Payment Processing Trends Businesses Need to Know
Scott Cruickshank discusses customer expectations, digital payments and fintech.
Payment processing is an evolving industry. Both web-based businesses and brick-and-mortar storefronts have their work cut out for them. Keep up with current trends or lose relevance — and revenue.
The primary driver for change in the fintech industry is simple but profound: customer expectations.
Not long ago, cash-only businesses were still surprisingly common, especially in the case of mobile operations. But cash is no longer king. Already, most customers expect to be able to pay with a credit card, too. And the focus is shifting to include additional digital options.
From electronic wallets to artificial intelligence, let's take a look at five of the biggest trends changing the landscape of payment processing.
1. INCREASED PAYMENT OPTIONS
First, let's be clear about one thing. Cash may not reign any more, but it isn't going away, either. Neither are credit cards. Digital payment options are on the rise in some big ways. Eighty-one percent of Americans own a smartphone. That means four out of five potential customers have the option to pay without cash or a physical card if that's their preference.
We're not there yet, but the day is coming when customers will grow increasingly selective. If you don't offer the most popular payment options, you'll be left behind. And the best way to outpace your competition is simple. Maintain a variety of payment methods. Unfortunately, small businesses aren't always at the cutting edge of new technology.
That makes sense. Small business owners have smaller budgets and tighter overhead than their enterprise equivalents. But modern point of sale systems make it possible for businesses of all sizes to be flexible and current. In fact, the best POS systems even come with some compelling perks, like inventory management, time clock tracking and advanced analytics.
2. PAINLESS PAYMENT PROCESSING Now more than ever, customers expect a simple, seamless buying experience. Within the industry, this is referred to as a “frictionless experience.” The less hassle, the better.
Here's why a frictionless experience matters. Chances are your customers can buy what you sell from others. The things that distinguish your company aren't really tied to your products and services. Rather, it's the customer experience that sets you apart.
When you facilitate frictionless transactions, the act of paying the bill becomes a powerful way to add value.
Just offering a variety of payment options will lower friction. And if your POS can handle other sophisticated options, like gift cards and a customer loyalty program, so much the better.
The key here is to partner with a proactive, engaged payment processor. Eliminate technology roadblocks that may affect your customers and make the experience as pleasant as possible.
3. ARTIFICIAL INTELLIGENCE AND MACHINE LEARNING
Eleven billion dollars. That's how much financial services companies are projected to spend on artificial intelligence in 2020.
AI has the potential to be a gamechanger. It could easily benefit both small businesses and their customers. AI and machine learning technologies are particularly valuable as antifraud tools. Newer, advanced software will be able to link sales and account data in real-time to stop cybercriminals dead in their tracks.
Technology should improve security, so these kinds of changes are both expected and critical.
What's more, AI and machine learning enable higher levels of personal touch, strategic analysis and even automation. And with the right POS system, you don't have to be tech-savvy to configure and manage these sophisticated tools.
The result? Better payment processing across the board, from cybersecurity to customer follow-up.
4. ENHANCED SECURITY MEASURES Cybersecurity is an important element of payment processing. Important enough that it's worth exploring more fully. While small businesses offer a level of trust and personal engagement that big businesses can't match, they sometimes struggle with security. Once again, historically this has to do with limited resources.
However, today's cloud-based business solutions, including cloud-based POS systems, make it possible to keep small business data as safe as any enterpriselevel server.
Because fintech continues to evolve, security will be an ongoing issue. This is not a one-and-done affair. Rather, changes in the way consumers spend their money will continue to mandate additional security measures.
For example, within the last few years, EMV chips have become the new security standard in credit cardpurchases. EMV technology makes credit card purchases much more secure, which limits liability for both the payment processor and the merchant.
But EMV chips also help your bottom line. That's because EMV payments typically process with lower transaction fees. (Be sure to check with your payment processor. Not all payment processors work as hard to partner with their clients and lower transaction fees when they can.)
And EMV chips are just one example of the new class of cybersecurity tools available. In the coming year, expect even more ways to protect your business.
5. PEER-TO-PEER PAYMENTS Peer-to-peer payment systems have been gaining momentum over the course of the last few years. As more people become familiar with popular options like Zelle and Venmo, you can expect more merchants to allow for payment via these apps.
To date, the most common use of peerto-peer payments tends to be exactly what it sounds like — one person (or “peer”) sending money to another person via an app on their smartphone. Convenience is a big part of the appeal. Now you can split a check at a restaurant, for example, without having to have cash-on-hand or visit an ATM.
Industry leaders anticipate that as customers become more accustom to the convenience of peer-to-peer payments, those same customers will want to be able to pay businesses the same way they transfer money to friends.
There were 82.5 million mobile phone peer-to-peer payment users in the U.S. as of the end of 2018. And that number is likely to grow.
All businesses, big and small, are in the process of finding ways to incorporate this technology, there's not a clear best practice yet. The real take-away here is to keep your eye on peer-to-peer payment options.
As peer-to-peer payments become a more accepted way to make payments, you'll want to adjust to keep up with and outpace your competition.
Scott Cruickshank is chief executive officer of Talus Pay.