Payment processing: Learning from the ups and downs of 2016

Payment processing: Learning from the ups and downs of 2016

Payment processing in 2016 made a great leap, largely thanks to technological advances. The transition to Europay, Mastercard, and Visa (EMV), as well as the behavior of Millennials, triggered several big events, worth of studying to better plan future moves.

Millennials ditched old banking methods

Skeptical, highly demanding and constantly on the lookout for innovations, Millennials are the fastest expanding, hyper-connected and most educated customer base.  Their behavior systematically affects businesses.

With regards to payment processing and banking, they proved to be very flexible in 2016, even preferring to go to a dentist than to listen to what banks have to say. More than 73 percent stated that they would be more interested if Google, Amazon, PayPal, Apple or Square offered financial services.

A majority equally made it clear that digital services, such as mobile payments and banking, are vital. Such modes allow them to track their money carefully and spend wisely. And of course, these digital financing services should be accessed in the palm of their hand; no Millennial think about queuing up in a bank to write out a check.

Mobile payments remained stagnant

Strangely, even if digital payments seemed to have flourished in 2016, the fact is that it did not. According to Accenture’s 2016 North America Digital Payments survey, mobile payments did not rise to become mainstream. Only 19 percent of consumers used their mobile phones for purchasing at the point of sales.

The two main reasons are that consumers were rather satisfied with eCash and credit cards and that retailers were slow to innovate with modern card readers. So, even if shoppers were willing to pay with their mobile phones, many simply could not do so in many stores.

Merchants were resistant to change

Changes in payment processing- be it innovative or not- automatically affect businesses. In 2016, retailers became really adamant in refusing to accept cards such as Visa. Even big stores in Canada, such as Walmart, refused Visa cards as a maneuver to negotiate more favorable terms and conditions. Certain retailers even filed lawsuits against Visa and MasterCard in the United States. In vain.

The transition to EMV was slow

Even if the transition to EMV chip cards took off smoothly, it stayed very slow. Only one-third of retailers could accept EMV chip card payments. However, the advent of EMV cards reduced fraud by 54 percent in the United States, regarding those retailers who adopted the new system or were almost ready to finalize implementation.

Alipay was launched at international level

Alipay, the payment application launched by Ant Financial (an affiliate of Alibaba), took off in Europe in 2016. It aimed Chinese tourists, facilitating purchases. Alipay is, however, targeting to reach two billion consumers within the next ten years globally.

Facebook devised a native payment system

Facebook started working in close collaboration with PayPal, American Express, MasterCard, Braintree, and Stripe to accept payments. In 2016, 30,000 Messenger chat bots were already able to accept native payments. Users did not have to go to an external website to do so.

PayPal is now a partner of Visa and MasterCard

PayPal, encouraging customers to use Automated Clearing House (ACH) for financial transactions had to review its approach after years of struggle. In 2016, it finally partnered with Visa and MasterCard. It can hence enter point of sale (POS) transactions from now on and will no longer urge users to use ACH.

Blockchain technology expanded

Certain big institutions and businesses adopted Blockchain in 2016 as financial experts observed that the real value of this technology is greater than the limits of cryptocurrency. It is predicted that 2017 is going to be Blockchain’s banner year, with blockchain being one of the most developed areas in technology after building up of momentum in 2016.

Merchant Customer Exchange’s mobile app was shelved

2016 was not a fruitful year for the merchant-owned enterprise. Merchant Customer Exchange (MCE) had to shelve its national launching of CurrentC, a mobile app. This decision was taken after Walmart, CVS and Kohls came up with their own respective mobile apps. MCE’s app was planned to be a direct rival to Apple Pay and Android Pay. However, skeptical experts already forebode that it was going to be doomed due to an absence of high-end technology and security nets. On a parallel note, with the transition to EMV cards happening at the same time, merchants were already being busy implementing procedures and adopting new systems for the chip card.

Data breaches continued in 2016

2015 was a bad year for data breaches. 2016 was not so different. Numerous cases of data breaches were reported from institutions like the Department of Justice to Snapchat. Luckily, these breaches which were not high-profile did not compromise financial transactions.

Same-day eCheck transactions system was launched

In September 2016, eCheck, also known as Automated Clearinghouse (ACH) opened two clearing windows. The latter made possible same-day transactions and the first month, over 5 billion US dollars were processed, regarding business-to-business (B2B) and emergency payroll.

Venmo flourished amidst intensified competition

Venmo- a free digital wallet allowing sharing payments with friends- boomed in 2016, with transactions amounting to 4 billion US dollars. This figure represents a growth of 140 percent compared to 2015. Even if solid competitors like Zelle, Facebook Messenger, Google Wallet amongst others do make things harder for Venmo, the latter is expected to become bigger than any other bank Peer-to-Peer (P2P) service.

Countries working towards a cashless society

Emerging countries in Asia, South America, Africa are following the steps of Sweden in devising ways to promote a cashless society. As technology became more affordable, developing nations witnessed a growth in terms of mobile technology too. For example, India’s digital wallet Paytm, welcomed over 10 million new users in 2016, after the Indian rupee crisis towards the end of the year.

Retailers launched their own digital wallets

Even if mobile payment apps like Apple Pay, Samsung Pay, and Android Pay fared well, retailers like Starbucks, Walmart and Kohl’s successfully launched their own respective digital wallets. Retailer wallets present further control at point-of-sales as well as seamless integration of store rewards programs.

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