The world of payments is constantly evolving, and the rise of fintech and the impact of COVID-19 have accelerated this change. In this blog post, Traderoot CEO, Jan Ludik, discusses the various payment types available to merchants and retailers.
In the era of digital transformation and disruption, the payments industry has grown exponentially. With the emergence of omnichannel payments, consumers now have access to a wide range of payment options to make their purchases. These payment methods range from traditional payment methods such as cash, checks, and credit cards to digital wallets, mobile payments, and contactless payments. Understanding the different payment methods available can help businesses ensure they can offer their customers the most convenient and secure payment options possible.
Traditional Payment Options
Traditional payment options such as cash, checks, and credit cards are still widely used, but there are now many other payment methods that are making their way into the market. One of the most significant changes has been the emergence of digital wallets, which have made it easier for consumers to make payments via their smartphones. Digital wallets can be used to store funds, make payments, and store loyalty and gift cards. However, consumers typically use digital wallets only occasionally, as they tend to be more costly and less convenient than other payment methods.
Cash is still widely used for small purchases, and it remains the most private payment method. The main advantage of cash is that it is a fast and inexpensive way to complete a purchase. The disadvantage of cash is that it is not widely available and has a high failure rate. Furthermore, cash is susceptible to fraud and theft, especially in public places.
Checks are still widely used by businesses, particularly to make larger payments or as a form of payment authorisation. They are typically slower than other payment methods. The main advantage of checks is that they are a reliable and safe way to transact business. The main disadvantage of checks is that they are quite slow compared with other payment methods.
Bank cards have made tremendous strides in the digital era, as nearly every consumer now has a credit card at their disposal. The main advantage of credit cards is that they allow consumers to make regular payments quickly. The main disadvantage of credit cards is that they can be expensive and are vulnerable to fraud.
Digital Payment Options
Since the emergence of digital wallets and mobile payments, consumers have had greater access to a wide range of payment options. Some of the most significant payment innovations have been the emergence of mobile wallets, the growth of digital payments, and the rise of e-commerce. As consumers have become more comfortable with these new payment methods, they have become more widespread.
“Digital wallets are growing in popularity,” says Ludik, “as they make it easier for consumers to make payments via smartphones.” One of the main advantages of digital wallets is that they are safer than cash or credit cards, as they typically involve the use of a mobile phone. Another advantage of digital wallets is that they are convenient and fast.
Mobile wallets are one of the most significant innovations in the era of omnichannel payments. They allow consumers to make payments using their smartphones or other mobile devices. Most major banks, credit card companies, and other financial institutions now offer their own versions of mobile wallets, which makes them easier for consumers to access and use. Mobile wallets typically work similarly to digital wallets. Consumers typically store their funds in their wallets, which allows them to make payments and store gift cards, loyalty programs, and other details. However, the main difference between digital and mobile wallets is that mobile wallets allow consumers to make payments with their smartphones. Mobile wallets are growing in popularity, as they have the potential to bring together all of a consumer’s payment information in one place. This can help to simplify shopping, reduce the amount of paper used, and make it easier to pay bills and manage finances.
Consumers have become increasingly comfortable with online shopping, and this trend has led to the rise of e-commerce. E-commerce has made it easier for consumers to make purchases across a wide range of products and services. Governments have also taken steps to make it easier for businesses to accept digital payments. With e-commerce, businesses and consumers can now make payments using a variety of payment methods. Consumers can typically pay online using a credit card or debit card, and they can also use PayPal, Apple Pay, or other payment methods. Some businesses also allow customers to make payments via mobile wallets
Mobile payments are on the rise, with consumers using their smartphones to make payments. According to a study by the World Bank, mobile payments have the potential to increase financial inclusion and reduce poverty, particularly in developing countries. In Kenya, for example, the mobile money service M-Pesa has more than 30 million users and has been credited with increasing financial inclusion and reducing poverty.
One of the most exciting advances in the payment space has been in the field of biometrics. This is especially crucial from a security perspective. Biometric payments are a type of mobile payment that uses biometric authentication, such as fingerprints or facial recognition, to verify the identity of the user and authorise a payment. To make a biometric payment, the user simply holds their device near a compatible payment terminal and provides biometric authentication, such as scanning their fingerprint or facial recognition. The payment information is then securely transmitted from the device to the payment processor for authorisation.
The use of biometric payments is growing rapidly, driven by the increasing availability of biometric authentication on mobile devices. According to a study by Goode Intelligence, it’s estimated that by 2023, over 2 billion consumers will be using biometric authentication for payments. Additionally, a survey by Mastercard found that over 70% of consumers would prefer to use biometrics instead of passwords or PINs to make payments.
Contactless Payment Options
Contactless payments allow consumers to make payments without the need to physically swipe or insert a card into a terminal or enter a PIN. Instead, the payment is completed using near-field communication (NFC) technology, Radio-Frequency Identification (RFID) or biometrics. According to a study by the UK Cards Association, contactless payments accounted for 45% of all card payments in the UK in 2020. The trend is similar in other countries as well, with contactless payments becoming more popular in Europe, North America, and Asia. The COVID-19 pandemic has accelerated the adoption of contactless payments as consumers and merchants sought to reduce the need for handling cash and touching shared surfaces.
QR codes are a type of barcode that can be scanned using a smartphone camera. They can be used to initiate payments, and they are becoming increasingly popular in countries like China, India, and Africa. QR codes can be used to make payments in a variety of settings, including retail stores, online, and peer-to-peer.
NFC stands for Near Field Communication, which is a technology that allows for short-range wireless communications between devices. NFC payments are a type of mobile payment made through an NFC-enabled device, such as a smartphone or a smartwatch.
“The use of NFC payments is growing rapidly, particularly with the rise of mobile wallets such as Apple Pay and Google Pay,” says Ludik. According to a study by the National Retail Federation, over half of all US consumers have used contactless payments at least once. Additionally, it’s estimated that by 2023, the global NFC market will reach over $30 billion in value.
Similar to NFC payments in how the technology is used, RFID stands for Radio-Frequency Identification, which is a technology that uses radio waves to communicate between a device (such as a payment card) and a reader. RFID payments are a type of mobile payment that uses an RFID-enabled device, such as a contactless payment card, to make payments.
The use of RFID payments has been growing rapidly in recent years, particularly with the rise of contactless payment cards. According to a study by the Nilson Report, contactless payments accounted for over $1 trillion in global transactions in 2019, and the trend is expected to continue to grow in the coming years.
The fact that most consumers now have access to a wide range of payment options means that it is important for businesses to have a strategy for managing these payments. This can help to ensure that businesses are able to protect customer data, make payments, and manage their spending.
Discover how Traderoot’s suite of Fintech payment solutions can enable merchants and retailers to cater for a wide range of payment types, enhancing customer sentiment and maximising revenues. Learn more about our Payment Services Provider – Channel, Payment Services Provider – Acquirer, Payment System Operator and Mobile Pay Solution Products on our website or by emailing firstname.lastname@example.org, and let’s start perfecting commerce.