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In November, when Dutchman Martin Wisjeimer became the first man to inject Bitcoin keys inside his hands, he captured the spirit of payments in 2015. Will others be crazy enough to try this? Maybe not, but many are going to try out new ways to pay. 2015 will be the “experimenting in college” years for shoppers.
Merchants will hit shoppers with options they never had before, and shoppers are going to try it all out because … why not? Waving your iPhone 6 in front of a NFC sensor to pay for stuff is entertaining and it makes good conversation during the holidays. If your sister-in-law bought you a bottle of wine with [company]Apple[/company] Pay, I promise you’re going to hear all about it. Personally, I arrived late to a meeting the day Apple Pay launched because I was eager to test it out. When I use Apple Pay at [company]Whole Foods[/company], [company]McDonald’s[/company] and [company]Walgreens[/company], other people in line are curious to see it in action.
2015 is about experimentation because tech companies are trying to displace the old card swipe system that facilitates a huge chunk of commerce in the U.S. These experiments will have ripple effects that change the underlying mechanics, rules and alliances of the payments industry. Here’s what you can look forward to in 2015:
From beacons to payments
Retailers are salivating over beacons, and 2015 will be the year we see them used here and there. Combined with a mobile app, these internet-connected, Bluetooth-enabled devices allow retailers to push location-based offers, collect data about how people navigate their stores, and link data from in-store purchases with online purchases in order to make personalized recommendations — just the way [company]Amazon[/company] does.
If you’re in the dental hygiene aisle, beacons can detect this and send electronic toothbrush discounts right to your phone. If you’re due to renew a prescription, beacons at a pharmacy could send a reminder the moment you walk into the store. If retailers use beacons tactfully, they will boost sales and pave the way for integrating payments into mobile apps. [company]Starbucks[/company] has gone that direction and many retailers will follow.
New checkout methods
Most shoppers with an iPhone 6 will try out Apple Pay, but the experimentation won’t stop there. [company]PayPal[/company] in-store, [company]Google[/company] Wallet, Alibaba’s Alipay, Coin, Current C and dozens of other checkout technologies will be tested (or re-tested) in 2015. Stratos, a company trying to build an all-in-one credit card, found that 30 percent of U.S. smartphone owners plan to use a mobile payment offering during the holidays. Consumers don’t necessarily find mag-strip credit cards inconvenient or lacking, but the sheer variety of payment technologies and accompanying buzz create a “cool” factor that adds social pressure to try them out. Didn’t I say this will be “college” for the payments industry?
“Card not present” rates will converge with card present rates
Visa and MasterCard set the rules on card processing, and currently, they charge a higher rate when consumers buy online. These Card Not Present (CNP) rates face some gray areas now that people can pay online and in-store at the same time. Say a restaurant guest uses [company]OpenTable[/company] to pay for the meal: Should the transaction face a higher rate even if customer is present in the restaurant?
With the lines of CNP blurring, [company]Visa[/company] and [company]MasterCard[/company] will have to somehow address or eliminate the rate disparity in 2015. Otherwise, they will lose ground to Merchant Customer Exchange, a consortium led by Walmart that is trying to fight back against Apple Pay, Visa and MasterCard with its own mobile payment system, CurrentC, which could save retailers billions in transaction fees.
Social payments will find a purpose
Twitter and Facebook are in the process of launching payment services, and in 2015, they will figure out how to make them profitable. Initially, Twitter and Facebook Messenger will feature peer-to-peer payments, but both companies must know that the real jackpot is serving merchants. They could take a “social commerce” approach and let people complete transactions from branded pages, posts and tweets instead of linking people to external websites. Like Visa and MasterCard, [company]Facebook[/company] and [company]Twitter[/company] could take a cut of each transaction. Shortening the gap between discovering and buying products would probably raise conversion rates for merchants and finally give the social networks a chunk of the e-commerce pie.
The upside to “experimenting in college” is that anything can happen in 2015. By the end of the year, I believe we’ll see an even clearer division between a pro-credit card group that partners with Visa and MasterCard, and an anti-credit card camp that tries to overturn their dominance in the payments industry. The current tension between Apple Pay (pro) and CurrentC (anti) is just a taste of what’s to come. Individual merchants, payment technologies and social networks will all have to figure out how to navigate this divide.
Ralph Dangelmaier is the CEO of BlueSnap, which aims to be the payments leader in e-commerce.