Posted by Mark Ranta on 02 Jul 2020
The world around us has changed drastically since February 2020. The months where we went from semi-isolation to full quarantine will be studied for years to come in classrooms around the world. One area that is interesting but will get less mainstream focus, is the change that we’re seeing in consumer payment behavior. This is where some lasting impact may be felt permanently.
For starters, the changes accelerating are not in and of themselves new trends. The world had started shifting towards contactless payments (commonly referred to in parts of the world as “tap and go”) over the past five years. We’ve seen cashier-less checkout stores, most notably Amazon Go, in the news for some time, and we’ve also seen the shift from brick and mortar to websites and mobile apps for at least the past 10 years.
The sudden dislocation of these trends is extremely jarring. What once were turn of the calendar trends with good CAGR (Compound Annual Growth Rate), are now suddenly trends put into overdrive. While the convenience of sites like Amazon, Uber Eats, or GrubHub was enjoyed by many before COVID-19, they became the only viable options when stores and restaurants were closed or only offered curbside pickup dining. Convenience was replaced by necessity.
The change in consumer behavior from physical to digital has an even greater effect when it comes to payment technology. It’s exciting to see where this goes because the biggest hurdle our industry has faced was how to make the leap from the physical in-store experience to the new world of fully contactless checkout (not just for making the payment, but for the whole checkout experience).
With that breakpoint, we now have an opportunity to re-think the payment itself. It can be freed from credit and debit rails that dominated the in-store POS experience, and early generations of the online POS experience (that simply replicated the in-store experience) and start a renewed focus on new payment options for consumers to use. Even better, we can create new products and experiences for checkouts like just in time financing options, delayed payment schedules, or new couponing/offer technology.
These new opportunities were not really possible until recently. For one, we didn’t have a central real-time payments infrastructure to support banks (although we had a few fintech driven options with Zelle®, PayPal, and Venmo being the most prominent). However, with the launch of The Clearing House’s RTP® system, all of a sudden a bank account can be unlocked as a payment token directly from the bank, versus a third-party app. The other challenge was overcoming consumer behavior and bridging the aforementioned conventional physical experience with one that requires a certain level of digital engagement to work. Again, this was a trend that had already commenced; however, it became a mainstream phenomenon in the last three months.
So this really is a perfect storm for innovation. As Plato said, “Necessity is the mother of innovation,” and the necessity of contactless payments may have just tipped us into a new era of payments innovation and change.