As 2016 gets underway, the payments industry will become more collaborative and harmonious, with further focus on device and product innovation, customer personalization, and creative brand communications. Fragmentation will keep the competitive wheels spinning. Everything mobile will lead the list of growth boosters, with new apps and wallet introductions a safe bet, though the customer usage rate for Apple Pay and other wallets will remain short of stellar. Security will address new authenticating payment processes and multi-layering, including progressive biometrics which feature greater customer convenience and simplicity such as voice and fingerprint recognition and eye scans. Tokenization will also play a larger role in establishing the framework for payment security, but further standardization will be necessary as utilization unfolds.
All in all, 2016 will be a year that supersedes prior developments and sets the pace for continual momentum. Here are 10 payment predictions:
#1 Mobile payments will continue to gradually expand in volume, scope and capacity. After years of lackluster activity, 2015 proved to be a defining year for mobile payments. 2016 is certain to continue the momentum driven by the gradual but steady acceptance of mobile payments, new heights in transaction volume, and inventive product offerings. With the introduction of Apple Pay, Samsung Pay, Android Pay, and now Walmart Pay, the race for market share will escalate as more issuers and merchants launch their own brand-specific payment applications and mobile wallets.
#2 Security solutions and privacy will be key to customer acceptance of payment innovations. Security solutions have the power to influence which payment method customers select and use. As EMV, biometrics, tokenization, and other emerging security features grow in importance, payment providers need to ensure that convenience is not lost during the transaction process. Watch for more Blockchain solutions to materialize as bitcoin transactions/wallet use spreads. Going forward, security requirements will include priorities for authentication and fraud deflection, though card-not-present transactions will remain a big concern.
- 43% of Millennials use mobile for online shopping
#3 EMV* conversion will shift into full gear this year as more merchants upgrade. The EMV conversion is well under way, however, even with the mandated liability shift, many merchants and some issuers have yet to make the transition. With credit cards being the top overall preferred payment method among consumers (42%), EMV-enabled technology is particularly attractive. The effects from EMV implementation will begin to surface this year, while new mobile wallet rollouts will prompt more businesses to adopt EMV and NFC.
#4 In-App ecosystem will alter competitive space for online and in-store purchases. Mobile shoppers are stacking up on their apps. Nearly one-third of consumers use their mobile device for online purchases – up from 18% in 2013. Among this group, 40% sign into the vendor's app, with Millennials and GenX shoppers leading the way. Not surprisingly, consumers age 35 and younger consider apps from their bank or issuer as important. In the coming year, we expect vendor app use to grow exponentially as mobile shopping picks up online and in-store. Look for more apps to gain back-end sophistication and front-end simplicity.
#5 Biometrics and tokenization will play progressively larger role with payments. Two game-changing security methods, biometrics and tokenization, will have a strong impact on the security of payments in 2016. Biometric technology is expanding rapidly in areas such as voice recognition, fingerprint/ pulse detection, and eye scanners. As tokenization protocols become more standardized, this technology is also likely to increase substantially. In the next several years, watch for most smartphones to come equipped with biometric sensors and for tokenization to play a progressively larger role in securing credit card payments.
#6 Omni-channel strategies will bridge online and offline shopping experiences. As payments continue to become a reality across a broader mix of channels, merchants and institutions need to set a clear and persuasive vision within their Omni-channel strategies. Consumers want the ability to make purchases on their own terms using the combination of channels which best fit their transaction or shopping journey. For the buying sequence, for example, this may mean having the potential to start the research process online and finalize the pick-up or payment in-store.
#7 Digital personalization will advance with better predictive analytics and proximity targeting. Digitalization has raised the stakes for delivering relevant, personalized content. With a growing number of consumers adopting an online or mobile payment approach, relationship and personalized marketing will be critical strategies. Across all channels, whether via online, mobile, in-store, social media, or other channel, watch for more companies to optimize predictive resources to support highly personalized contextual and visual content as well as mobile promotions with targeted distribution. Loyalty programs and rewards linked to mobile wallets will also increase in popularity.
#8 e-Branding will feature creative and more relevant content which inspires purchase interest. Consumers are paying greater attention to e-branding as more commerce moves online. As a result, e-branding is strongly influencing familiarity, reputation, and loyalty, particularly with social media. In fact, 11% of consumers express the likelihood to use social media buy buttons in the coming year. Purchase consideration will be swayed by relevant brand promotions, many of which will be proximity-based and delivered via mobile wallets. Videos utilizing social media will also emerge as a key marketing consideration in 2016, allowing e-branding to shine through with video, text, and audio, driven by consumers' seemingly limitless appetite for engaging content.
#9 P2P payments will be a trend to monitor as greater integration and more services pop up. Though not new, the usage of P2P payment services is still relatively low, but we expect this type of service to grow more rapidly over the coming year in volume and diversity as more providers enter the field (i.e., Apple). Online, non-mobile access is most common among users (80%), while P2P payment apps are gaining acceptance (38%). P2P services through big banks and non-bank providers like PayPal/Venmo, Facebook, Snapcash, Google, Square, and Popmoney are among the more prominent providers.
#10 Wearable technology will ignite some isolated sparks. The appeal for wearables such as Smart Watches has ignited sparks of interest among select consumer groups. Though the existing market is still relatively small, nearly 10% of Millennials say they will consider using a Smart Watch as a device for purchases, while 1% or less of Baby Boomers and the older generation have plans to do so. As wearable technology evolves, we are likely to very gradually see mobile payments become less reliant on smartphones.