As market digitalization accelerates, customer expectations
are reshaping how we shop and pay, blending online and offline experiences into
unified commerce. Digital wallets are rising in popularity, automated systems promise to simplify transactions, and innovations like tokenization, biometric authentication, and AI-driven fraud detection are enhancing security.
The future of payments will hinge on consumer acceptance and the seamless
integration of these new technologies into everyday life.
Customer expectations are rising quickly as the market
digitalization speeds up. The way we shop and pay for goods and services is
changing as the online and offline worlds are increasingly merging into a
holistic shopping experience. The age of “unified commerce” is being driven
primarily by this transformation in payment habits and expectations.
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Now, those buying a product or service may do so through
various channels—online, mobile, or the traditional in-store experience.
Customers order from the comfort of their own homes and pick up the goods in
the shop. They may hear about a service in person but book online later. Or
they pay in-store but want the convenience of having their purchase delivered
(and often set up) in their home.
Retailers are being forced to link their online and offline
sales channels to retain loyal customers. Unified commerce is the new name of the
game.
Digital Wallets and Card Payments on the Rise
Changing shopping habits go hand in hand with new payment
methods. Younger generations, in particular, are showing a preference for
paying with digital wallets, also known as “e-wallets.” These digital wallets
enable instantaneous electronic transactions without physical cash or cards.
The most popular digital wallets include Apple Pay, Google Wallet (Google Pay),
Klarna, Amazon Pay, and PayPal.
Technically, wallets are primarily a place to securely store
different funding sources – so users don’t have to enter their card details on
a terminal. Users can link their debit or credit card and make online and
offline payments at the point of sale (POS) using their smartphone. A
traditional debit, credit card, or SEPA direct debit remains the basis for
these payment transactions.
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As a result, wallet providers are caught up in fierce
competition for consumer preference, investing heavily in features and
capabilities that will help them earn the spot of preferred payment method. An
amusing anecdote illustrates this competition: Klarna, once seen primarily as
the leading invoice purchase provider, is now venturing into the wallet space.
In-store habits are also changing. In central and southern
Europe, nearly one-third of all retail sales are still made with coins and
bills. But the trend is clearly in favor of cards, especially for larger
amounts.
As trends continue to show, Europeans prefer to use their debit cards
over traditional payments. Only in the US are credit cards almost on par with
debit cards. In addition, more and more people are paying in shops using their
smartphones or other devices, i.e., using mobile wallets such as ApplePay.
A Digital Euro Would Revolutionize Payments
The shift in consumer preference brings us to a topic that
no article on payment behavior can avoid at the moment: the digital euro.
If the European Central Bank (ECB) has its way, the digital
euro could become a reality by 2028. Payments would be made by smartphone or
chip card, and consumers could exchange cash for digital euros at ATMs and vice
versa. Online payments with the digital euro would be directly linked to a bank
account; for offline use, money would have to be loaded into a special wallet
in advance.
The idea behind the digital euro is to make payments
simpler, faster, and more secure, as well as to strengthen the autonomy and monetary
sovereignty of the euro area. The ECB also expects the digital euro to play a
role in spurring innovations such as autonomous cars that can refuel themselves
or a fridge that can order and pay for milk at the supermarket.
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I believe this initiative’s success will largely depend on
consumer acceptance, not on the technology itself. While infrastructure and
merchant acceptance are crucial, the real test will be how quickly and widely
consumers adapt to using the digital euro for their transactions.
For this to happen, the digital euro must be cheap to use,
secure, risk-free, easy to utilize, and convenient. As mentioned above, the
last two criteria, in particular, could be difficult to achieve given the
increasing popularity of wallets.
Trust Is Key to Change
Speaking of security, the best new ideas for making online
payments more secure include tokenization, multi-factor authentication, and the
use of AI to improve fraud detection.
Tokenization replaces sensitive card data with a unique
code, making it harder for hackers to steal data. Multi-factor authentication,
such as fingerprint or facial recognition, provides an additional layer of
security. Real-time AI-based fraud detection is also making great strides,
helping identify fraud and reject certain payments preemptively.
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In retail, the trend is towards more automated systems.
Biometric authorization methods such as fingerprints and facial recognition
could make physical payment devices obsolete.
Traditional checkouts are being replaced by self-service checkouts that automatically collect payments using weight sensors or image recognition. Technologies such as near-field communication (NFC) or QR code payments promise to make the payment process faster, more secure, and more convenient.
Soon, we may no longer have to queue up at the checkout because
everything will be automatically debited from our account as we leave the
shop—or the fridge at home will do it for us.
The Future of Payments
Connected retail that offers convenience, security, and
choice, watches and rings that replace coins and notes at the checkout, and a fridge that reorders groceries—the future of payments is undoubtedly
exciting.
At the same time, the success of these advancements will
rely on their ability to seamlessly integrate into our daily lives, ensuring
that consumers feel secure and empowered in their financial interactions. The
rapid changes in consumer payment preferences are set to redefine how we perceive
and interact with money, heralding a new era of digital convenience and
security.
This article was written by Robert Bueninck at www.financemagnates.com.
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