What have been the main three innovations in the past five years?
The accelerated adoption of contactless payments has led the way for me. Contactless cards accounted for 15% of all payments last year and are set to reach 36% a decade later, according to UK Finance. I think it’s fair to say that contactless is enabling the transition of the UK away from a cash-based society as it has also paved the way for mobile payments like Apple and Android Pay to follow. Last year debit card payments overtook cash for the first time in the UK
. Support from organisations like TfL has certainly helped with adoption, turning contactless payments into routine, day-to-day behaviour.
Faster Payments may have technically been around since 2008 and winning adoption in day to day banking activities, but the potential to transform retail payments is only just starting to be realised. New PSD2-enabled services have started to appear offering consumers the choice to pay online not by card but by immediate bank transfer. For merchants, this could mean lower card processing costs and chargeback risks. Such payment methods are already well established in other countries such as the Netherlands, where around 60% of all online payments are made using the iDEAL service rather than traditional debit/credit cards.
Finally, I think the growth of QR code payment methods like those promoted by WeChat and Alipay in Asia could be significant. They’ve opened up the market for a different kind of digital payment which could also herald a mini-revolution in the sector. All you need is a piece of paper with a code printed on it to accept electronic payments: no payment terminal required. If methods like this catch on in the UK you could even see mPOS devices start to lose their appeal.
How has mPOS helped micro-merchants?
Card payment systems like those provided by iZettle and Square have really added value for micro-merchants, by allowing them to accept card in a fast, simple secure and cost-effective manner wherever they are. But mPOS devices have also found a niche in traditional retail and hospitality where they have been deployed to support activities such as assisted selling and pay at table.
What are the biggest barriers to the adoption of payments innovation?
Probably the investment that’s required. We all know that times are tough for retail and any new technology roll-out will require extra financial resources and staff training. At a time when retailers have multiple challenges to manage, many may decide not to investigate emerging payment innovations as cash and cards are doing just fine for them.
What can we expect to see in the next 3-5 years?
We can certainly expect to see greater adoption of Faster Payments in e-commerce, which in turn will displace some card transaction volumes. There could also be an uptick in QR code payments — Alipay is offering this at the Edinburgh Festival, for example. Biometrics and tighter multi-factor authentication will also start to emerge, driven in part by new requirements from PSD2. Plus, we’ll see customers increasingly being able to pay direct from their bank account. NatWest is trialling
a service which it says will cut the payment process from minutes to seconds.
How should businesses adapt to the above to stay ahead of the curve?
As with anything in the retail world, you need to understand your customers. If you have a high proportion of Chinese tourists, for example, you need to think about offering WeChat Pay and Alipay. But if you’re an e-commerce focused business, then you might want to think about introducing Faster Payments.
It’s all about understanding how your key customers like to shop and pay and making sure you never have to turn them away because you don't have the payment method that they want. Get payments right and you’ll minimise lost sales, improve the shopping experience and ensure you have happier customers who are more likely to return.