The advancement of alternative payment systems is like Manhattan in the ‘70s. The edifice is amazing, but you can’t go there without constantly looking over your shoulder, afraid you’re going to get mugged. No one wants to show their wallets.
Today, Manhattan is fantastic. An amazing place for shopping and business. A lot of that comes down to the feeling of legitimacy and safety. People buy when they have that feeling.
The city was able to bring in higher security standards, better policing and visual control, which directly impacted its crime problem.
The same goes for the future of alternative payment systems. What it boils down to is finding a frictionless process that you trust.
For a long time banks have been one of the key drivers of that trust. The moment a bank supports a particular model, then the trust automatically rolls in. It’s considered mainstream once the banks support it.
The other big driver of trust is the hardware providers. If you look at how the payment systems have advanced, they have come preloaded in our devices as payment apps. Apple release a new iPhone and suddenly thumbprint recognition becomes mainstream. Fast forward another couple of years and the options include or Siri or Cortana voice recognition to access the payment apps. It is already common to see people use their phones instead of bank cards, for payment in coffee shops, bars and restaurants.
The market adapts because the technology has allowed the process to become mindless. People like mindless. They’re more concerned about the thing they are buying than how they are buying it.
Who knows what future iterations will be able to check? The simple truth is that as the hardware becomes more sophisticated, the avenues available for alternative payments are advancing with them.
Of course, on the flip side of all this is that necessity has always been the mother of all invention. We have people with the entrepreneurial mindset who are inventing out of nothing.
In those situations, it comes down to implementing a system that solves needs and which those on both sides of the sales process are willing to trust. It’s how you end up with a system like M-Pesa, which was first rolled out in Kenya and has grown and grown since 2007.
That system grew out of people using phone credit as a form of currency and now payments can be transferred from mobile phone to mobile phone – with no bank account involved. It’s a wallet linked to your mobile device. So if you are purchasing something as simple as a piece of fruit from a market stall, all you need to do is send money to a mobile phone number. The exchange of funds couldn’t be simpler.
That model is about reducing friction. There are of course other ways of removing friction from the money management process. Look at businesses like N26 or Revolut. You can set up a free bank account in minutes, all you need is a passport.
For start-ups that don’t have legacies to rely on, this makes it much simpler to get a bank account for their business. They don’t have credibility. They don’t have credit history. But they can still get an internationally recognised bank account and a debit card without going through the same bureaucratic process as required by the traditional financial institutions.
What all this highlights is that the future of alternative payments will ultimately be driven by the human experience. When you look at buying something on a day to day basis, no matter what way you pay for it, there are still a significant number of friction points.
Anyone who can reduce those friction points, who finds a fluid and elegant payment system will have uptake. But you have to be able to validate it. You have to maintain and justify everything that goes back from that point. That involves cost. There is always code and developers in the background, which is one of the reasons why the new payment companies describe themselves as development houses or code houses. They are all pushing for complete passports in and out of every system, making them as easy to use as possible.
When they crack that, when they have the validation that the world around them can rely on, that’s when they’ll be a modern day Fifth Avenue and a modern day Wall Street combined.
In Continuum our role is to maximise our clients online sales and growth so we are continually tracking the development of alternative payments and the possibilities they provide. We’re constantly looking at how we can use innovation to steamroll any friction points in the sales process. Over the years we have seen how today’s outlier can quickly become validated and normalised in a digital business environment that evolves in a New York minute.
The content in this blog summaries some of the points raised by Colin Meagle during his recent appearance at the ‘PSD2ready?’ conference organised by the eCommerce Association of Ireland (eCAI). During that event Colin was part of a panel discussing ‘The Rise of Alternative Payments’.
If you would like to speak to Continuum about selling online or eCommerce payment processes, please contact us on firstname.lastname@example.org/ email@example.com or +353 (0)1 8558860/ +1-212-235—2076.