1. The Mobile Take Over
Generation Z (those born between 1996 and 2010) are arguably having the biggest influence on societal trends today. For instance, most of those classed as Generation Y can remember the days of dial-up internet and landlines, as the World Wide Web wasn’t invented until 1990. This generation was born and lived at least a few years of their lives outside of the always-on, constantly connected, mobile-driven world that we know today. However, Generation Z has been born into the era of the internet and mobile devices, and don’t know life any other way.
The oldest of this generation has now begun to enter employment and has the spending power which means their demands have quickly driven societal expectations with regards to how mobile technology should be recognised at virtually every consumer touch point – particularly within the retail and banking sectors. In fact, within the next four years, Gen Z will account for 40 percent of all consumers, and their expectations for fast, seamless and secure retail and banking experiences will be higher than ever.
Without a doubt, having a mobile first solution will be even more critical in 2019 should both the physical and online retailers and banking institutions want to survive on the torturous British highstreets. WompMobile, in collaboration with Google, analysed their eCommerce clients and found that those which used Accelerated Mobile Pages (AMP) increased conversion rates by 105%, decreased bounce rates by 31% and increased click-through rate from search engines by 29%1.
2. Rise of Alternative Payment Methods (APMs)
Visa and Mastercard account for only 23% of global eCommerce today; by 2021 that number will be as low as 15%2. This is driven by merchants realising that in order to reach a broader global consumer market, they need to offer the payment method of their customers’ choice. Unlike the US and the UK, for example, where a strong and established card acquiring model exists, many markets prefer ‘alternative methods of payment’ (often this is culturally driven).
Card centric cultures, such as the UK, that heavily depends on debit and credit payment cards, seeing alternative payment methods enter the market, such as PaybyBank app, Venom and Klarna etc. It is also worth noting that in China, UnionPay (local credit card) recently overtook Visa as the world’s largest form of card payments by transaction value and number of users. Even ApplePay is entering into the non-debt, cash based German market.
The list is almost endless as there are approximately 350 relevant APMs worldwide, but it is key that the merchant chooses only what is needed for them and ensures checkout pages are relevant and not cluttered. 2018 has seen many Payment Service Providers (PSPs) and Acquiring Banks recognise this and begin to add APMs to their portfolio for merchants. However, if merchants don’t address cultural payment differences with the help of their PSPs, 2019 will see them miss out more than ever. Consumers don’t take any hostages and if you can’t give them what they want, they will quickly go to a competitor who can.
3. Trend towards omni-channel shopping
There is much hype over brick-and-mortar stores becoming a thing of the past. However, with consumers craving something tangible, I predict that in 2019 we will see the online shopping phenomenon begin to penetrate physical stores.
For some consumers, nothing e-commerce has to offer can quite measure up to the physical in-store experience. High street outlets are also recognising that creating a social and omni-channel experience is key to bringing footfall back.
In fact, leading global retailers like Amazon and Alibaba are now experimenting with the newly revived power of hands-on shopping. For example, Amazon recently opened a store in New York offering a range of bestselling items and additional items that were chosen to directly reflect consumer buying behaviours in the region. The concept store is set to turn traditional shopping on its head by replicating the virtual within the physical. Copying the structure of the Amazon website, the store has products organised by headings already known to online shoppers such as “Trending Around NYC”, “Frequently Bought Together” and “Amazon Exclusives.”
Alibaba Group also seems to believe in the renaissance of physical stores, as it recently debuted its first ‘Fashion AI’ concept boutique in Hong Kong. The store displays a selection of Guess apparel with the help of a “smart mirror” that shows product information on a special screen while shoppers are examining the items. The smart mirror points to where the garments in question can be found, utilising another way to bring the digital shopping experience inside physical stores using digital signage.
While digital kiosks aren’t unknown to brick-and-mortar retail, in 2019 digital signage, will begin to offer additional interactivity, increased engagement, and a seamless omnichannel experience for consumers. For example, just one of the many benefits will mean customers will be able to use the interactive screens to order goods in-store to be delivered direct to their front door. Shoppers will be able to enjoy product visualisation that was once perhaps only available online via digital installations in physical environments, where experience will become a central point to the store of the future. Besides offering improved product visualisation, digital signage will also allow customers to browse goods that are not available in stores and select direct home delivery. All of this will be made possible with the introduction of omni-channel payment methods, such as Alipay and increasingly PayPal, that can be used online and in-store with the same account, also acting as loyalty cards, to make payments easier than ever. Just about any shopping scenario will be possible.
4. Mergers & Acquisitions
The digital payment and transaction processing segment accounts for 40% of the fintech sector’s top deals in 2018. For example, PayPal’s $2.2 billion all-cash acquisition of Stockholm-based payments provider iZettle and Worldline, agreed to buy the payments unit of Swiss stock market operator, SIX Group, for $2.75 billion.
As for online and electronic payments processing, whilst the transactions were predominantly focused in the U.S market, the largest of these deals was the $442 million sale of First Data’s card processing business in seven European countries to its Italian rival SIA. Other prominent acquirers in 1H2018 include payments processing company, Paysafe Group, which was itself taken over by buyout firms, Blackstone and CVC capital Partners in 2017.
The implementation of Europe’s PSD2, is likely to be a major game changer for the M&A landscape as it will force banks to collaborate and innovate with Fintech providers, as well as encourage pan-European competition and participation in the payments industry, including non-banks. As a result, it is likely to encourage a high-volume of bank and Fintech M&As early next year. Those new to the market will therefore find a more level playing field with harmonised consumer protection and rights, which will encourage new entrants to the financial services market and fuel further M&A deal growth and valuations.
2 2018 PPRO Group Payment Almanac, Source: Edgar, Dunn and Company