Payments has always been a source of innovation. The Lydians, who lived in what is now western Turkey, introduced coins as a token to represent value and replace bartering in the seventh century BC – now a digital token represents your card in a mobile wallet. Removing complexity for the end user lies at the core of the future of payments. When you send money home to a relative you need to have confidence it will arrive, and for a retailer the ease of a payment transaction cements a sale.
More than 50 countries have – or are building – faster payments networks, finally enabling payments to move at the speed of business. Person-to-person payment services such as Australia’s Osko or Sweden’s Swish piggyback on these networks. Regulators drive change too, such as India’s Unified Payments Infrastructure, and the subsequent withdrawal of large-denomination banknotes. This enabled digital wallets such as Paytm to fill the gap, helping millions of Indians to access digital commerce without cards or bank accounts.
Mobile often sits at the heart of payment innovation, ushering in a new age of digital empowerment. Kenya’s mPesa, an SMS-based money transfer service, began in 2007, and now half of the country’s GDP flows through it. Chinese citizens went straight to mass mobile enablement, using digital wallets such as Alipay as lifestyle platforms and gateways to financial services, all built around the need to move money and transfer value. Mobiles take payments too: Square and iZettle turned smartphones into mobile points of sale, allowing small businesses to accept cards for the first time.
Few actually want a better payment experience – what people are really after is a better shopping experience. Forrester sees payments as the “invisible valuable”, rapidly becoming the anchor for better experiences and rising higher in the value chain. Payment providers such as Stripe hide complexity behind an API, democratising payments by allowing developers to seamlessly integrate payments into their online and mobile marketplaces. FrogPro is WeChat’s facial recognition payment system – you are the authentication via a glance at a screen. The experience was not right first time however. Chinese consumers did not like seeing an image of themselves on the screen, so now algorithms virtually enhance the shopper’s reflection. Amazon Go, meanwhile, enables payments to be invisible, with no intervention required as you shop.
A great experience is at the heart of the future of payments – and payments themselves will be less visible in that future. Jaguar Land Rover’s experimental in-car system combines several technologies in a way that points to this future. Drivers can report things such as damaged road signs or traffic congestion, earning micro-payments, that they can then use for car parking. The difference is that the car does this automatically, almost completely by itself. The car is a connected device, a smart wallet, and a distributed ledger, capable of earning, storing and spending money.
The future is one of autonomous and embedded payments. Less likely to be visible, they will nonetheless be an important anchor of value-enhancing customer experiences, embedded in connected devices that transact according to rules set in place by their owners. And as for the death of cash? Well, we will not see it anytime soon – payment innovations are mostly additive and take a long time to break entrenched customer habits. After all, we have been working to replace coins since the seventh century BC.
Learn more about Forrester’s research on financial services here.
By Jacob Morgan, Forrester Senior Analyst