The age of digital payments has arrived
Throughout the years, money has had a lot of different faces: gold, metal, paper, cheques, credit and debit cards and more. It became the default means of payment because it is easy to carry, measure and spend. From regular cash transactions to wire transfers and QR code links, payment methods have been constantly evolving both online and offline, but mainly online. Some even say that the future is cashless on account of digital payments leading this monetary revolution, propelled both by the COVID-19 health crisis and the rise of online shopping.
But what are these payments all about, how do they affect customers and businesses worldwide and how to safely manage this new cash flow?
Goodbye “cash or card”, hello digital payment!
Digital payments, or online payments, are all types of payments made over the internet and mobile channels without any physical transfer of funds. Using your phone’s digital wallet to buy coffee at your local shop or typing your credit card information in an app to order are some examples.
They’re known for being easy and contactless, but also safe and secure. Suddenly, a physical wallet stopped being a must-have when leaving the house.
If those payment methods started as a tentative way to make shopping experiences both online and offline easier, they surely have grown to become an essential service every online retailer must offer. New consumer habits and behaviors related to money and paying methods emerged a few years ago, but the adoption of online payments was highly accelerated by the coronavirus pandemic, social distancing policies and brick-and-mortar stores closing, that all led to the eventual ecommerce sales growth.
With over 1.2 billion registered digital money accounts across 96 countries today, mobile money is reaching different levels worldwide. In December 2020, over $70 billion were transacted through those methods and research shows that this trend has come to stay.
Convenience for both customers and retailers
By offering an assortment of fully digital options to customers, businesses are able to also offer different advantages such as cashback policies, instant payment, receipts and lower interest rates.
The payment step must be seen as a part of the buying process and not only as a consequence of it. This is why checkout experiences matter so much when talking about payments: it is the most crucial part of the online buying process and perfecting this flow guarantees a lower cart abandonment rate.
According to a study published in November 2020, some of the reasons for abandoning a purchase were a too long/complicated checkout process, no trust with credit card information and that there weren’t enough payment methods available. By analyzing this data, running tests and checking results, online retailers can start to make the most out of digital payments and use them to boost their conversion rate.
The more, the merrier?
Customers will choose where to buy from depending on what type of payment solutions are offered, but that doesn’t mean that offering as many options as possible is ideal. The total cost of ownership when it comes to payment methods must encompass a lot of variables such as:
- strong security and anti-fraud system;
- interest rates on different payment policies;
- customer preferences;
- and if they fit your business model needs.
This is why we advise you to firstly get to know your customer and understand where your business is lacking when it comes to payment.
Many shoppers prefer using online payment methods because they are easy and practical, making checkout simple by default. And simple, easy and safe new things can spread like wildfire. With that, companies can increase revenue and use convenience as a weapon to preserve and build customer loyalty.
Safety and reliability
New payment methods made it easy for customers to purchase goods online however they pleased but, on the other hand, it is a tricky and sensitive subject when it comes to trust. It is a tale as old as (internet) time that people should be careful with what and where they are putting sensitive information, such as their payment method data, on the internet.
That is one of the reasons why digital wallets are so important and apps like PayPal and Payoneer are so successful. The customer only has to input their information once and in one place, without having to worry about data security when jumping from one ecommerce website to the other.
It is also incredibly safe, because it functions on tokenization, a system that generates virtual information for each transaction rather than storing financial details and personal information in the device.
But still, it is important to comply with online safety tools and to showcase them on the website, in case your customer is still paying digitally – but in the old fashion way. Labels, padlocks and certificates are the comfort images for wary customers when proving to be a safe website for digital transactions.
This requires a deep understanding of local market preferences, including currency and payment methods, as well as complying with regional regulations, which can be complex to an outsider. Fortunately, there is help at hand. Payment providers with the right reach, expertise and scale can be an invaluable partner for merchants when entering new markets and will very likely make the difference between success and failure when expanding.
PayPal has been here for a while and everyone knows what it’s about: it was one of the first digital payment services ever, introduced in 1998 and setting the pace for the future of what is today known as digital banking. Just last year, it announced its new cryptocurrencies policy where clients can trade and keep cryptos on the platform.
Stripe offers an economic infrastructure software that accepts payments and manages businesses, be them big or small, online. Recently a VTEX partner, Stripe helps to enable global and local businesses alike by increasing conversion rates through a diverse range of payment options, meant to meet everyone’s preferences. VTEX merchants can now accept Google Pay, along with key wallets such as Apple Pay and the more traditional options. Additionally, local payment methods are also a mere checkout configuration away.
They also offer other products, including its anti-fraud tool Radar, which helps detect and block fraud for any type of business using machine learning.
PIX is a Brazilian instant payment method that allows customers with different bank accounts to transfer money between them without paying extra bank fees. The transaction happens in real-time and is available 24/7. Through a generated QR code, payment link or a number code, customers can pay for their purchases on their own banking apps through the PIX financial service.
What lies ahead
The digital payment system’s full potential has not yet been reached. Creating and dominating security protocols and making shopping more convenient and safe for customers is a complex operation that, though, only scratches the surface. Here are possibilities ready to be unleashed by this revolution.
The pandemic helped in bridging borders and connecting countries through international relations. Cross-border commerce is a buzz-worthy word to look out for. The future is global and online payments help to reach that by offering easier options for currency exchange and lower transfer rates.
Imagine buying a product in Peru, paying for it in US dollars, running it through a payment provider in Europe and having it delivered in Australia. That’s how global it can get.
New types of currency
Many websites and marketplaces are already accepting cryptocurrencies as exchangeable currency as payment methods, proving that the blockchain trends are here to stay, especially with the popularization of Bitcoin. Apps like BitPay and Circle are already offering integrations to ecommerce websites and there are a lot of options on what to buy with digital currencies, from fast food to cars.
A cashless future?
The cashless trend has been gaining momentum for a while. Some restaurants in Europe and in the United States already had no cash policies even before COVID hit, but there is no doubt that this trend is only getting started.
Safer, easier to carry and without the hassle of withdrawing money every time you need something. The default is slowly, but surely, becoming digital.