Our world is becoming increasingly digital, and so is payment processing. Here are five digital payment methods that your business can use to process transactions.
Businesses and consumers alike are interested in faster, safer, and more convenient payment methods, as cash is becoming obsolete and, especially in the wake of COVID-19, contactless transactions are highly desired. Here are five trending digital payment methods consumers will prefer to use in the coming years.
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What are digital payment services?
Digital payment services are forms of contactless, cashless and paperless payment methods. Technology has allowed the world to embrace these more convenient exchanges of payments through services like mobile apps and AI/machine learning. According to Statista, the number of digital payment users is projected to grow by 5.4% in 2020.
Types of digital payment methods
Various digital payment methods are trending today. Here are five of the most popular payment types to implement as a business:
1. Devices with biometric authentication
Customers are going digital with their payments, increasing the need for security. Biometric authentication is a form of verification that uses fingerprinting scanners, facial recognition, iris recognition, heartbeat analysis and vein mapping to prevent identity theft and fraud.
Currently, many phones with digital wallets like Apple Pay and Google Pay use fingerprint or facial recognition, but additional options are in the works. For instance, Visa is piloting a biometric payment card that will allow users to authenticate a transaction by touching a sensor on the card that can determine if the fingerprint is a match instead of entering a PIN code or signing a receipt.
By 2021, there is expected to be over 18 billion biometric transactions happening each year. As a business owner, it's important to protect your data, as well as your customers' information, and biometric authentication is a promising way to achieve both intents.
2. Mobile point of sales (mPOS)
Convenient payment processing should be a top priority for businesses today, since there will be 27.7 million mPOS devices by 2021, compared to 3.2 million in 2014. Mobile POS systems are tablets, smartphones or other wireless devices that use an app and a card reader to process payments as a cash register would.
This offers businesses the freedom to eliminate a central checkout area and accept payments from anywhere in their store, and even off-site. For example, you can bring your payment system to a trade show and other off-site locations without worrying about how you'll carry out transactions. Customers can swipe their credit cards or debit cards using the card reader attached to your device and instantly make a purchase – it's that simple.
3. Smart speakers
Voice commands are no longer a futuristic concept. Through smart speakers like Google Home, Apple HomePod and Amazon Echo, consumers can give a voice command to make an instant payment or purchase. In fact, 35% of users buy products like home care, groceries and clothing through their smart speakers.
Some consumers fear this isn't the most secure method of making purchases. Still, this digital payment trend is projected to grow to 77.9 million users by 2022 (up from 18.4 million users in 2017). With this type of growth on the horizon, it will be important to optimize your online store for voice search so your business is easily recognizable through tools like smart speakers.
4. Contactless payment
There are various mobile payment apps that allow users to transfer money, purchase products, pay bills and complete virtually any other type of financial transaction, all with the tap of a finger. By creating an account and storing your payment details in it, purchasing goods and services using a mobile phone is quick and easy.
Examples of this technology include Venmo (which is also great for peer-to-peer payments), PayPal, Google Pay (previously known as Google Wallet), Apple Pay and Samsung Pay. Allowing customers to make electronic payments with their wallet app/digital wallet or other mobile payment apps offers a convenience that can't be matched.
There are costs involved with contactless payment methods. First, you will need to purchase card terminals that are enabled with near-field communication technology. There's no fee to accept Apple Pay and Google Pay, but just like all other credit card transactions, rates and fees do apply when consumers use a credit card to pay for goods or services in your store. (These transactions are considered card-present transactions.) You can check with your processor about these specific rates. [Read related article: Mobile Wallet Guide: Google Pay vs. Apple Pay vs. Samsung Pay]
Many consumers are turning to these methods because they feel that it's a safer option and that it's quicker than counting out cash or swiping a card. And, for the many consumers who perpetually have their phone in hand, it's much easier to access.
Contactless payments aren't limited to mobile wallets. New credit cards are also equipped with the RFID technology used for contactless payments. With a contactless credit card, customers simply hold the card close to the card reader – they no longer need to swipe their card, insert it into a card reader or even tap it against the terminal.
5. Social media payment options
Social media networks have expanded their reach to include payment solutions such as transferring money from one user to the next (P2P payments) or from consumers to retailers, directly within the network.
An overwhelming number of millennials turn to social media when looking to purchase. An Animoto study found that 75% of millennials' purchasing decisions are influenced by a brand's presence on social media.
Facebook, Instagram and Pinterest all offer business accounts that allow brands to sell to consumers, with digital payment transactions conducted directly on the site for a small fee. According to a 2018 study from Avionos, 55% of online shoppers had made a purchase through a social media channel.
Changes in payment methods have been propelled forward by consumers. We will continue to see the rise of various alternative payment methods, such as those above, while the use of cash and credit cards, in particular, as the Avionos consumer survey illustrates, will continue to decline.
Is your business ready?
Additional reporting by Eran Feinstein.