Traditional payment methods and the way consumers spend money is constantly changing and the wave of alternative payment solutions in 2015 has demonstrated that this trend is simply not slowing down. Alternative forms of payment such as contactless and mobile payment solutions, have taken off and are now considered mainstream, so in this article we’ll aim to give you the information you need to know as a retailer to get on board with alternative payment solutions.
Contactless Card Payments
After an initial slow start, contactless payment technology really took off in 2014, with mass adoption across the UK. Total contactless spending in 2014 was recorded at £2.32 billion, which represented a 255% increase from the previous year’s figure, and the first half of 2015 alone showed more than £2.5bn in contactless payments showing dramatic growth levels. This time last year, there were 58 million contactless cards in circulation, and it’s expected that 2015 will have continued to see an increase.
What’s Driving this Rapid Growth?
Rapid growth and uptake are mostly driven by the ease of use and convenience of contactless payment methods. Transactions are quicker, easier, more convenient and less stressful than with more traditional card or cash payment methods. The customer doesn’t need to try to remember their PIN, they simply hold their card or mobile phone up to the machine and wait for the beep. This makes transactions much smoother, reducing hassle, waiting times and the stress associated with trying to remember a PIN.
Why Should Retailers Care?
Aside from the fact that transactions will be made at a much quicker rate, reducing waiting times for customers, and creating a better customer experience, research suggests that consumer spending actually has the potential to increase with the uptake of contactless payment methods.
The fact that no PIN is required, and therefore the transaction is much easier, makes consumers more willing to part with their money. Recent data from Mastercard revealed a 30% increase in total spend 12 months after contactless payment was adopted. From a psychological point of view, consumers tend to be less frugal the easier the transaction. If paying in cash, consumers are much more conscientious of where their money is going, whereas a card payment, and particularly a contactless card payment, makes it much easier to part with money without dwelling on the amount.
The Rise of Mobile Payments
If 2015 has taught us anything is that card and cash payments are no longer the only options, as mobile payment uptake has already taken off. Mobile wallets and other forms of NFC capabilities had very limited penetration in 2014, but fast forward a year and we’re already seeing dramatic changes.
July 2015 saw the launch of Apple Pay in the UK, which recently increased transaction limits from £20 to £30 due to consumer demand. Media coverage tells us that adoption rates have been relatively low, however it’s important to take into account that not all banks have launched contactless services yet, so we can expect to see these numbers increase in the year ahead as more developments in mobile payments arise.
Apart from Apple Pay, we’re also seeing the growth of new innovative banks like the digital-only Atom Bank, which recently received a £45 million investment from BBVA taking its total funding to £135 million. ‘Digital wallet’ services have also emerged, introducing social media into the picture, allowing users to make payments to their network of friends and followers. Venmo, for example, allows sharing expenses between friends, including restaurant bills, taxi fares and even rental payment.
What we can expect over the next year is that innovative payment technology will shake the business world and therefore it is now the perfect time for retailers of all sizes to adopt this technology and reap the benefits.