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Ways to pay keep on coming

Wave, swipe, or punch a button—all sorts of new mechanisms

Bank tech trends can make your head spin. So regularly longtime Tech Exchange Editor John Ginovsky does his best to “make sense of it all.” Bank tech trends can make your head spin. So regularly longtime Tech Exchange Editor John Ginovsky does his best to “make sense of it all.”

What more can be said about the payments space? Plenty, it turns out. Current surveys and studies show robust trends in interest, innovation, investment, and development in different ways to exchange value from one entity to another.

Lots of familiar buzzwords abound: person-to-person, wearables, internet of things, apps, contactless, mobile bill pay, connected devices…

But they are more than buzzwords. And they are all important. People’s payment vehicle preferences continue to morph even as payments systems providers offer more and different options.

Here’s a rundown of some of the payments-related studies that have been announced recently.

Paying via connected devices

Visa and found that more than 80% of Americans have a strong interest in using connected devices to make purchases. Some takeaways:

The average consumer owns 4.4 connected devices. This includes game consoles (47%); activity trackers (41%); smartwatches (15%); voice-controlled assistants (14%); connected thermostats (9%); and virtual reality headsets (7%).

Connected consumers make more purchases across more product categories than those with just one connected device, with apparel and footwear leading the way.

50% of the 2,600 smartphone owners surveyed had made online purchases through a device within a week of the study, in 11 out of 19 product categories. The top three categories were travel services, household repair, and entertainment.

Over 65% of respondents cited card issuers and bankcard networks as the institutions they trust most to enable those experiences, over retail channels, social networks, and mobile device manufacturers.

“The category of payment-enabled devices is still in very early days, yet this research shows just how much consumer interest and understanding is starting to build for what these experiences can offer,” says Jim McCarthy, executive vice-president, Visa Inc. “As we work with our banking partners to make it easier to put payment credentials onto devices, a few new consumer use cases will inevitably break through and start to really change the game.”

Payment by mobile devices

Fiserv sponsored a Harris Poll survey of more than 3,000 U.S. consumers and found consumers are starting to pay more bills from mobile devices and making more person-to-person payments, while starting to venture into digital wallets, than before. Some takeaways:

The percentage of consumers using mobile bill pay rose from 22% in 2015 to 28% in late 2016. Reasons respondents gave for using mobile bill pay include the ability to pay bills anywhere and anytime; the ability to pay bills at the last minute; and the receipt of mobile alerts when bills are due.

Use of P2P payments grew to 19% in 2016, from 14% in 2015. Most-often-cited P2P uses were: sharing household expenses; repaying debts to a friend or family member; and rent.

Security concerns among nonusers declined from 29% in 2015 to 21% in 2016.

Digital wallet adoption grew at a slow but steady rate. In the survey 13% said they had used a digital wallet in the last 30 days, up from 11% in 2015, and 8% in 2014. This growth curve parallels the growth curve for online banking following its introduction in the late 1990s, Fiserv says.

Why might respondents consider using a digital wallet? Reasons include: being able to turn off credit or debit cards in case of fraud, withdrawing cash without a card, and paying someone in real time.

“Consumers are living more digital lives, and that is being reflected in the way they pay,” says Mark Ernst, chief operating officer, Fiserv.

Payment via contactless methods

Juniper Research looked at global contactless payments projections and forecast that the total value of such payments made via payment cards, mobile, and wearables, will reach $1.3 trillion by 2019, more than doubling from an estimated $590 billion in 2017. Some takeaways:

Contactless card levels will continue to dominate global transaction values, accounting for 80% of total contactless transactions in 2019. Contactless transactions via debit/credit cards will exceed $2 trillion globally by 2021.

In the United States, however, in 2016, mobile wallets accounted for 90% of the total contactless transactions.

In the U.K. and Ireland, donors to charities that offer contactless payment options tended to pay three times more than the average cash donor.

Tracking how consumer prefer to pay

A study by ACI Worldwide and Ovum found that 57% of billing organizations are investing in relevant payments technology to keep up with consumer wants and expectations. Some takeaways:

IoT is driving growth, with 49% of organizations actively developing or planning to offer payment capabilities embedded into new devices.

Most organizations post payments to their enterprise resource planning system in real time, and almost 70% plan to enhance ERP integration within payments even further.

SaaS and cloud models will advance. While SaaS/cloud only accounts for a small proportion of biller organizations’ delivery model today, 54% report that they are likely to move more of their payments infrastructure to SaaS/cloud models in the future.

“The role of payments has never been more central to both the consumer experience and overall operational capabilities, so organizations must continually invest in their payments capabilities,” says Gilles Ubaghs, Ovum.

Rapid growth of P2P payments seen

Research by Aite Group into P2P found that leading players in the industry are reporting double- and triple-digit increases in P2P volume. Some takeaways:

• U.S. financial institutions and financial sector tech companies are building interoperable networks that execute real-time payments.

Most of the larger U.S.-based financial institutions offer P2P payments solutions via platforms such as Zelle and Popmoney.

Alternative providers are developing dedicated digital P2P solutions in order to improve the consumer experience. However, consumer preferences and lack of ubiquity across different payment channels may present barriers to widespread adoption of digital P2P payments methods.

“In the U.S. today the majority of P2P payments are made using cash and checks, with just 10% of the total P2P transaction volume being made using a digital P2P payments method,” says Talie Baker, Aite analyst. “In what Aite Group estimates is a $1.2 trillion market, there is tremendous room for growth in digital P2P payments as consumer become more familiar with mobile payments and as digital P2P payments solutions become more ubiquitous.”

It almost seems quaint now to mention cash and checks.

Sources used for this article include:

57% Of Billing Organizations Are Increasing Investment In Electronic Payments Over The Next Two Years

Contactless Retail Payments To Exceed $1 Trillion In Transaction Value By 2019

Digital Person-to-Person Payments In The U.S.: The Competitive Landscape

Fiserv Survey Finds Payments Now More Mobile, More Personal, While Digital Wallets Show Measured Growth

Visa Study: IoT And Things Paying For Things Are Driving The Future Of Commerce

John Ginovsky

John Ginovsky is a contributing editor of Banking Exchange and editor of the publication’s Tech Exchange e-newsletter. For more than two decades he’s written about the commercial banking industry, specializing in its technological side and how it relates to the actual business of banking. In addition to his weekly blogs—"Making Sense of It All"—he contributes fresh, original stories to each Tech Exchange issue based on personal interviews or exclusive contributed pieces. He previously was senior editor for Community Banker magazine (which merged into ABA Banking Journal) and for ABA Banking Journal and was managing editor and staff reporter for ABA’s Bankers News. Email him at [email protected].

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