The worldwide economy has become increasingly interconnected and the demand for a frictionless, efficient, and global outbound payment solution has grown substantially. The point of sale and retail industries have been shaken up in recent years with the rise of new payment technologies. From mobile wallets to on-demand apps, and consumer demand for a more personalized and interactive shopping experience, merchants big and small are facing a new wave of expectations from customers.To stay ahead of the rapid changes in payment technology, merchants need to understand the factors is driving these changes.
The amount of cash in circulation in India is estimated at around 18% of the country’s gross domestic product (GDP), making India one of the most cash-dependent countries in the world. A report by Axis Capital Ltd, NPCI: Driving digital payment revolution, said that the externalities brought about by cash dominance pose significant concerns, such as the presence of large unorganised sectors, black money, persistent exclusion of millions from formal financial services, loss of revenue on account of evasion of taxes and poor transmission of monetary policy measures taken by the Reserve Bank of India.
The National Payments Corp. of India (NPCI) aims to create an infrastructure which rests on the principle of large-scale and high volumes resulting in payment services at a fraction of the present cost structure. The industry is at an inflexion point led by fast-changing consumer behaviour, government and regulatory initiatives, ever-increasing entrepreneurial activity and strong investor appetite. This synergy is unleashing a lot of innovation and would transform the financial services and payment sector in India.
Additionally, at one-fourth the U.S. population, millennials outnumber Baby Boomers and are three times the size of Generation X. Having grown up in the days of instant gratification (e.g. Netflix), the millennial generation wants everything to be ready when they are. This crosses over into their interactions with a retailer or restaurant, which they expect to be as easy as a swipe, click, or voice command.
As each year brings new technological advances, the POS and retail industries will continue to experience the impact of innovations in payment technology. In 2017, the following trends will transform how businesses approach payment processing:
Boosting mobile payments: In 2017, consumers will continue to convert to the mobile wallet. Realizing its ability to create a fast and seamless experience, consumers will opt to replace their credit cards for mobile wallets and NFC technology. With all the major players in the mobile device industry having delivered their own version of the mobile wallet (e.g. Apple Pay, Android Pay, Samsung Pay), and Apple Pay reporting a growth of one million new users per week, this technology will continue to make strides in the coming year.
On-demand takes over: The days of waiting for an order to arrive will fade away in 2017. The new year will see a new level of demand take over the POS and retail industries as consumers increasingly expect a faster turnaround on the delivery or fulfilment of their purchases. This new “on-demand” economy is already taking shape among major retailers and will continue to grow as small business merchants see its potential and add technology to meet its requirements. A current scenario would be a consumer using a smartphone to make an “order ahead” purchase online and enabling location tracking that will notify a store when they’ve arrived for pickup, thereby providing the consumer an on-demand experience without any hassle or a wait time. In 2017, the improvements to mobile wallet and related technology will drive the on-demand economy.
Bluetooth Will Boom: Consumers will become more proficient using Bluetooth in the coming year as millions of iPhone users adjust to not having a headphone jack as per Apple’s campaign to go all wireless. This movement also paves the way for more experiences with payment technology through Bluetooth. As consumers increasingly use Bluetooth, they will become more adept using this technology in a mobile payments setting.
Digital Assistants: The rise of the digital assistant in 2017 will have a significant impact on the POS and retail industries. Using data from Google, today’s personal assistant can provide a whole new level of interaction between consumers and their mobile devices. In 2017, digital assistants will interact with users on a more personal level, connecting all the data, and providing them with helpful information based on online habits and behaviors. Small business retailers and restaurants can take advantage of this technology in 2017 by offering incentives and loyalty programs based on customer preferences.
The sharing economy: In 2017, the sharing economy will continue to find its way into our everyday lives. As consumers increasingly demand fast and easy ways to share services, the POS and retail industries will see new players enter the on-demand app market in the form of supporters, entrepreneurs and contributors. It seems every day there’s a new app to grab a cup of coffee, a place to spend the night, or catch a ride. This proliferation of on-demand apps will continue to facilitate the sharing economy in the coming year.
Beefing up retail: Consumers will push for a more personalized shopping experience in 2017. With the consumer in the driver’s seat, retailers, big and small, will be forced to adapt and rethink their approach to attracting customers. They will need to think outside the box and consider using interactive screens, pop-up shops, recreation and virtual reality that combines a visual and sensory experience for customers. By embracing these types of changes and incorporating them in the coming year, small business merchants will be able to provide an elevated experience that keeps customers coming back.
New sub-segments: Referring to Ken Research, India’s payment market is expected to reach Rs.817.3 crore by 2019. The payment industry is composed of various segments—mobile wallet, mobile banking, mobile point of sale (MPOS), bill payments and online payment gateway—with each segment comprising a number of entities. Telecom operators have a larger reach and distribution to the bottom of the pyramid. This presents a good opportunity for telecom companies and payment system operators.
Government initiatives: The JAM Trinity – Jan Dhan, Aadhaar and mobile – holds the key to one of the biggest reforms aimed at transforming India. To accelerate financial inclusion in India, the JAM Trinity works across different sectors and will be the backbone for this government initiative. It will provide a boost both to traditional banks and telecom companies as well as new entrants such as payments banks and fin-tech start-ups. Large-scale enrolments under the Jan Dhan Yojana and Pradhan Mantri Suraksha Bima Yojana have been an enabler.
By licensing telecom companies, non-banking finance companies, business correspondents, prepaid payment issuers and micro-finance companies to become banks, India has joined the small list of countries putting in place a proactive framework.
Structural growth drivers: Smartphone penetration, increasing awareness about digital payments, preference for hassle-free transactions and secured payment solutions are driving growth for digital payments. The payment industry in India is expected to witness multifold growth in the next few years, helped by the new entrants int the banking and payments space. Technology is driving innovations in the payment space with mobile money, e-wallets and payment aggregators. Proliferation of e-commerce has also helped in bringing people online. Payments have grown to include loyalty cards and prepaid instruments which further widen the scope of payments and their role today.
With 2017 fast approaching, the POS and retail industries must continue to adapt to the constant changes in payment technologies. By updating their POS systems, preparing for future trends, and implementing the suggestions as outlined above, these merchants will begin to streamline processes and deliver an improved experience for customers.