Technology continues to shape the way we shop and conduct business. For consumers, the expectation is that the way we transact will keep pace with innovation, and remain seamless behind the scenes. In this Q&A, I spoke with Oracle Commerce Cloud partner, Worldpay, Spiros Theodossiou, SVP of Product. He shares insights into some of the changes underway in the payment industry and predicts what the future of payments may hold.
1. I think there is often a perception that payments just happen. You take out your debit or credit card, swipe or enter in the details, and press ‘enter.’ I imagine that it’s a bit more complex than this.
Technology and payment methods are rapidly changing the commerce and payments landscape. If you accept payments, it can be more than a little bewildering and downright intimidating at times to try and keep up with everything you need to know.
Consumers often don’t realize the number of steps and separate entities involved in their credit or debit card transactions. We just pull out our cards, things somehow magically work, and we continue on our way. The industry has done a good job of masking this behind-the-scenes complexity and making it increasingly seamless – but not perfect – to consumers and for businesses.
2. I’ve read that the average authorization rate for card-not-present transactions, or eCommerce, is lower than for card-present, or point-of-sale transactions. In your experience, what does the cost of declined transactions look like to businesses you work with? Also, what are Worldpay and others in the payment industry doing to improve acceptance rates?
According to a report from Javelin Strategy and Research, false-positive declines impacted nearly 7% of all consumers – just in the U.S. alone last year. The large number of issuers and vague declined reasons can make authorization strategies difficult. Unfortunately, this means that many organizations are leaving lots of money on the table.
Increasingly, artificial intelligence (AI) and machine learning (ML) are being incorporated into payment processing solutions to present information in the right formats to help organizations maximize approvals on their initial authorizations – thereby increasing their approval rates and getting a corresponding lift in revenue.
3. The annual Worldpay Global Payments Report highlights the increasing number of payment methods across the globe, varying from region to region and often country to country. What are some examples of new and exciting payment methods for merchants? And given that the common method of payment can vary from country to country, what does this mean for businesses that are thinking about global expansion?
Our most recent Global Payments Report, published in Q4 of 2018, reveals a complex payments landscape brimming with diversity. Alternative payment methods are rising to meet the needs of consumers online, led by digital wallets and bank transfers. Though its long reign of supremacy is nearing its end, cash remains the leading payment method at the point of sale. This multifaceted landscape opens doors for organizations to increase consumer satisfaction by offering the right mix of payment options that are most appropriate for a given geographic region.
Digital wallets have vaulted to the forefront of payments by offering seamless convenience. We expect continued growth in China and a surge of adoption in North America to propel digital wallets to become the leading eCommerce payment method globally by 2022.
Bank transfers are also growing in popularity as an online payment method. Factors contributing to the growth of bank transfers include convenience for consumers, lower costs of acceptance and fewer chargebacks for merchants. There is also a regulatory push from PSD2/Open Banking mandates in Europe, and a rise of banked populations in emerging markets.
Being aware of payment preferences and differences in consumer behavior across geographies is key to anyone contemplating global expansion.
4. Do you see the world going cashless? There are businesses going this route, but there are also real societal concerns, prompting some cities to ensure businesses offer cash options.
In some parts of the world – China's major cities, for example – mobile payments are already the preferred way to pay for just about everything as mobile phones and QR codes have largely replaced cash, and card schemes aren’t accepted by many smaller retailers. But, will using cash as a payment option ever entirely go away everywhere on the planet? It’s hard to see that happening in the short term, and perhaps even in the long term. But, who knows? That’s what makes this industry so fascinating.
5. If you had three tips for companies thinking about their payment strategies for 2019, what would those be?
Regarding payment strategies, the three primary areas of focus can probably best be summarized by what we like to call the three “Rs” – reach, revenue, and responsiveness.
6. Lastly, what do we have to look forward to over the next 5 years in how we shop and make purchases?
What was made abundantly clear from the research as part of our 2018 Global Payments Report is that in the next half-decade the ongoing adoption of digital wallets around the globe, such as WeChat Pay and Alipay in China, will be quite pervasive.
We also see a corresponding rise in mobile commerce, or mCommerce, as merchants need to offer customers compelling mobile experiences. Research studies found that consumers are seeking a more luxurious and personalized service on their mobile devices, and are willing to pay a premium for it. What’s interesting is that this preference was strongest in emerging markets. For example, 62% of consumers in China indicated they would pay for a “five-star” service compared to just 37% in the United States.
All of this means that understanding consumer behavior in different parts of the world, staying on top of payment landscape shifts, and offering localized, and even customized, payment experiences are important factors in the success of any global eCommerce business.
Spiros Theodossiou is the SVP of Product at Worldpay. Spiros is responsible for defining and executing on the product vision and roadmap, aligning to the company goal of ‘advancing the ways the world pays.’ Spiros and the Worldpay team are focused on helping businesses grow by breaking through borders to simplify payments.