By Sri Shivananda
Online and mobile payments have come a long way in Africa since their early iterations, which involved multiple clicks, checks and balances, and a great deal of crossing fingers, hoping the payment would go through.
But while digital payments have improved dramatically, we don’t think the journey is over yet – we believe we’re on our way to a future in which payments are so simple, intuitive and personalised, they become almost invisible.
The road to cashless
In 1950, Diners Club issued its first charge card, followed by American Express in 1958, starting the evolution into what we use as credit cards today.
The convenience of not carrying cash or a cheque book drove global demand for cards for everything: credit, debit, loyalty programme freebies, points, miles and coupons.
The move to cards paved the way for the concept of a cashless society.
Globally, non-cash transactions are growing at the fastest pace ever, led by Asia.
Over 60% of payments in developed markets are now digital, and Sweden is expected to become the world’s first cashless society by 2023.
To date, South Africa and several other African countries have lagged the world in terms of going cashless. Cash remains prevalent in lower income communities, where many people remain unbanked, and many merchants only accept cash.
However, we think this is set to change, thanks in part to the forced digitisation that took place during the early days of the pandemic.
During the first year of lockdown, consumers who still favoured cash had little choice but to adopt mobile and digital money for remittance and shopping as they abided by social distancing guidelines and lockdown rules.
How do we now foster the progression of digital payments in a way that makes all stakeholders comfortable and enables a better future for payments and e-commerce?
I suggest we look at commerce for the answers.
Commerce becomes contextual, conversational and boundaryless
The early days of e-commerce and payments were fraught with challenges. Connectivity was limited, payments didn’t always work, logistics took too long, and fraud was hard to detect and deter.
Consumers couldn’t fully trust that people on the other side of the computer were actually going to deliver the products and services they offered.
There were questions around whether online commerce was reliable, competent, or honest – in other words, whether it was trustworthy.
We’ve already seen a massive shift in how and where commerce is conducted; before 1999, you went to the shop. Now the shop comes to you – no matter where you are in South Africa.
The years in between saw a steep rise in online and mobile commerce, and the creation of new offerings like direct-to-consumer subscription services and conversational commerce via social media, chatbots and voice technology.
The payments industry innovated alongside these changes, shifting to allow users to pay for goods and services at every turn, because consumers are mobile and on the go. Digital payments disrupted industries, created entirely new economies and transformed the way we work and live.
Think about how the internet has enabled even the smallest businesses to grow beyond their communities, sell nationwide, and even target a global customer base.
E-commerce has brought choice, variety and savings with access to endless aisles of merchandise to consumers across the globe, in a vast number of currencies.
That’s been driven by one thing – trust.
Trust must be earned, however. Customers and merchants need to feel confident in the payment mechanism, customers need to be sure their data will be safe, and they will receive their purchase, while sellers need to be confident that they will be paid for their goods. Once trust in the process is established, growth snowballs.
Security and trust become synonymous
At the heart of a trusted, frictionless payments experience is the secure and proper use of data. Customers want to be informed how their personal data is collected, stored, and shared in the entire commerce journey.
To harness data and use it responsibly at its full potential, a lot of boxes have to be checked: regulatory compliance, privacy, and security. Customer data should be protected by strong cybersecurity measures, supported by evolving fraud and risk features and handled in a way that meets regulatory requirements around the globe.
Building, maintaining and updating the proper controls for all of these areas are table stakes, yet also serves as a competitive advantage in an increasingly complex payments landscape.
Digitisation of currency helps remove the boundaries to financial inclusion
With any major transformation in the commerce industry, before it can become reality it must first be embraced by the entire ecosystem: consumers, merchants, partners and regulators.
This is true of cryptocurrency and virtual currency, and the underlying technology of blockchain. All have uniquely different potential in the commerce and payments industries.
Blockchain for example, is known for having potential in trust, identity, payments, contracts and custody. Virtual currency is not only a way to manage and move money, it provides access to the financial ecosystem without a bank account, something experienced by underserved communities. And while it remains volatile and under scrutiny on many levels, cryptocurrency is lauded for its anonymity and viability as an asset outside of the traditional financial infrastructure.
The digitisation of currency is only a matter of if, not when. The next decade will see currency become more digitised, and will likely experience increased support from fintechs, governments, and regulators.
But most importantly, for digital currencies to be adopted and become mainstream among South African consumers, they must feel that it’s a safe, secure and convenient method of participating in the financial ecosystem.
Ambient experiences provide limitless opportunities for commerce
We believe that the biggest advancement in payments is going to happen through the arrival of ambient payments – a world in which shopping intent and paying are no longer two explicit and separate actions.
In the next phase of commerce and payments, the lines will be blurred between consumption, the experiences of everyday life, and paying for those experiences.
Merchants will partner with payment platforms to make commerce as seamless as possible. Just think about the last time you ordered food from home.
Did you pay when you ordered it, when the food arrived home or somewhere along the way?
You didn’t have to think about it. It just happened - because we’ve made the payments disappear.
A disappearance made possible by payments that are powered by a robust, safe, and reliable ecosystem.
Payments become like air - invisible, but always there for your needs.
Sri Shivananda is the Executive Vice President and Chief Technology Officer at PayPal.
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