Over the course of the last decade, digital payments have become virtually synonymous with global trade and commerce. Digital payment volumes have risen by more than 10% each and every year like clockwork. By 2020, researchers at Capgemini say that digital payment platforms will be responsible for processing an eye-watering 726 billion transactions annually – and payments via apps are expected to reach an annual $318.8bn within the next two years. The mobile payments market alone is expected to generate more than $1trn worth of revenue by the end of 2019.
This tidal wave of digital, cashless transactions has inherently generated sky-high demand for faster, more flexible and more dynamic payment systems – and plenty of payments providers are stepping in to fill that demand.
From blockchain-powered mobile wallets and cryptocurrencies, to payment chatbots, biometrics, machine learning and a dizzying range of new finance opportunities, merchants are now absolutely spoilt for choice when it comes to digital payment systems. Providers range from multinational incumbents and major banking institutions to scrappy, niche start-ups, and the options businesses choose to harness vary greatly.
The payments landscape has seen unprecedented change thanks to huge growth in fintech, as well as platform players entering the consumer payments space
“The payments landscape has seen unprecedented change thanks to huge growth in fintech, as well as platform players entering the consumer payments space,” explains Gareth Wilson, the global lead for payments at management consulting firm Accenture.
“Accenture research shows that 17% of banking players globally are new companies, in that they joined the market since 2005. In Europe, 20% of financial services providers in 2017 are new, and capture a third of new revenue. Of these 1,400 companies, 1,200 are in payments – which is a stunning amount.”
As a new business that’s preparing to start trading, or even as a more established organization looking to upgrade its existing payment systems, trying to sift through this increasingly vast sea of payments providers can often feel a bit daunting. That’s why it’s imperative leadership teams and treasury managers truly understand what it is they need in a digital payment system, what they expect that system to do and how its deployment will help their business to achieve its goals.
What is a digital payment system, and why does my organisation need one?
At this point, it’s getting increasingly difficult to define what a ‘digital payment’ actually is – because quite a few markets are finally reaching the point in which most of their payments are digital. In China, total transaction value for digital payments is expected to increase nearly 20% per year over the next four years, and mobile transactions reached a record $12.8trn in first ten months of last year alone. Although Alipay and WeChat Pay are responsible for around 80% of those transactions, China’s mass-adoption of digital payment systems extends well beyond dynamic mobile wallet platforms.
At its core, a digital payment system is essentially just any type of cashless commerce platform designed to facilitate payments between two or more parties online or using a range of electronic means – and chances are, even the world’s biggest technophobes are unknowingly familiar with some of the most popular digital payment systems. Buying a coffee via the Starbucks App, hailing an Uber, transferring money via PayPal and contactless payments in supermarkets all qualify as actions facilitated via digital payment systems.
From a consumer point of view, these digital payments systems have rapidly become a crucial part of everyday life. Payment apps, advances in cashless banking and making purchases on mobile devices has removed a huge amount of friction from payment journeys. Digital payment systems make life more convenient, and they make shopping, lending, transferring cash and doing business a whole lot simpler.
Being able to offer that frictionless payment journey is now life-or-death for many merchants – while business-to-business organizations can deploy digital payment systems to automate cross-border payments to suppliers, transfer cash across multiple jurisdictions to subsidiaries and deliver a range of simple billing and account functions for clients and consumers. That’s why it’s critical to invest in a dynamic digital payments solution that perfectly suits a firm’s organizational needs.
What to look for in a digital payment system
Regardless of company size or business activity, B2B and B2C organisations must both consider a variety of factors when exploring digital payment services and alternative payment solutions – and that journey begins by selecting a platform with an appropriate payment flow. Businesses hoping to sell online or accept mobile payments will need to select a digital payments solution with access to a scalable payment gateway that’s simple to deploy online and even easier to use.
Options range from ecommerce sites with integrated payment forms, payment redirects to secure hosts or the inclusion of a secure escrow system. Fortunately, there are key market participants that already offer all of these payment flow options and more for companies looking to sell or transfer money online across a series of websites or existing digital networks.
Freemium payment processing systems like PayPal are capable of facilitating international payments from financial institutions, businesses, digital wallets or individual customers in more than 200 countries – and are easy to integrate with existing online store platforms like Shopify and customise for a unique checkout experience.
Similarly, swiftly rising competitor Stripe is a cloud-based digital payment suite that uses unified APIs to handle payment functions and manage full-stack payments, invoicing, shared customers and collect applicable transaction fees – all from one mobile-friendly dashboard. Better yet, integrations with most major accounting apps enable firms to manage PCI compliance and synch financial reporting, all while producing a frictionless payment journey for clients.
Beyond gateways and ease-of-use, any organisation hunting for the perfect digital payment system needs to place extreme emphasis on security. Huge financial regulations and data laws were introduced across key jurisdictions in 2018. From PSD2 to GDPR, it’s more important than ever that businesses sending and accepting electronic payments are able to guarantee a secure payment journey in which both data and funds remain fully protected at all times.
Processing more than 31 million transactions per day, WorldPay is inherently the first port of call for any organisation in need of ultra-secure digital payment services. In fact, subsidiary Paymetric focuses exclusively on the delivery of cloud-based digital payment integrations designed to work with enterprise management solutions like SAP and Oracle using a patented tokenisation feature that protects sensitive data and prevents fraudulent payments.
At the SME end of the spectrum, popular digital POS terminal specialist Square utilises a similar tokenization scheme that ensures all unencrypted payment data never touches merchant apps or devices, and allows merchants to maintain full PCI compliance and access historic payments via a simple smartphone app.
In addition to security, firms must also consider the fees and service agreements that go hand-in-hand with electronic payment systems, as well as functionality and scalability across a range of devices.
Payment systems must also be responsive on all mobile devices, and should ideally be able to send and accept payments from digital wallets. Digital wallet leaders include incumbent card providers like Visa or Mastercard, which can utilise their card network wallets, device walletscan solutions and P2P wallets – but each solution should be able to instantly submit payments to POS terminals, ecommerce sites and other mobile wallets in order to maximise convenience for customers and clients.
Social media-savvy brands are even taking that convenience a step further with cloud-based digital payment systems like Tap2Pay – an undeniably timely start-up that allows online business to accept payments, submit invoices and process secure transactions solely via smartphone apps like Facebook Messenger, Viber and Telegram.
The winning formula for an effective digital payments solution combines a seamless consumer experience with trust
According to Accenture’s Wilson, it’s that combination of frictionless, customer convenience with security and ease of use that make an ideal digital payment solution for any organization.
“The winning formula for an effective digital payments solution combines a seamless consumer experience with trust,” he says.
“Sometimes the success of a payments solution is also when it is part of a wider customer experience, fuelled by technology. For example, according to Starbucks, its payment app was used for more than a third of its retail payments and had more active users in the US than Apple Pay.
“Starbucks’ success metric is not payments revenue. Instead, they have a laser focus on store-level revenue growth enabled by a better customer experience, of which invisible payments is only one component.”
Yet in order to maximise efficiency and reduce the need to implement a gaggle of management systems, management teams must also consider key business functions and B2B transactions when selecting a digital payment system. Tools like automated recurring billing are vital for organisations needing to submit multiple payments to suppliers across various jurisdictions – which is why there are plenty of secure and convenient digital payment solutions designed around online invoicing and recurring billing functionality.
From Bill.com’s intuitive accounts payable module to Tap2Pay’s pre-defined billing processes, each payments platform and processing solution should have capacity to handle digital billing and invoicing.
At the end of the day, no two businesses are alike – and so the ideal digital payment solution will inherently vary from organisation to organisation. That being said, each firm should bear in mind basic security requirements, ease of use, gateway functionality and B2B features when starting the hunt for a new digital payment system. Yet above all else, the most crucial part of any hunt for an alternative payment system is ensuring that firms deploy some sort of digital payment solution as soon as possible.
After all, digital payments now represent almost $3trn worth of transactions per year, via nearly 3 billion customers, clients and businesses. The digital payments landscape is only going to increase – and the world is inching slowly closer to a truly cashless society.