January 24, 2017 | Authored by: Vindicia Team Blogs
Payments are evolving - are you ahead?
The world of payments is never stagnant. As consumers demand more convenience in their lives, tech developers and business leaders devise more ways to satisfy them. The key for businesses, especially those using a subscription billing business model, is to stay ahead of modern payment innovations.
If one considers the upsurge in subscription services over the past decade, it's easy to assume this payment style is innovative in its own right. There's an element of truth to that concept, but companies can't rely on recurring billing alone. They need subscription management partners that understand the way payments are changing and can keep them ahead of the trends.
Mobile isn't to be ignored
Mobile payments have been around for a few years, yet many companies are still on the fence about them. This could be because they haven't been adopted as widely as companies like Apple and Samsung would have hoped. Based on the way these businesses marketed mobile wallets, one could expect over half the country to use them on a daily basis. According to the Federal Reserve, however, only 24 percent of consumers made a mobile payment in 2015. One could assume businesses are taking a cautious approach to mobile wallets, waiting for more consumers to use them before taking the plunge.
This is a backwards approach, however. Companies that don't prepare now will fall far behind when mobile payment adoption rates start rising beyond 50 percent. Consider how long it took the credit card to become popular. Although it was first introduced in the 1950s, according to Business Insider, the cards didn't take off until 1978. Consumers might be just as wary about mobile, and it could be a few years before use suddenly surges.
In addition, according to Pew Research, most mobile payment users are below the age of 50. Specifically, 33 percent are Gen Xers and 39 percent are millennials. What's more, according to separate research from Pew, the latter are officially the largest generation of consumers in the U.S. Their payment preferences will have a significant impact on the state of business over the next few years, and companies need to begin preparing. Thankfully, there's no question about what millennials want. Research from J. Walter Thompson, an advertising agency, found this generation was more likely than any other to agree with the idea that it doesn't make sense to prefer cash, credit and debit payments in light of today's technology.
Consumers are more global than ever
Mobile payments are beneficial for targeting another consumer group besides millennials. The GSMA Association, a trade body representing mobile companies, noted this payment method is also better at reaching unbanked consumers and people in emerging markets. These individuals are more likely to have smartphones because of their multiuse functionality - consumers can access the internet, message friends, and send and receive payments from one device. A number of technology companies have designed mobile financial services that greatly benefit these consumers.
"Mobile is a key enabling tool for financial inclusion and over the last year, we've seen significant growth in mobile financial services, not only in the number of services and geographies served, but also in the breadth of products that are now available to previously unbanked individuals," said Tom Phillips, chief regulatory officer of the GSMA.
"Global citizens prioritize speed and convenience."
Mobile, of course, isn't the only way people make cross-border purchases. Some companies still rely heavily on credit and debit cards, and these individuals shouldn't be ignored. Rather, businesses should provide a wide variety of payment options to meet customer preferences no matter where they are in order to minimize friction. As one executive noted in a conversation with PYMNTS.com, the past year saw the rise of the global citizen, a new type of consumer who isn't confined by borders. Global citizens prioritize speed and convenience, and keeping ahead of payment innovations ensures businesses continuously provide what they want.
Are you ahead?
This is the question companies must continuously ask themselves as they assess their payment strategies. It is not enough to merely be in line with the times - businesses must start thinking about how mobile and cross-border commerce affect their practices. In addition, new business technologies like predictive analytics and machine learning can help businesses combat failed payments and avoid chargebacks.
Thankfully, companies don't have to exhaust their resources staying on top of the latest payment developments. All they must do is partner with a subscription management service primed and ready to bring new payment methods to their doorstep.
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