A growing segment of the population is increasingly comfortable using digital payment methods to secure their goods and services. As a result, the last several years have seen a gradual but continuing expansion in the use of new forms of mobile payments and Internet of Things (IoT)-related payment devices, including digital wallets, Bitcoin and more.
Moreover, given the increasing familiarity and acceptability of digital payment methods by millennials and affluents, it is likely that digital methods will expand rapidly over the next decade. This draws heavily on the fact that millennials, the first native digital generation, represents the largest demographic cohort in U.S. history. With product information, reviews and price comparisons at their fingertips, millennials are turning to brands that can offer maximum convenience at the lowest cost.
Merchants need to face the challenge
Consumer comfort levels and the tools available to them continue to expand, resulting from digital natives like millennials and Generation Z coming of economic age. But the buck doesn’t stop there—over time, the expansion is also likely to permeate older cohorts. To avoid being left out, merchants must adapt and prepare to meet the changing consumer needs brought about by the digital payment wave.
For starters, merchants must prepare to incorporate a variety of digital payment methods into their operations–and that means redefining the “point of sale.” Not only will consumers complete future sales via mobile phones, they’ll employ a variety of devices including connected cars, intelligent personal assistants and consumer electronics such as refrigerators. Today predictions point to the existence of over 34 billion devices connected to the internet by 20201, making the recognition of these points of sale an immediate necessity.
While the new digital wave presents a challenge, it also represents a real opportunity for well-positioned merchants to enhance customer experiences through improved checkout, better loyalty programs and greater understanding of consumer preferences and the customer journey. This requires openness to new customer engagement models, the ability to better manage growing data sets and the capacity to ensure security for their financial systems.
Disruption is already underway in financial services
As consumer interactions shift from physical branches to digital channels and customers engage with multiple companies to meet their financial needs, the profitable consumer-facing business segments will come under increasing attack. Fintech’s competitive advantage rests in having the agility to provide seamless user experiences, a byproduct of having been born in a digital-first age. In this new world, financial institutions will be faced with a stark choice: Either they digitally enable accounts for their customers and extend their reach in the value chain organically and through partnerships, or they become simply “dumb pipes” funding the account for their customers which feeds the digitally-enabled accounts provided by other, more agile players.
Visa, an ideal partner
Just as merchants need to be prepared to incorporate digital payments into their shopping experience, issuers need to digitally enable their cards to support new use cases. Visa, through its Visa Checkout platform, is already hard at work enabling this future, making it an ideal partner to help issuers adapt to this new culture of innovative payments, and do so in a simple, fast, secure and scalable manner.
Visa Checkout allows cardholders to save billing and shipping information through a seamless online process. Visa Checkout is opening its platform to clients so they can integrate the payment service into their digital wallets for online and in-app payments, collaborating with Android Pay and Samsung Pay to enable consumers to pay with their preferred mobile wallet at merchants that accept Visa Checkout. This functionality helps to ensure that merchants and issuers can meet increased demand for secure tokenized payments. Visa Checkout’s overall openness to innovation and flexibility in the payment process helps merchants and issuers to have the tools in place to be active beneficiaries of the new digital payments wave.
To learn more read the second post in the series, Evolving technologies, evolving consumers, or the full report.