The recent increase in consumer adoption of digital payments is an important hurdle cleared towards further payments innovation, yes. But the floodgates are yet to open. Barring more unprecedented external forces, most consumers will not suddenly adopt new payments experiences, especially if their primary added value is novelty alone. However, many consumers and merchants alike have graduated to a new level of digital payments maturity.
What we’ve collectively experienced – in the changing of our payments habits this past year especially, but also in years prior – is that payments are the invisible invaluable. Invisible because the best payment experiences are quick, painless and, increasingly, barely perceptible. Invaluable because merchants depend on payments, to, well, make money, and also because it is one of the most emotionally potent moments of the customer experience (most evidently when something goes wrong).
Let’s look at a few of the coolest experiences in payments today and explore what they may show us about what’s possible tomorrow.
The present: merchants are getting creative with payments and currency in campaigns to drive sales and improve other experiences. When IKEA Dubai launched a new store – on the outskirts of a city as they often are – it ran a “Pay With Your Time” campaign to drive traffic to the store. The customer would share the time it took them to get to the store in their Google Maps app, then IKEA would use the average salary of a Dubaian citizen to calculate the value of their travel time and discount their purchase by that amount. Or take Dominos, whose finance and payroll system is now partnering with challenger bank Branch to enable instant payouts for employees’ and drivers’ wages and tips in addition to offering other financial services.
The future: the emotional potency of payments and payments-like experiences become the battleground for competitive differentiation. Merchants will use APIs, automation, virtual currencies, digital issuing and real-time payments to inject payments and payments-like experiences into more customer journeys and to improve more of their internal processes. (Employee experience is the new frontier of customer experience improvement after all.) Expect more partnerships with big tech and fintechs to deliver on these more creative and payments-immersive experiences.
The present: more payments players and fintech firms are stepping up to support customers and merchants in unique scenarios. Take Apple Cash Family and Splitwise, which both, in their own ways, support shared finances among connected consumers and whose capabilities align to the complicated realities of our financial lives (caring for children or parents, shared custody agreements or roommates, for example). Or take PayPal Extend, which supports the secure portability of consumer PayPal data across PayPal merchants to support more seamless payments across its merchant ecosystems.
The future: payments innovations will converge with distributed digital identity management and distributed ledger technology to support authentication, value accrual and redemption within multi-merchant and partner ecosystems. For merchants, this will enable, for example, loyalty programmes to break out from the walled gardens in which they exist and let consumers organise and orchestrate rewards across an open portfolio of programmes.
Some merchants still treat the payments experience as perfunctory: a necessary but unremarkable threshold. They see the payments team and technology as a cost centre. This modus operandi will go the way of the dodo. The companies laying the foundation today for payments as invisible and invaluable will likely stick around long enough to see the future we see in the extraordinary payments experiences of today.
Get more insights into Forrester’s Predictions for 2021 here
by Lily Varon, senior analyst, Forrester