Despite the growth of electronic payment processing methods, it may surprise you to learn that cash is still one of the most popular methods of payment. A study by the Federal Reserve Bank of Atlanta on the payment preference of consumers found that cash transactions amounted to more than 30% of total transactions in 2017.
Still, more and more people are ditching cash for the ease of card or mobile payments. By 2020, 64% of consumers are expected to adopt and use mobile wallets, according to a study by Accenture. That’s a 39% increase of mobile wallet users from 2017.
For businesses, this is crucial information. Failing to implement new payment technology has the potential to negatively impact sales. Given the expected changes to electronic payment processing in the future, businesses need to be prepared.
Modern Day Payment Processing
Cash itself is not new. According to the U.S. Currency Education program, paper money has been printed as legal tender since before the Declaration of Independence was signed, and it’s still one of the most widely-used forms of payment today.
According to a piece in The Financial Brand, the increase of data breaches and issues with cybersecurity may be causing a return to cash. Many consumers said they feel cash is the safest way to pay for purchases.
Since the creation of the Diners Club charge card in the 1950s, credit cards have expanded both in who offers them and what they do for customers. Many cards offer rewards for large purchases, such as cash back or airline miles. That type of bonus is a nice perk for consumers who get to enjoy the main benefit of credit cards, which is a convenient method to purchase and finance products and services.
In recent years, credit card technology has improved to include EMV chips that allow for more secure purchasing. These factors and more have had a major impact on the popularity of using charge cards. The Federal Reserve reported that payments made with debit, credit and pre-paid cards amounted to $6.48 trillion in U.S. spending in 2017.
According to a McKinsey study, mobile apps in 2017 accounted for 31% of global digital commerce volume.
By using a mobile device to complete transactions, consumers can simply tap their phone to an electronic receiver to pay over the internet. It’s fast and secure. In fact, Fidelity Investments has reported that using a mobile payment method is more secure than using a credit card. Account information on mobile devices is protected by advanced encryption methods, and in order to pay with a smartphone, a passcode or fingerprint is required.
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There are multiple avenues for mobile pay, which include:
- Digital Wallet: Mobile apps such as Apple Pay or Google Pay store credit and debit card info. Digital wallets can be used to make purchases through an online retailer or at a physical point of sale. These apps utilize near field communication (NFC) technology, allowing consumers to simply hold their smartphones close to an electronic receiver to complete a purchase.
- Quick Response (QR) Code: A QR code is essentially a digital barcode. Originally developed for the automotive industry, QR codes have gained in popularity because the technology is open source and available to everyone. Recently, they’ve been adopted as an electronic payment method. Companies such as Walmart, Starbucks, Target and Macy’s have all incorporated QR code purchasing into their apps.
- Mobile Banking: Online banking helps users share funds with the touch of a button. Many banks have fund transfer options within their apps, and there are apps created specifically for that purpose, such as Venmo and Zelle.
Future of Electronic Payment Processing
As we look forward, there are many exciting trends for what the future of electronic payment processing could look like. If you’re looking to run a business that needs a streamlined, easy-to-use digital payment process, here’s what to look forward to in the future.
- Growth of Mobile Wallets: As cell phone security improves, more people will be incentivized to make purchases using card or bank data stored on a smartphone device within a mobile wallet. In fact, market research firm 451 Research has projected “mobile contactless payments” will exceed $1 trillion by 2022. In order to adapt to this change, businesses can use technology that allows for contactless payment processing.
- Introduction of Wearable Technology: Payment transaction volume for wearables will reach $501 billion by 2020, according to a report from market intelligence firm Tractica. One popular example is wrist-based payments using radio frequency identification bands. Festivals, live events, and amusement parks are taking advantage of that payment method, which works similar to any other type of contactless payment method, like using a credit card near a payment terminal. Having an electronic and wireless reader that can accept these forms of payment will help businesses earn more sales.
- Biometric Payment: Businesses can also receive payments using people’s unique physical characteristics. In 2018, credit card giant Visa unveiled a pilot program to test a new chip credit card that relied on an individual’s fingerprint to prove authentication, as opposed to a pin number. As this technology evolves in the future, fingerprint scanners could be used to facilitate payments for products or services, with account information linked through the internet to each person’s personal fingerprint.
Adapt to the Latest Payment Processing Technologies
Businesses are always innovating and looking for how the latest technology can increase sales, reduce costs and boost profits. These new electronic payment innovations could help solve what is considered a big issue for retailers: long lines as customers are trying to check out with their purchases. A study commissioned by e-commerce payment company Ayden found that American retailers lost almost $38 billion in potential sales from long lines alone. In addition, almost one in five surveyed found that the store they were in didn’t accept their “preferred payment method.” More of that group wound up spending less than they would have, or left the store entirely, leading to more than $1 billion in lost sales.
With the adoption of new technology in the future, checkout lines could be streamlined to the point where consumers can grab their items, pay for it in a flash with whatever payment method they’d like and then go. If you’d like to stay on the cutting edge of merchant service technology and be best prepared for what comes next, enroll today in Point Park University’s online MBA. Designed for working adults like yourself, you can earn your degree in as little as 18 months. In addition, the online format enables you to balance your education with your busy life. Learn advanced management skills and business strategy that will provide you and your business with the ability to stay ahead of the latest trends.