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Digital payments hit the tipping point

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29th Apr 2014
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Businesses that fail to embrace new payment technologies such as contactless payments, payment apps and virtual currencies will get left behind, according to new research from Sage Pay.

Launched on the same day as the new Paym phone payments app, Sage's Payments Landscape 2014 report reveals more than a third of customers would be more likely to shop at outlets that offer a range of payments methods or innovative payment types.

Despite this increasing customer demand, 80% of businesses surveyed said they would only embrace new payment methods if customers actually requested them.

This passive stance on payment technology has created a gap between what customers want and what businesses provide, opening up an opportunity for business growth among early adopters.

“We’re at a turning point,” explained Sage Pay chief executive Simon Black. “If SMBs fail to innovate, they are in danger of being left behind.”

Sage Pay says successful businesses are more likely to:

  • Offer a range of payment methods
  • Integrate their online and offline channels
  • Use tokenisation to offer a ‘single click’ checkout
  • Be clued up on the issues when it comes to selling to overseas markets
  • Get the right balance when protecting against fraud, taking care not to reject legitimate customers with their defences.

Black said the technology situation was scary for some small businesses, who see it as a ‘space race’ they can’t keep up with.

“You need to know what your customer wants to do, so it’s all about measuring and learning,” he said.

“Reducing friction should be the focus of every business. Whether that’s looking at moving away from cash towards newer payment types, using ‘single-click’ checkout or adopting an omnichannel approach,” Black added.

One of the standout results from the survey was the fact that £12bn was lost by small and medium sized retailers last year by them not accepting cards.

In this situation around 31% of consumers said they would shop elsewhere and 17% would put items back.

The word ‘omnichannel’ appears prominently in the 2014 survey report and describes the philosophy of supporting customers across different distribution channels. Omnichannel goes a step further than multichannel, where each channel is joined up with the other at the back end, allowing a seamless customer experience.

“The customer is omnichannel, not the business,” Black said.

Looking to the future, the report highlighted how businesses need to be aware and conscious of future trends.

Black said in a few years’ time the smartphone will replace the wallet in the same way that the ‘information super highway’ exploded in the last 15 years when few realised how widespread it would become.

“This is the death of cash, and customers may well leapfrog you,” he said. “By 2025 in developed economies it’s a decent bet that we won’t be using cash. We won’t have wallets – you’ll just use your phone. Smartphones will be the hub of everything.

“It’s not a radical departure. Where we’re at today with smartphones and payment technologies, I see it as a very small step.”

Mobile money: Paym

On the same day Sage released its report, the major high street banks including Lloyds, Barclays and HSBC launched the Paym phone payments app - a new system linking your mobile phone number to your bank account.

Paym will let you send and receive payments directly to a current account using just a mobile phone number, and there will be no need to ask for the other person's sort code or account number, or tell them your own.

The banks think that by 2018 we will have made one billion payments using Paym, with nine out of 10 of us using the system. 

Many see it as just the start of a data harvesting revolution which will see most people using their mobile phones for almost every aspect of their finances.

Next year EE, Vodafone and O2 plan to launch Weve, a "tap and go" payment system, which is their bid to replace debit cards, Oyster cards and loyalty cards with a chip embedded in new phones.

Transport for London is also upgrading readers at entry barriers on the tube network, allowing them to accept suitable payment applications on mobile phones. London buses already accept contactless cards and from 6 July they will no longer take cash.

Looking further ahead the Zapp app is expected to be the way we’ll use our smartphone to make payments for anything in a shop or over the internet.

Launching this autumn, Zapp has been working with banks such as HSBC and Nationwide, and retailers including WH Smith and McDonald's, allowing shoppers to pay at the till with their phone.

Facebook is also launching a money transfer service that could be a prelude to a new payments system and Google has a tap-and-go payments service called Google Wallet.

What are your payment technology trend predictions for 2025?

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Replies (4)

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By User deleted
30th Apr 2014 08:32

Yes and no ...

Seem to recall that Sage had a hiccup with their original payment system many years ago - believe it proved to be a disaster and was sold. They subsequently re-entered the market with the current one a few years later (all air-brushed out of their history)

'.. One of the standout results from the survey was the fact that £12bn was lost by small and medium sized retailers last year by them not accepting cards ..'

There are many reasons for this, however, one suspects that the inability to accept card payments on devices has been a major factor and products such as iZettle & Zapp (different approaches) etc. will change this. (SagePay is a Zapp partner - so good marketing boys! - but what about citing others where you are not involved?)

Although quite why it has taken quite so long for this approach to be introduced into the UK is beyond belief. Of course Sage could have taken a lead in this area years ago rather than now just spouting rhetoric about market research, however, they chose not to! Once again demonstrating that Sage are followers and not innovators with marketing their forte rather than IT - after all talk is cheap! and once upon a time they were burn't by a payments system

Nevertheless, apart from the iZettle approach what contactless approaches allow payment to market traders or those who do not have a permanent base of a shop front or premises
 

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By johnporter
02nd May 2014 09:35

Digital payments

With the use of Credit cards becoming increasing costly  7 as Retailers are now passing these costs to customer & who can blame them.

The use of cash monies may come back into its own

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By slarti
08th May 2014 12:16

Increasing customer demand?

"Sage's Payments Landscape 2014 report reveals more than a third of customers would be more likely to shop at outlets that offer a range of payments methods or innovative payment types.Despite this increasing customer demand"

 

So nearly 2/3rds are not interested?

 

 

Sounds like a sales puff to me!

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By seeroo
12th May 2014 08:26

No surprise that "research" done by an online payments processor would result in a recommendation that the sky will fall if businesses do not use online payment processors

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