For most of human history, payments have been tangible, whether they’ve come in the form of bartered goods, hard currency, or cards. But in our digital world, invisible payments are increasingly ubiquitous, as customers turn to convenient, efficient, and user-friendly methods like e-wallets and app-based payments.
As merchants navigate a rapidly evolving market, invisible payments are becoming a crucial means of offering customers the seamless, simple, and streamlined experiences they crave.
Here’s what this growing phenomenon means for the payments world. Juniper Research forecasts that invisible payments technologies like Amazon Go will process more than $78 billion in transactions by 2022, compared to $9.8 billion in 2017 – a spike of nearly 700% percent. Customers increasingly expect quick, on-the-go payment experiences, and the technology needed to power those experiences is growing more sophisticated, fueling further growth.
The proliferation of IoT devices – of which there were 8.74 billion in 2020 and will be 25.44 billion by 2030 – has been a key factor in the growth of invisible payments. Many of these devices – smart appliances, wearables like Apple Watches, and so on – are functioning as payment portals for users to complete purchases. As more IoT devices are introduced into the global economy, invisible payments will become more mainstream, while cash and cards will decline as a share of payments.
As invisible payments grow more popular, merchants vying to meet customer expectations will latch on to the trend. Merchants will partner with financial institutions to ensure seamless integration of digital payment capabilities. Reflecting the broader consolidation underway within the payments industry, large industry players will absorb smaller, more agile companies developing innovative payments solutions.
For all of their advantages, invisible payments can lead to some challenges, such as payment regulations and getting customers on board with feeling safe and secure with the newer payment method.
Under the new Strong Customer Authentication, enforced by Europe's second Payment Services Directive (PSD2), customers must verify their identity before a payment can be completed. This means that a consumer would have to authenticate the purchase by entering a PIN or using biometric data. For invisible payments to become a dominant means of paying, there must be a way to authenticate these purchases, without undermining the benefit of having payments happen behind the scenes.
Additionally, while consumers may feel comfortable with low-value unauthenticated invisible transactions, such as paying for cab ride, they might not be as comfortable making larger purchases with a payment option that doesn’t require authentication.. Merchants will need to continue to provide consumers with payment options with a little more friction until consumers are fully comfortable with the idea of invisible payments.
This evolution in payments comes amid a larger shift toward e-commerce – a phenomenon accelerated by COVID-19 that is assured to outlast the pandemic itself.
The more customers do their shopping online, the more they’ll come to expect seamless, fast, and secure experiences as a basic standard of service. That makes it all the more imperative for merchants to harness innovative payments solutions. If customers had little patience for common hiccups like a lack of sufficient payment options before the pandemic, that patience will only be thinner in a post-COVID world. As fintech startups develop their own innovative solutions and established players ramp up their technology investments and acquisitions, the payments industry will be in prime position to help merchants navigate this new normal.
In the digital economy of 2021, friction-free shopping is the name of the game for merchants vying to win customers’ hard-earned money – be it visible or invisible.
