A generation ago, a consumer would visit Main Street to fulfill all of one’s shopping needs and undoubtedly pay in cash. A lot has changed since then. The arrival of personal computers in homes and the launch of companies, such as Amazon.com, Alibaba Group and eBay, in the 1990s acquainted consumers to the new concept of shopping online. The popularization of smartphones within the last decade then introduced consumers to anytime, anywhere commerce.
Technology has reinvented commerce. It changed what consumers expect to experience in physical retail and foodservice outlets. It opened the door to new ways of engaging with brands across the path to purchase. It altered the role the payments industry plays in the transaction. Stemming from this week’s Money20/20 event, the below takes a deep dive into three of the most impactful technology-driven trends reshaping payments.
New payment forms emerging
Digital commerce is no longer restricted to computers or smartphones. There are now a plethora of things, including connected devices, appliances, devices, clothing, fashion accessories and sensors, all with the potential to disrupt commerce and usher in new payment form factors. Consumers also are shifting from type to voice interfaces with personal assistants powered by the established smartphone and emerging wireless speaker categories driving this uptake. Euromonitor International estimates that nearly 81 million wireless speakers, such as Amazon Echo, will be sold globally in 2017, with that category expected to expand 84% from 2017 to 2021.
As a result, payments are becoming more of a commodity in the commerce experience. Consumers expect frictionless checkout experiences combined with the same level of security across all devices as exists today with other more established payment forms. “Today’s consumers are smarter and have higher expectations than ever before,” said Kiki Del Valle, Mastercard’s senior vice-president of commerce for every device. In an effort to promote security in this digital era, Mastercard unveiled a suite of APIs for card issuers that will provide consumers with a single view of where their cards are stored across all digital devices. Consumers are able to more easily control how, when and where their cards are used when accessing their card issuer’s mobile banking app. Consumers also can remotely deactivate cards or set spending controls at the device level. “We are providing the consumers with the tools they need in the Internet of things era,” Del Valle explained.
Artificial intelligence’s big day
While companies have been collecting petabytes of data for years, the reality is that most struggle to make sense of it all. At its lowest common denominator, artificial intelligence (AI), allows brands to better synthesize data and incorporate those learnings to improve the commerce experience. AI, which refers to technologies capable of performing tasks normally requiring human intelligence, goes back centuries. While AI technologies were commercially available by the 1980s, it was not until the turn of this century that the emerging machine intelligence trend truly took off. Now the confluence of three powerful drivers, including exponential data growth, more sophisticated distribution networks and smarter algorithms, have propelled artificial intelligence to the center stage.
Artificial intelligence is likely to transform many industries in the next decade, including payments. Dr. Matt Wood, the director of deep learning for Amazon Web Services, spoke at Money20/20 about how Amazon and its AWS clients use artificial intelligence to help inform decisions from fulfillment and logistics to personalization to fraud prevention. Capital One, for example, deployed chatbots to allow consumers to conduct basic account inquiries, including the status of balances and transfers between accounts. Liberty Mutual offers similar functionality with the addition of fraud risk prevention. Expedia incorporates machine learning, which continues to take in new information to become smarter over time, to display more aesthetically pleasing user photos alongside its consumer reviews. Logistics company Instacart uses machine learning to memorize grocery store layouts in order to provide its delivery personal with the most efficient routes to complete order assembly. “Machine leaning is becoming the future of growth,” Wood explained. “The more that companies invest in machine learning, the more they grow.”
Chinese wallets moving west
Within the last decade, smartphones emerged as a must-have device for consumers globally. The first mobile-centric nation was China. For the first time in 2015, Chinese consumers made more purchases through mobile phones than computers. As of 2016, two-thirds of digital purchases were mobile based, according to the latest data from Euromonitor International. Players like Alipay and WeChat, which offer Chinese consumers a lifestyle-driven app with commerce capabilities, are powering many of these transactions in China and now increasingly abroad. These Chinese wallets are moving west as the spending power of its residents grow and the government improves international cooperation allowing consumers to travel to more nations. Chinese residents are expected to take 225 million international trips in 2030, growing at 7.3% compound annual growth rate over 2016-2030, according to Euromonitor International.
Alipay, which has an estimated 520 million active users, now supports payments in 27 currencies across 30 countries. “It allows Chinese consumers to spend with the method they are familiar with,” explained Souheil Badran, president of Alipay North America. In particular, Alipay has partnered with a number of payment providers, including First Data, Verifone, Payworks and Stripe to expand acceptance outside of China. This week Verifone and Alipay announced it was extending its existing partnership to allow taxi payments for Chinese travelers in North America. Such partnerships are important as these digitally connected travelers grow in number and venture farther. Euromonitor International forecasts that Chinese residents’ outbound tourism expenditure will be one of the fastest growing globally, with a 7.4% CAGR over 2016-2030 -- a figure that is expected to outpace China’s overall consumer expenditure growth of 5.7% CAGR.