proposition that adds value for the consumer. In this way, APIs deconstruct traditional value-chain thinking.

In commerce experience design, APIs expand opportunity for innovation. A company can combine its own APIs with externally available building blocks to create a new solution more efficiently.

APIs can also be viewed as a more efficient, more scalable distribution channel. A good API platform allows a company to deliver the most needed capabilities of more comprehensive products.

70% of bankers agree that their organization’s API strategy is instrumental to their brand, and 73% believe that in five years’ time ecosystems will have shared responsibility for a brand, according to Accenture’s Banking Technology Vision 2017 report.

Enabling financial inclusivity through APIs

In July 2017, Visa expanded its mobile payment platform, mVisa, to include Nigeria. Designed for both smartphone and feature phone users, the mVisa platform promotes financial inclusivity. To make a purchase, smartphone users scan a QR code available at the point of sale and then input the amount to be deducted. Feature phone users will be able to do this using alphanumeric codes. One of the major barriers to the progress of mobile payments in Nigeria is the general misunderstanding of and lack of trust in electronic payment systems. mVisa will help consumers feel more in control of the process and their money.

And the system is cost-effective and easy for merchants to set up. So now they no longer have to worry about spending $400 on POS systems—or passing transaction fees onto their customers. The mVisa implementation in Nigeria has benefited from the Visa Developer Platform, which allows participating partner banks to integrate the mVisa APIs directly into their mobile banking apps.