purchases each year and they aren’t just seeking payments technology -- they’re demanding it. Unlike their parents, 63% of millennials do not have a credit card and 73% are more excited about financial services from companies like Amazon and Paypal than from nationwide banks. Twice as many millennials are more likely to use a mobile wallet in the next 12 months than those 35 years or older, with 26% aiming to use digital currencies in the near future. Millennials’ eyes are on the digital prize; to attract this coveted demographic, payments providers and third-party companies alike will have to devise new ways to engage Gen Y come the new year, with an emphasis on contactless payments and mobile wallets. Come the new year, payments providers will seek alternative ways to move money. The payments industry is in the midst of transformation and millennials are leading the charge, accounting for 55% of all mobile payments. Millennials use financial technology differently than older generations, often opting for socialintegrated applications like Venmo and Facebook Messenger. With Gen Y flocking to social media, it makes sense that payments solutions with a social integrations would experience steady adoption, especially since millennials prefer not to make cash transactions. These utilities allow millennials to digitally transfer funds while simultaneously engaging with friends within popular social networks like Facebook and Snapchat. WILL EMV DRIVE NFC ADOPTION? Apple recently jumped on the bandwagon, entering a discussion with U.S. banks about peer-to-peer solutions. With Venmo accounting for 19% of p2p payments and gaining popularity among millennials, Apple’s interest comes as no surprise. Given their decision to work directly with banks, Apple is encouraging more rapid mainstream adoption of payments technology. This bold move will likely inspire other key players to further innovate their own solution. An early adopter of NFC technology, Apple’s peer-to-peer solution would likely
dovetail with existing, complementary payments technologies, like Apple Pay, resulting in a single, seamless mobile payments solution. The issue for NFC providers like Apple and Google has been not only merchant acceptance, but user adoption. The rise of EMV is teaching consumers to transact in a new way. In addition to exchanging swiping for dipping, EMV technology provides shoppers with an extra level of security, allowing them to shop with ease. After a tumultuous year of data breaches, it’s essential that both merchants and consumers alike realize the value of encryption. However, EMV transactions may sometimes prove cumbersome, creating experiences that are slow, confusing, or prohibitive in high transaction environments. Such obstacles may lead users to direct their attention towards NFC, in favor of more seamless experiences. By the end of 2016, NFC adoption will likely see significant traction. BITCOIN Over the last few years, there’s been a lot of buzz over the rise of cryptocurrency and whether it will see increased adoption. Since its inception in 2009, bitcoin has been a viable contender, but conversion has been an uphill battle. Last year, Goldman Sachs reported that while 22% of US millennials had used bitcoin in the past (and intended to do so again), 51% had never used the technology, nor did they have plans to do so. According to data from Accenture, affluent consumers are most likely to embrace bitcoin transactions, with 32% expecting to use them by 2020. While it’s unlikely 2016 will spur mass adoption, the industry is continuing to move forward. This past November, Coinbase issued a mainstream debit card to encourage bitcoin spending. Approved in 25 states, the card aims to increase every day transactions and attract new customers to the digital realm. In the next 12 months, bitcoin and other cryptocurrencies will continue to make headlines and, slowly, educate consumers about emerging forms of payments.
BEACON TECHNOLOGY In the last few years, marketers have seen the tangible value of personalization and have worked to implement unique customer experiences into the purchase cycle. Beacon technology, in particular, has played a significant role, helping retailers increase sales and create compelling offers in-store. Approximately 71% cite the ability to track and understand browsing and buying patterns as a key advantage. Another 65% has seen success targeting customers to specific aisles, while 59% note customers were more engaged instore. But while beacons are a frequent presence among big box retailers and established brands, set to fuel $44.4 billion in-store retail sales in 2016, they’re not yet on the radar for many small business owners. According to eMarketer, 35% of small-to-mid-size merchants plan on investing in data-supported marketing by the end of 2016, with 34% looking to implement beacon. When examining the payments space, such growth trajectory makes sense. 2015 was a big year for technology, bombarding merchants with changing EMV liabilities and the expansion of Apple Pay. In all likelihood, the majority of business owners will be familiarizing with these technologies before looking towards beacon adoption, but as we tread closer to 2017, implementation may begin to rise. By keeping 2015’s most significant innovations in mind, small business owners can best prepare for the exciting advancements 2016 will bring. Looking towards the past helps inform the direction of the future, allowing merchants to make investments that make the most sense for their companies. By adopting emerging technologies and reading up on trends to come, independent merchants can ensure the new year will be a bright one.
Payment Quarterly | Q1 2016
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