Merchant Centre

The future of digital payments

It’s still early days when it comes to the ‘digital economy’ and yet I’m sure you agree that the rate of change is daunting. 

I must admit it’s exciting to be an innovator in e-commerce, an area that will continue to have transformative impacts on the way we live and work. 

From my comfy leather seat in Auckland, it’s easy to forget that from a global perspective e-commerce has a huge influence on how future economies develop, such as those in the third world. Online payment trends in various countries are so different, and it’s really intriguing to me to see how developing countries are early adopters in some of the most innovative emerging technologies. 

In India or many African nations for example, consumers are using mobile solutions when they don’t even have bank accounts, let alone a debit or credit card. 

United Nations report on ‘The Information Economy’ 

The United Nations recently released the ‘Information Economy Report 2017: Digitalization, Trade and Development’ (check it out here). 

A lot of it was fairly dry, I must admit, but it also made for essential reading from where I sit. Not just as a payments solution provider, but as a business professional. 

António Guterres (UN Secretary-General) says the report’s purpose is to provide insights and resources, ‘so the international community can reduce inequality, enable the benefits of digitalization to reach all people and ensure that no one is left behind by the evolving digital economy’. 

And most pertinent to me in my line of work - the report says that online, mobile and digital currency payment systems are set to overtake credit and debit cards as the most popular ways to pay in e-commerce worldwide by 2019. Compelling food for thought for the global finance industry as well as policy makers

Of course, these figures are heavily skewed by developing nations, which are not anywhere near as reliant on credit and debit solutions, like we are. But it’s still interesting to see that in line with other studies conducted mainly in the US (for example, this one), the reliance of credit and debit cards is predicted to slow down in the western world. 

What does this mean for your business? 

It’s a no-brainer that it's still essential to provide credit card payment options on your website, and it will be for some time to come (check out our blog on the ‘Top 8 Methods for Accepting Online Payments in New Zealand’). 

But as the need for credit/debit alternatives grow, and trust and awareness builds with solutions like POLi, and the growth of Digital Wallet options increases, you’ll need to keep abreast with what’s going on in the global payments sector to make sure you’re meeting customer expectations. 

Growth of the ‘Digital Wallet’ 

This is a term we throw about in the payments industry quite a bit, but it covers a lot of bases. It may be worth offering some clarity. 

The term ‘Digital Wallet’ is essentially just a device that allows you to make electronic transactions. It’s more commonly referring to the use of a smartphone to purchase something via an app, whilst you’re on the go. Also termed a “mobile wallet”. 

With a mobile wallet solution you can simply tap your phone to a digital payment-enabled terminal at participating merchants when you’re buying something. It uses what is called a Near-Field Communication (NFC) chip, (the same technology that lets you use contactless payments such as “Paywave”), that’s securely hooked up to a bank account or credit card. 

So at the petrol station for instance, you might simply tap your smartphone to a compatible checkout register to pay instantly at the counter. (How great would it be to be able to lean out your car window and do this at the pump?). 

It’s pretty compelling technology for consumers because its so darned fast. Plus it has the obvious benefit of putting an end to physical wallets. I carried out a very scientific ‘wallet audit’ for the purposes of this article, and was surprised at the stuff congregating within. Credit, debit, EFTPOS cards, gift cards, loyalty cards, receipts – not to mention photos and scribbles I can’t make sense of. Some mobile wallets in the US will track your gift and loyalty cards as well, so you don’t need to carry these around for months and forget about them like me. 

According to ANZ – merchant benefits of this technology are that your customers spend less time in queues; less chance of customers going elsewhere, and there’s reduced cash handling and reconciling. ‘The device remains in your customer's hands and the card number is not stored on the device or your systems – improving security and giving your customers reassurance’. I’m thinking of small businesses too, who will have a cost-effective and quicker way to collect payments on the go, without having to take the larger leap into using merchant credit facilities or issuing invoices. 

So why is it taking so long for Digital Wallets to take off in NZ? It seems to be taking a while for the banks and tech companies to work out what’s best for the future. One of the big questions has been whether banks partner with external providers (Samsung, Apple etc) or whether they build their own apps. 

Over the ditch, Commonwealth Bank, Westpac, and National Australia Bank have got together and recently announced they are launching their own payments app. ‘Beem’ enables users to make instant payments using their smartphone, and request payment from someone who owes them money and split bills. More features will be added soon. 

Yet ANZ Australia has chosen to partner with Apple Pay – and recently launched it at ANZ here as well. And Westpac NZ have partnered with Samsung Pay. 

It will be interesting to see how this all unfolds! 

What does this mean for your business?

The growth of mobile wallet use shouldn’t keep you up at night – but do keep an eye out, especially if you offer in-store payment solutions. 

Things will certainly change in the next few years if not sooner, thanks to the banks finally making some decisions. 

Right now in NZ, you have credit card and POLi facilities on your website you’re well covered. 

Oh – and just keep an eye on those Millennials - the largest customer base when it comes to online shopping. They are hyper-connected, well educated on e-commerce trends, arguably more trusting and savvy about online payment mechanisms, and they don’t own credit cards. And of course, they all have mobile phones. 

Change is inevitable. 

Mobile Commerce and what it means to your online business

E-retailers simply can’t afford to ignore the mobile world anymore. If you have a website and it's not fully functional (and that includes online payments) on a mobile device (smartphone, tablet or fablet) you have to question whether your website is truly effective as a business channel.

Whether your website is brand new shiny out of the box or has been around for a few years, you can’t afford to take your eye off the world in which New Zealand’s online consumers are living. We live in fast, connected, mobile-enabled world and if your website isn’t part of it, you’re going to lose out.

Life is getting faster and people’s shopping habits are following suit. People shop online between doing other things (when shopping used to actually be the ‘thing’ they were doing). Whether a spot of online shopping is squeezed in on the bus to work, on a tablet while watching Sky On Demand or on the sly in the office when the boss isn’t looking, one thing is for sure: businesses that can’t keep up with the pace are going to lose the race.

2 out of 3 Kiwis now have a smartphone

2.7 million New Zealanders now have access to a smartphone (and probably a tablet as well). Do you honestly think they aren’t using these devices to shop? Clearly they are and the fact that all the leading subscription-based ecommerce platforms (Magento, Prestashop et al) are making responsive websites the norm (more on this below), just goes to show that the big boys are taking this pretty seriously. 

But what about the smaller Kiwi e-retailers? How do they step up to the plate?

The options

Depending on your budget and appetite for change, there are two main options for online stores.

Mobile eCommerce

The simple explanation.

Mobile eCommerce sites are often smaller versions of their desktop counterparts with fewer products and slimmed down functionality (eg cross sell widgets don’t feature). ‘Smaller’ in this context means less - of everything: less functionality, fewer products, fewer options, fewer pages, no advertising etc. 

From an administrative point of view this could be a winner. You just need to create a mini version of your website (cheaper than a full rebuild) and there are less pages to curate. However, the flip side of the coin is that your customers might not get exposure to all of your products, offers and specials which isn’t necessarily all that great!

Mobile websites are certainly better than nothing. But what we are interested in is responsive websites. And for good reason.

Responsive eCommerce

Responsive eCommerce is the best option because you only have to build and manage one website (rather than two) and because it will function perfectly on all mobile devices. The shopping experience is also optimal and allows customers to flit between desktop, tablet and smartphones (which they will do during the shopping process). Who wants to find a product on a desktop, save it to their wish list only to return later on a mobile phone to discover the wish list option isn’t available?

Responsive eCommerce is faster, easier to administer, costs less to maintain and offers an far better shopping experience than mobile eCommerce. It really is a clear cut winner.
How will responsive eCommerce impact my online sales?

67% of online shoppers are much more likely to purchase from a shopping site that works well on a mobile device. I would be prepared to place bets that very few consumers would be happy to complete a transaction end to end on their mobile if they have to use the desktop version of the site. 

A working example of this is with Trademe. This is a monster of a website, crammed full of products, prices, promotions you name it. Yet, it works like a dream on a smartphone. Consider the lost sales if they didn’t invest in making a mobile version of their site? 

So, go responsive or go out of business

Whether your website is a bedroom business or an international superstore (or both!) don’t put off mobile eCommerce. More and more New Zealanders are shopping online on smartphones and tablets and if they find your site, what will they see?

The POLi team