Nowadays there are quite a lot of ways to pay someone from traditional MasterCard to Bitcoins and many more. In our time of smart home devices and artificial intelligence, you can even confirm the transaction with selfie due to MasterCard facial-scanning technology. These innovations will join approximately 200 different types of electronic-payment methods that are currently available.
The global payments in future will look very unlike it does today. Major factors influencing these changes will be shifts in global trade flows, the impact of technology, changing global demographics, changing customer expectations and the growing impact of regulation and currency markets. The market is already changing due to both traditional and new types of payment providers.
Variety of payment systems and boom of technologies are creating a crowded financial surrounding. With such range of options, it can be tough for any global business to choose the right method of payments. It’s more complicated for software-as-a-service and various subscription businesses that have to deal with more complicated payment processes comparing to one-time-sale, traditional models.
To begin with, the central criteria to assess global payment methods are recurring vs one-time payments and push vs pull. Push means that your client has to actively send you the money. The majority of payment methods are push-payments, and these are usually one-time payments. Only a few customers are ready to send payments on a monthly basis. As for pull-payment methods they suit better for subscription businesses, as they allow the merchant to withdraw the money themselves. Of course, everything happens only before the previous agreement. Let’s together take a look at top pull-payment methods:
This is another popular recurring pull-payment method. The clients give you their bank account information, and you can pull money through a safe network connection and secure email service. The main benefits of bank transfers are the popularity of around the world and low fees.
The major difficulties with bank transfers come from many different flavours, and ways of payments processing in different countries. So, as a merchant, you will have to manage which countries and types you’ll support very carefully if you want to stick to this method.
Today credit cards are the most popular global payment methods. Especially in e-commerce, credit cards are at the top. Such way is excellent for recurring payments as they are guaranteed up front, removing settlement issues. Besides, once a client agrees to pay with credit card, you can keep pulling from that card on a recurring basis without any problems.
But you also should be aware that there are a couple of downsides such as fees, charge-backs and fraud. But relatively these are minor due to customers’ convenience and all the benefits listed above.
The third primary global payment method is an electronic wallet or e-wallet. It is a third-party payment method funded by a range of means. There’s always another payment method behind it (such as a bank transfer or a credit card). But the e-wallet company handles all the security, complexity and process of the payment transaction. For example, PayPal is by far the most used today. It is basically in every country and has an established track record. Other growing contenders include Apple Pay, Amazon Payments and Google Wallet, which are all adding recurring payments support and expanding their reach as well.
Influence of social media and technology to global payments
Large social media and technology companies such as Google, Amazon, and Facebook are seeking entry into the payments market. Simultaneously, new electronic currencies such as Bitcoin offer payment systems that are independent of government control. These companies are posing a significant threat, if they can leverage, even monetize, their substantial customer reach by presenting straightforward and safe payment propositions together with their other non-payment offerings, they could win over banks, mainly in growing segments of the international payments business.
Banks also face growing competition from network and clearing solution providers. Their business models are changing the way multi-currency capabilities are delivered and are reshaping global markets.Some banks are already noticing and responding to all of these challenges. They are looking for innovative strategic alliances and adaptation to the evolving expectations of exporters and importers. Also, banks are trying to develop new propositions that have creating value around global remittance solutions.
What should we aspect?
As more and more people start using some type of subscriptions for products or services, we will see most spending happen with usual vendors on a recurring basis. This means:
- Pull-payment, recurring methods will continue to increase market share.
- Consistent, simpler user experiences will win over regional and fragmented methods.
- Major e-wallets will gain ground, but credit cards will continue to remain very popular.
- Bank transfers will continue to be widely used certain regions, but international standards around guarantees and authentication will need to change.
- In the long term, we will likely see an e-wallet payment boom, just like Alipay has in China. The flexibility for customers and the simplicity for merchants seems to unite the best of both worlds. The key will be to figure out the security aspects and fees, so there is a confidence in the market to use it.
Businesses must be proactive, perceptive and consider brand development if they want to survive in the face of these fundamental market transformations. Of course, those changes will differ according to markets, regions, and client segments, but one thing is clear – going forward. Successful payments providers, whether emerging or traditional, should:
- take a strategic view of payments, to develop and offer value-added products and solutions,
- update their technology to meet customer expectations,
- identify lines of business and markets where payments are a prominent aspect,
- explore non-traditional partnership and alliances models, to access new client bases,
- target traditionally poorly served and high-growth customer segments such as small- and medium-sized.
Remember that the successful businesses will be those taking action today. So, do not waste your time and help your company grow today!