There’s been a sea change in customer expectations

The expectations of customers when it comes to payments have changed radically in recent years. Payments that are instant, invisible and free (IIF) have quickly become the norm, especially in certain segments of the market like airlines, fashion retail, hotels and online travel agents. Non-IIF payments options in these segments and others have all but disappeared.

This is driving the second of the six payments trends that we’re unpacking in this blog series: the rise of in-app payments.

The high-level forces driving this trend are easy to understand. The apps that customers use on their smartphones for everything from ordering takeout to learning a new language can also function as one-stop shops for payments. After providing a one-time authorization to the app, users can order, receive and pay for a good or service with zero friction.

As a result, app commerce is increasingly beating out traditional internet-based payments solutions.

The leading example here must be Uber, the ridesharing firm. Uber’s smartphone app has led the way by giving people immediate access and service with easy payment options.

Yet other firms and other industries are catching on—and, in some cases, taking things even further.

Retailers, for example, are increasingly aware of the advantages of app commerce, as apps can serve as a powerful platform for self-checkout and can integrate with loyalty programs.

A good example here is Starbucks, which remains a leader in mobile apps. The Starbucks app offers a formidable combination of payments functionality and customer loyalty benefits.

These easy payments methods are leading to gradual growth in the volume of mobile-commerce. Many large merchants now offer customers the convenience of storing their payment credentials in mobile apps, paying for services via multiple payment-acceptance modes, and finally, the experience of a frictionless self-checkout process.

The greater convenience of shopping and paying via an app simply improves the overall purchase experience for the customer. App payments also allow merchants to remove bottlenecks from the retail experience. There is, after all, no queue for the cash register if everyone pays with their smartphone.

Regulation is also acting as a catalyst for the rising use of in-app payments. In Europe, for example, PSD2 aims to increase e-commerce security by requiring strong (two-factor) customer authentication for these payments.

The growth of app payments points to the ongoing expansion of mobile and digital payments—and, ultimately, a cashless society.

We won’t reach a cashless society this year, of course. But there can be no doubt that in-app payments are one of the most important trends in the payments space in 2020.

In the next post in our series, we’ll look at another exciting payments trend: Open Banking directives as catalysts.


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