Traditional Payment Options Will be Disrupted in 2013

Online-PaymentCompetition within the online payment marketplace is heating up, according to a recent Forrester  report. In the Three Disruptive Payment Trends in 2013 report, Forrester dives into the three trends that will affect payment options which include the new versus old payment options, the digital wallet war, and alternative financials services for underserved customers.

The first predicted trend by Forrester is how emerging payment models are expected to “disrupt” traditional payment economics. According to Forrester, “merchants have a growing set of payment options that do not adhere to the traditional interchange or processing fee model.”

Some of these new options, according to the report, could come at a lower cost than traditional payment options and at a “much greater value” for both consumers and retailers. The new emerging payment technologies include mobile digital wallets and the startups of free or low cost payment processing companies.

Forrester states that “as merchants adopt these new payment methods, their expectations will reset and they will expect lower costs and greater value from incumbent payment service providers.” While Forrester states that “traditional” payment models will not disappear overnight, “it would be a mistake for payment incumbents to dismiss the growing number of unique pricing schemes and the disruptors who are moving aggressively to gain scale.”

The second trend for 2013 predicted by Forrester is that mobile digital wallets will differentiate themselves from competitors by offering more options. These options, according to Forrester, “can create a more convenient commerce experience for consumers and give merchants a growing set of potential benefits — that may provide a distinct competitive advantage — to evaluate and weigh against the additional costs of wallet acceptance.”

The third trend, according to Forrester, is that “emerging alternative financial services will appeal to a broad base of consumers.” Translation, more and more payment options for ecommerce retailers will begin to address “a large base of underserved consumers” who might be “unbanked, underbanked and debanked.”

The “disruptors” of traditional mobile payments, Forrester states, are looking to create “quick and easy conversion of cash for digital payments.” This new approach, Forrester said, will now appeal to other segments and directly compete with checking accounts and debit cards.

So what do these trends mean for retailers? According to the report “each new model invites merchants to reframe their expectations around the cost and benefit of payment acceptance.” In time, the report said, merchants will begin to expect to pay less and get more from their payment providers.

In return, the report said, payment providers will begin to look at these new emerging trends and models as “inspiration” to create their own models to compete with these new expectations.

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