The payments industry is extremely dynamic with new payment methods and solutions constantly popping up at different locations worldwide. Aside from the uncertainty regarding the longevity of these payment solutions, there is also the question of regional preferences. A solution which may be appropriate for one area of the world might not work at another.
Should you use the proven “wait and see” approach or go for early adoption? Before making a decision, let’s take a look at some of the payment options available at the beginning of 2016:
Mobile Payments
In theory, digital wallets are an ideal payment mode because purchasers can conduct payments via a device that they are constantly carrying with them anyway, as opposed to the physical wallet which could just as well be left at home.
Despite all the talk about digital wallets, there aren’t that many options available at this time. Major players currently include Apple Pay, Samsung Pay and Android Pay. Last year Starbucks launched its own closed-loop mobile payment app that has proven to be very successful. Several large retailers like Walmart are currently in the process of emulating Starbucks and launching their own mobile apps.
Pros
- Consumers no longer need to carry around leather wallets full of credit cards and cash.
- After the initial one-time registration, the user does not need to enter his or her details again.
- When using a mobile wallet, the customer is not obligated to wait in the checkout line. Payment can be made independently via a smartphone.
- Mobile wallets can easily be combined with reward and points programs (similar to the one Starbuck offers) that inspire brand loyalty and returning customers.
- Most mobile wallets offer a high level of security due to the use of tokenization during the payment process.
Cons
Despite all the hype around mobile wallets, they have not been able to gain traction among buyers for several reasons:
- Users currently do not believe that mobile wallets are a real improvement over classic payment methods.
- Due to the fact that most mobile wallets can only be deployed on certain devices, their use is not yet widespread.
- Users fear cyber breaches and are unaware that mobile wallets are in fact very secure.
- Before integrating a mobile wallet, the merchant must look into integration and ongoing operational costs.
- The development of a mobile app can be costly and time consuming, especially considering that it ultimately may not be widely used.
P2P Payments
Person-to-person (P2P) payments are becoming increasingly popular: Facebook, Venmo and Google Wallet are examples of active P2P payment solutions available today.
Pros
- P2P solutions make it easy to transfer money to friends and family straight from the sender’s bank account.
- Some P2P solutions allow users to transfer money amongst themselves using a mobile phone app or web interface and can be linked to the user’s bank account or debit card.
- Solutions like Google Wallet can be used for P2P payments as well as for purchasing items online and in person.
Cons
- While P2P payments enable the transfer of funds between peers, this model falls short when it comes to transitioning to ecommerce payments.
- Time will tell if this sort of solution can evolve into a viable ecommerce payment platform as WeChat did with great success in China.
- This type of payment solution serves a very limited audience with little commercial value. Most ecommerce merchants have nothing to gain from integrating this solution.
Social Media Payments
Social media lends itself to payments because it is already widespread and is often used for sharing product reviews and ratings. While Facebook and Twitter are just beginning to test potential commercial capabilities, the Chinese WeChat model shows how social media can serve as the perfect medium for commerce when handled correctly.
Pros:
- Social media is highly popular, making it easy for the merchant to reach large audiences.
- Social media encourages ecommerce and purchasing because of ongoing live interaction between the merchant and buyers.
- Upon reading a favorable review/comment about a certain product, a social media follower is more likely to make a purchase immediately rather than delay it.
- Due to its immediacy, social media lends itself to highly lucrative impulse buying.
- Social media already stores shoppers’ credit card payment information, which eliminates the need to re-enter data for each purchase and enables personalization of the shopping experience.
Cons:
- The integration of a company’s payment solution within social media necessitates the investment of time and resources.
- The social media payment model has yet to prove itself, so investment in this type of solution may be premature.
- Behind these buttons is computer code that hooks up to a social media site and posts a link to the merchant’s content. This connection can slow down the speed of websites and mobile sites.
- Average order value will probably be lower when purchasing on a social media site instead of the retailer’s website, as the shoppers cannot add other items to their cart.
New Payment Technologies
Several new technologies, such as wearables, blockchain and IoT, are in the early stages of integrating with payments. It is anyone’s guess if and when they will gain traction and provide viable payment alternatives.
When it comes to the adoption of new or more veteran payment solutions, there is no sweeping rule whether you should take the plunge or sit on the fence. You must weigh the pros against the cons and resolve which route is best for your enterprise.
The rule of thumb when deciding to adopt a payment method is to explore how widespread its usage is in the regions where you are active. Don’t rush in to spend funds on a technology that may ultimately prove to be useless. As your definitive goal is to reach specific audiences, there really isn’t any advantage in being the first to adopt an unused and untried payment method. In cases like these, it pays to be patient and play the waiting game.
Oren Levy is CEO of Zooz.