Convenience and speed driving alternate payment channels to the mainstream

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Digital Payments are a critical component in today’s economy, and banks need to keep customer demand for speed and convenience top of mind.

Payments are a critical component of the modern economy, and banks need to keep customer demand for speed and convenience top of mind. Legacy payment methods such as swipe cards are now considered slow, while customers cite the ease of using cash as their reason for not switching to digital payments.

Alternate payment channels such as contactless and wearables are poised to become game changers. With the widespread use of smartphones, mobile banking and payment applications have gone mainstream – and wearables provide convenient access to these applications.

Consumers can make everyday purchases quickly and safely through contactless payments, especially for low-value transactions. Alternate payment channels also help to improve banks’ customer experience by enabling faster, integrated, and seamless transactions.

Mobility and internet of things (IoT) – connected homes, entertainment, and media – are encouraging the rise of the internet of payments (IoP) to augment non-cash transaction volumes significantly. Payments via wearables are expected to rise as brands such as Garmin[1] and Samsung[2] offer payment services via their smartwatch devices.

Major banks, such as Australia’s Bankwest, which has begun trials with a limited release of a contactless payments ring that enables touch-and-go transactions at the point of sale,[3] are exploring wearable payment solutions. Meanwhile, Australia and New Zealand Banking Group, ANZ, now supports the platform from San Francisco-based FinTech firm Fit Pay that allows users to make contactless, near-field communication-based (NFC) payments.[4]

Improved device security features such as biometrics and cryptography are fostering customer confidence in the security of contactless payments. Bank of Cyprus will soon debut a biometric chip EMV card for contactless payments to enhance security and enable higher transactions.[5]

Wearables, coupled with improved security features such as biometrics and cryptography, will allow payments to become increasingly effortless and invisible in the future.

Expanded processing power, increased adoption, and more widespread availability of high-speed internet are propelling mobile payments growth. In fact, the mobile contactless user base for Apple Wallet, Samsung Pay, and Android Pay grew with a compound annual growth rate (CAGR) of 168.3% from 2015–2017.

Mobile contactless user base (million)
Apple Wallet, Samsung Pay, and Android Pay, 2015–2017[6]

Convenience and speed driving alternate payment channels to the mainstream

Source: Capgemini Financial Services Analysis, 2017, https://www.nfcworld.com/2017/04/11/351590/150m-people-use-apple-pay-samsung-pay-android-pay-end-2017

Driven by ease-of-use, contactless payments are becoming increasingly popular in the many mature markets such as the UK, Canada, Singapore, the Netherlands, Sweden, and Australia. The growth of mobile pay in China comes off a solid base of smartphone users and is being encouraged even more by technologies such as NFC and QR code.[7]

Payments are becoming increasingly invisible with innovations such as Amazon Go,[8] a store that allows check-out free experience and payment is automatically deducted from connected amazon account. Business rule-based automated payments with high security and without any need for intervention are becoming a reality and soon best payments services would be secure, automated, and invisible.

Banks must respond to customer demand for frictionless payments. Alternate payment options are becoming a requirement of doing business in order to deliver positive customer experience. As the adoption of contactless cards, wearables, and mobile payments increases, alternate payments channels could challenge traditional magnetic stripe technology and EMV cards.

Those banks that embrace change are most like to emerge as winners in the fast-paced payments game. Learn more in Top-10 Trends in Payments 2018, a report from Capgemini Financial Services.

 

[1] CNET, “Garmin’s new Forerunner GPS smartwatch adds music and payments,” Scott Stein, January 8, 2018, https://www.cnet.com/news/garmins-forerunner-645-music-gps-smartwatch-adds-music-and-payments-ces/

[2] Albawaba Business, “Samsung Announces Samsung Pay for Gear S3 Smartwatch,” December 20, 2017, https://www.albawaba.com/business/pr/how-samsung-pay-came-be-gear-s3-1063974

[3] Finextra, “Bankwest opens waiting list for wearable payments ring,” January 4, 2018, https://www.finextra.com/newsarticle/31491/bankwest-opens-waiting-list-for-wearable-payments-ring

[4] Mobile ID World, “ANZ Backs FitPay Wearable Payments,” Alex Perala, December 19, 2017, https://mobileidworld.com/anz-fitpay-wearable-payments-012192/

[5] Banks AM, “Bank of Cyprus to launch first biometric EMV card for contactless payments,” January 8, 2018, https://banks.am/en/news/fintech/14911

[6] NFC World Knowledge Centre, “More than 150m people to use Apple Pay, Samsung Pay and Android Pay by end of 2017,” Rian Boden, April 11, 2017, https://www.nfcworld.com/2017/04/11/351590/150m-people-use-apple-pay-samsung-pay-android-pay-end-2017

[7] CNBC, “Cash is already pretty much dead in China as the country lives the future with mobile pay,” Evelyn Cheng, October 9, 2017, https://www.cnbc.com/2017/10/08/china-is-living-the-future-of-mobile-pay-right-now.html

[8] https://www.amazon.com/b?ie=UTF8&node=16008589011

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