What’s Next for Retail Payments?
Five trends to watch
Peer-to-peer (P2P) payment solutions, like Cash App, are already a staple for diners looking to split the bill. LendingTree reports that 93% of Americans have used peer-to-peer services. 15 And an eMarketer study projects that both 80% of Millennial smartphone users will send money via a P2P service in 2024 and that the number of Gen Z smartphone users using P2P services will nearly double by 2028. 16
P2P payment solutions are fast and convenient, allowing shoppers to pay using their mobile device — often via an app they’re already familiar with. And because P2P solutions come with their own layers of security, businesses can receive payments while keeping customers’ information safe.
the percentage of American P2P users who use Cash App. 17
Over the past decade, social media has moved from a medium for personal expression to a critical aspect of eCommerce. Young shoppers, in particular, flock to social media to explore trends and aesthetics, discover brands and products, and — increasingly — make purchases online.
say they discovered a new brand or product on social media. Of these, 32% reported buying that product or purchasing from that brand. 18
Brands can still convert followers to shoppers with sponsored ads. However, social media platforms are trying to capture shoppers’ attention via in-app marketplaces — like Facebook Marketplace, Instagram Shop and TikTok Shop — that allow them to make purchases without ever leaving the app.
The rise of in-app purchases offers some benefits for brands, including a frictionless checkout experience that may help maximize conversions. But businesses have some costs to consider when selling inside social apps. Many in-app marketplaces collect a commission on each purchase — sometimes, up to 20% of the transaction value. 19 And, because shoppers are no longer directed to a merchant’s website, brands may miss out on opportunities to deepen customer relationships by delivering a personalized eCommerce experience and collecting useful data.
Cryptocurrency has gone mainstream. An estimated four in 10 American adults now own some form of crypto. 20 Retailers can set themselves apart by allowing customers to pay with them.
Also, crypto payments are designed to be irreversible, which means a refund would require a separate payment back to the customer’s crypto wallet. 21 However, crypto values can be subject to volatility, making them highly unpredictable when compared to the U.S. dollar. Those price changes can make proper accounting for cryptocurrency purchases complicated when it’s time to do your business’s taxes.
Greg Salvatori, owner of Greg Salvatori Gallery in Provincetown, Massachusetts, accepts crypto payments to make the buying experience seamless for customers. 22 He offers crypto payments through the cryptocurrency wallet MetaMask. “It’s always younger [clientele], like the 28-to-40 bracket,” Salvatori said of those who tend to use crypto payments the most.
While the money is the important part of your business, the interaction for someone buying a $25,000 art piece is supposed to be about the art. It’s supposed to be about them and not about a [point of sale] that doesn’t work. It’s about the customer’s desire to buy themselves, or their loved ones, something special, and their mind can stay in that emotion instead of worrying about the credit card.”
Biometric payments are payments that use biometric authentication before processing. Biometric authentication can include 3D facial recognition; vein recognition; behavioral biometrics, such as voice and typing patterns; and inputs, such as a fingerprint. These payment types are becoming more and more commonplace because they involve features that are more secure and harder to replicate.
Thanks to the iPhone and other smart devices, biometric payments are more commonplace than we realize. For instance, in order to access Tap to Pay for iPhone, a device usually prompts the customer to authenticate via Face ID (depending on your settings) before processing a payment. This allows customer transactions to be more secure, which can help decrease chargebacks and fraudulent purchases that can often impact a business’s revenue.
In the European Union, Strong Customer Authentication (SCA) is now a requirement for customers to make online payments. The SCA requirement involves customers completing two to three levels of authentication, including something they know (PIN or password), something they own (cellphone or wearable device), and something they are (fingerprint, voice pattern, etc.). While this level of authentication is not prevalent worldwide, regulatory standards by entities such as the FIDO Alliance may seek to change this in the coming years, which can have a significant impact on online payments across industries.
consider biometric payments the most secure authentication method, and two-thirds of customers already use — or are interested in using — biometric payments. 23
Central bank digital currencies (CBDC) are official forms of digital currency issued directly by a country’s central bank rather than through a financial institution. CBDCs occupy a middle ground between crypto and physical currencies. Like crypto, CBDCs only exist digitally, and its value is tied to the value of the issuing country’s legal tender.
The United States has taken a cautious approach to considering CBDCs, though it’s exploring the potential. 24 However, 69 countries around the world have CBDC programs in launch, development, or pilot phases, with another 44 nations researching CBDC options. 25
While it’s still early for CBDCs, once deployed, these digital currencies have the potential to enable fast and convenient payments across a number of industries. Depending on the lengths governments go to promote CBDCs, these digital currencies could shift the way significant populations pay for purchases in the future.
