Cash still enjoys supremacy at the point of sale, but digital payment methods continue to grow, from wallets for mobile phones to wire transfers. Statista predicts digital payments will exceed $4 million in 2019 with a 12.7% YoY increase by 2023.
Ecommerce’s evolution has led to the meteoric growth of online payments. According to Worldpay’s Global Payments Report 2018, online payments made up more than half of all the ecommerce transactions. Worldpay researched 36 countries and spotted 140 different digital payment methods used last year.
The rapidly expanding markets of China and India also contribute much to the mass adoption of contactless transactions. As eMarketer puts it, China tops the list of online payment solutions users. In 2019, 81.4% of Chinese people are forecast to use proximity mobile payment apps (mobile transactions made via the Near Field Communication (NFC) technology at a point of sale) with a maximum number of consumers coming through Alipay and WeChat Pay, built into the WeChat messenger.
India keeps up the pace as the quickest mobile payment adopter. eMarketer claims the number of Indian mobile users increased by 26.4% in 2018, as compared to the previous year. Together, China and India make up two-thirds of all the mobile payment app users. This is primarily because of the colossal improvements made in technologies like sound wave, NFC, QR, and RFID, as well as an enhanced internet connection.
Open banking is another huge change driver, pushing forward contactless transactions. The 2nd Payment Services Directive (PSD2) allows consumers to share access to their financial data with third parties to get loans or other services.
So, how does the payment ecosystem look from a global perspective? What types of online payment solutions are being used and what functionality has been popular with merchants and buyers? These are some of our findings.
Various Geographies of Contactless Transactions
The “now” economy dictates these rules. Consumers are searching for real-time services, instant purchases, same-day deliveries, and tapping. Visa has come up with contactless transactions statistics that prove the assertion: Over 40% of the in-store Visa payments are made by tapping.
Research and Markets have recently spread the news about an alternative online payment solutions takeover. Following their significant findings, tap-to-go mobile wallets may override credit card payments and account for half of ecommerce sales.
China’s mobile wallets will also expand its reach. Alipay has obtained an e-money license issued by the EU and will benefit from PSD2 access policies to provide services to the European market. This consumer-centered protocol aims to foster a quicker embracement of online payment processing solutions that will support instant transactions and have more consumer-focused features: voice, face, and movement recognition, real-time cross-border payments, AI-protected online payment software solutions, etc.
In North America, the pace of progress in online payment processing solutions will slow down, as the World Payments Report 2018 by BNP Paribas assumes. This will mainly be caused by long-established technology infrastructures and habits. The market will be reliant on check payments, credit, and debit cards. Here, card payments constitute almost half of ecommerce transactions. Even though cash remains dominant at points of sale, its use is decreasing. Growing concerns over fraud and online payment convenience are why North American consumers avoid shopping online. However, Worldpay predicts a considerable increase in the use of mobile wallets:
Credit card 34%, eWallet 20%, debit card 19%,
charge and deferred debit card 13%, bank transfer 6%
Credit card 27%, eWallet 33%, debit card 19%,
charge and deferred debit card 11%, bank transfer 5%
Latin America has been enduring hard times. However, its economic conditions are slowly improving, giving hope that non-cash payment methods will thrive. In the ecommerce sector, installment purchases and POS cash payments prevail, while credit card accounts amount to 44.6%, according to the Worldpay research. Meanwhile, GSMA, a platform uniting more than 750 operators, has unveiled a mobile phone penetration rate across Latin America. That rate amounted to 67% (436 million subscribers) in 2017 and is projected to reach 74% by 2025 (517 million subscribers). That said, mobile wallets use is forecast to go up, from 15% in 2018 to 18% in 2022. Here are the important Worldpay findings:
Credit card 45%, eWallet 15%, debit card 10%,
bank transfer 9%, PostPay 8%, charge, and deferred debit card 7%
Credit card 29%, eWallet 18%, debit card 16%,
bank transfer 8%, PostPay 14%, charge and deferred debit card 7%
The EMEA ecommerce payment landscape is broken evenly into mobile wallets, credit, and debit cards, with cash and card payments dominating at a point of sale. Once PSD2 comes into full force, innovative non-cash payment processing solutions will win a bigger audience. Thus, Worldpay envisions that ewallets, debit cards, and bank transfers will predominate in this region with cash POS payments decreasing, from 47% in 2018 to 30% in 2022.
ewallet 21%, credit card 20%, debit card 20%, bank transfer 16%,
charge and deferred debit card 10%, cash on delivery 7%
ewallet 24%, credit card 14%, debit card 17%, bank transfer 20%,
charge and deferred debit card 10%, cash on delivery 7%
Asia Pacific is one of the most promising regions in terms of digital payments and innovative payment processing solutions. Its ecommerce industry shows exponential growth. Statista’s forecast says that e-retail sales totaled $877.6 billion in 2015 and are going to exceed $2.3 trillion by the end of 2019. Because of the tremendous increase in mobile use, the top Asia Pacific payment methods include ewallets, cards, and bank transfers. Here are the Worldpay stats:
ewallet 52%, credit card 17%, bank transfer 12%, debit card 5%
cash on delivery 4%, charge, and deferred debit card 4%
ewallet 66%, credit card 11%, bank transfer 11%, debit card 3%
cash on delivery 2%, charge, and deferred debit card 3%
Technology Renewal in Online Payment Solutions
The success behind online payment software solutions can also be explained by great technology advances. NFC, mPOS, and wearables have become game changers.
Wearable devices, from fitness bands to smart watches, that have in-built NFC chips allow consumers to make contactless POS payments quickly and conveniently. The Australian Westpac’s PayWear is a kind of a debit card diminished to a “SIM card-sized chip” connected to a consumer’s Westpac bank account. Being battery-free and waterproof, it can be used separately from a mobile phone or a debit card.
NFC technology has started to include Quick Response (QR) codes too. After being first released for the US smartphones in 2010, QR codes have made a big comeback. They are extensively used to show ads, product details or discounts and are supposed to enable contactless transactions. Thus, Japanese banks and financial institutions may come up with a unified QR-code system:
“The envisioned service will allow savings account holders to pay merchants by showing QR codes that will appear on their smartphones. Payment amounts will then be debited from the buyer’s bank account.”
retrieved from Nikkei Asian Review
South Korea has also announced its future release of a mobile wallet service similar to Alipay and WeChat Pay. It will help consumers buy from merchants via QR codes without third-party interactions. Amazon keeps up the pace and announces its intention to support CoDi, a Mexican government payment technology that allows purchasing through QR codes.
Another huge enhancement is a mobile point of sales. Square helped to pioneer the field by introducing its mPOS solution in 2009. These online payment processing solutions let merchants use portable computers to complete transactions or process payments with mobile phones.
Blockchain-powered digital identity software has also been growing more popular. Thanks to the distributed ledger system, blockchain is capable of verifying a data holder and preventing fraudulent data use. In 2018, Visa started working on its blockchain-based digital identity system to be applied in cross-border payments. It will use cryptographic identifiers to store banking details securely.
Use Experience in Online Payment Software Solutions
Undoubtedly, embracing advanced technologies does not guarantee user satisfaction with an online payment processing solution. It must cater to both merchants and customers.
For merchants, the primary choice criteria include:
- Accessibility across various geographies
- Compatibility with POS systems, desktop, and mobile devices
- Moderate fees without high transaction charges
- Customizable interfaces to match a merchant design
- Various integrations supported
- Detailed financial and analytical reporting
- High-security levels achieved through encryption
- Availability of multiple payment methods
- Interfaces localized into many languages
- Around the clock responsive help desk, etc.
For customers, everything revolves around ease of use, quick checkouts, the speed of transactions, and security. These factors directly impact sales and add-to-cart rates, leading to an average 69.89% cart abandonment if an online payment software solution fails to perform well.
Here is a neat checkout page design that was featured in the BigCommerce post as an excellent distraction-free sample:
Other deal breakers include the following:
- Lacking in supported payment methods
- Necessary registrations with no chance for a customer to shop as a guest
- No evidence proving an online payment processing solution is secure (a website should have an SSL/TLS certificate in place as well as Norton, Google TS, BBB, or other validation, and support secure transactions like Digital Secure Remote Payments (DSRP) suggested by Mastercard).
This is how trust badges are used:
Popular payment giants, such as Alipay, are one of the best role models for those who want to create their own payment processing system. In his article at www.techinasia.com, Matthias Hendrichs interpreted Alipay’s success this way:
“The user experience on Alipay’s mobile app is designed based on actual usage scenarios. For example, users can transfer money to other Alipay members and share or split bills among them using QR codes. Alipay can be used to pay utility bills, top up mobile phone credits, buy train tickets or check the balance of a connected bank account.”
Retrieved from this article
Given that there is a myriad of ready-made online payment systems available, are there any reasons for developing a custom solution? These are some of our major arguments.
Reasons to Build a Tailored Online Payment Solutions
Development of a tailored online payment solution does require more time and budget, but they are a seamlessly working solution with an abundance of payment processing functions (authorization, refunding, recurring, and other types of payments), a myriad of payment methods available, custom third-party integrations (with Stripe, Amazon Payments, WePay, etc.), custom applications to support POS terminals, secure payment and multi-currency processing tools, and more.
In the long run, one benefit of custom development is saving budget on payment gateway fees, custom integrations, and features, and smooth user experience backed up by in-house robust analytics and reporting.
At Innovecs, we have experience in:
- Validating business ideas and working out a workable product concept
- Mapping out an entire product delivery process
- Transparent hiring and reporting processes
- Developing full-scale online payment solutions enhanced with mobile wallets, multi-currency, and multi-lingual features
- Developing internal and external online payment solutions APIs