The United Kingdom, just behind China and the United States, is the third largest card-not-present market in the world, with Germany a close fourth. Britons are savvy consumers, always seeking a more convenient and safe way to pay. Merchants constantly need to innovate and adopt new payment trends to meet consumer demand and ensure the consumer experience is as smooth as possible. Earlier this year, Verifi highlighted some payment trends and emerging technologies worthy of review in our blog “Payment Trends that Will Shape 2018 and Beyond”. This article takes a second look to serve as an update on how they are performing and how consumers are adopting these technologies.
The use of mobile wallets has exploded over the last few years. PayPal led the way with their wallet solution, and Google Pay, Apple Pay, and Samsung Pay have each implemented solutions for consumers to pay without having to use their physical card. In 2017, spending through mobile wallets reached nearly £1 billion, boasting a growth of 365% over 2016 according to FinExtra. Even though more than 9 million Britons are due to use their mobile wallets at the checkout this year, research from eMarketer is showing that this growth is set to slow over the next three years. This is due in part to smartphone penetration and growing consumer trust in contactless payments.
Futuristic visions of paying for items with watches, jewelry, or sunglasses are no longer fantasy and, in fact, they are growing in popularity. Mastercard recently surveyed more than 9,000 people across Europe and more than a quarter of respondents indicated they were ready to adopt this emerging technology. Per recent studies by Mastercard, in the UK 36% of in-store payments are made with wearable devices, and in the Netherlands this figure is more than 50%. These studies further predict that payments in the UK made with smart wearables will surpass cash by the end of this year, which is three years earlier than expected.
With the growing adoption of contactless payments and other new payment methods, fraud concerns are still at the forefront of consumers’ and merchants’ minds. Biometrics, the use of biological data to confirm the identity of an individual, are quickly emerging as strong authentication methods. Apple phones have used fingerprints to unlock devices for several years, and Apple Pay and Samsung Pay also require a fingerprint ID to authenticate payments. However, a more diverse range of methods are emerging. Smart watches with built-in heart rate monitors can now learn the unique heart rhythm of the wearer to authenticate their identity for payments, NPD Group predicts. Consumers are skeptical, as a report by Transaction Network Services has shown that 61% of respondents felt providing their fingerprint or iris readings to companies may put their personal identity at risk. Biometrics have proven their worth but still have a battle in winning the trust of consumers.
Consumers can now purchase groceries by telling their smart speaker device to restock the milk, etc. – and it is seamlessly purchased through their Internet-connected device. An example of this type of service is Amazon Fresh through Alexa. In-store payments now can also be authenticated by saying “I will pay with Google” into a smart device at the point of sale. The US is leading the charge when it comes to purchasing through a voice-controlled device. Research conducted by Narvar and YouGov in the UK predicts that 6% of Britons are to use a voice-controlled device to shop by the end of 2018 – this is in contrast with a projection of 31% in the United States by PaySafe.
Payments are not just the requisite formality to completing a purchase, but part of the overall consumer experience. With these emerging technologies, the consumer is intimately involved in making the payment through their wearable device, fingerprint, or voice. These technologies also come with risks. Expert fraudsters are always seeking ways to exploit new technologies and defraud consumers. Merchants need to adapt their payment practices to welcome new technologies as consumers adopt them, but also develop assurances to protect their consumer data and revenue streams. The danger lies in the merchant’s preparedness to identify and handle fraud. Robust prevention strategies, including choosing the right solution partner and identifying potential gaps in the customer journey, can lead to stronger protection against fraudsters.