One of the many things that technology has shown us over the last years is its enormous potential to reinvent commerce.
Nowadays, there is a plethora of things, including connected devices, gadgets, accessories and sensors, all with the potential to disrupt commerce and create new payment experiences. As we can see daily, the media is filled with headlines about artificial intelligence, blockchain and the Internet of Things and their impact on our lives and the way we shop.
In such a context, the US leads by example. Over the years, the market has been at the forefront of many innovations in payments technology, mainly driven by US-based giants, including Amazon, Apple, Facebook, Microsoft, IBM, Google, eBay and the list could continue.
Since it would take a very long book to cover such a topic and complex market in depth, the present article focuses only on some key trends and developments in the US.
Cards Usage and the Rise of Alternative Payments
An in-depth overview of the online payments landscape shows a great variety of systems, ranging from credit cards and mobile systems to payment services via online banking. However, when analyzing their actual usage, there is still a clear lead for credit cards. The main reason?
The card networks have historically dominated the country`s online payments landscape, with loyalty programs as the top card feature for US consumers. As revealed by the “10 Mega Trends Driving the Future of Payments” Accenture study, the importance of rewards as a competitive differentiator has never been greater on this specific market. Notably, 48% of consumers are willing to switch their primary card to receive higher value for purchases and 42% would switch for a large up-front bonus, the same source indicates.
Beyond branded credit and debit cards, it’s important to monitor and understand another major US market characteristic, namely the importance of alternative (non-card) payment methods. Among these, PayPal and digital wallets continue to be the most popular.
Higher Impact of Gen Z Consumer Type
Gen Z, the generation after Millennials, born in and after the year 2000, represents a customer segment for whom shopping is an indispensable part of life. They hold USD 44 billion in buying power and are definitely a particular type of shoppers. They are price sensitive, know technology better than any previous generation, use mobile to manage key aspects of their financial lives and depend on apps on a daily basis.
This segment, which is projected to represent nearly 40% of all US consumers in 2 years time, will continue to demand immediacy and highly personalized and relevant shopping experiences. Investing time and resources in monitoring their shopping behavior is key to ensuring access to the products these consumers want, exactly when and where they want them.
Starbucks Leads the “Pay” Wallets War
Digital wallets have their well-deserved place alongside other payment options in the US ecosystem. The notion that digital devices can replace physical wallets in consumers’ pockets has certainly great appeal in the US: they whip out the mobile phone, wave it around a bit and the payment is made. Convenient, frictionless and simple.
Recent data suggests that Starbucks is set to remain the most popular proximity mobile payment app, staying ahead of Apple Pay and other competitors. More than 23.4 million people ages 14 and over are expected to use the Starbucks app for a POS purchase at least once every six months. Apple Pay comes second (with 22 million users), followed by Google Pay (11.1 million users) and Samsung Pay (9.9 million).
The Starbucks app’s popularity is explained by the value it brings to its customers, its early adoption, ease of use and a loyal customer base that enjoys a robust rewards program. An important differentiator is that Starbucks’s in-store mobile payments app is available on both iOS or Android, while users of the other 3 types of wallets are restricted by the type of phone they have.
It is difficult to predict who will be the absolute “winner” of the US wallets war, but it certainly is interesting to watch the future evolution of the market players and the strategies they put in place for higher market share.
Going Omnichannel to Win
In the past, payment methods were closely connected to specific channels or contexts. POS, online and mobile contexts all had their own characteristics. We now see traditional businesses moving into eCommerce, online payment methods developing value propositions in brick-and-mortar contexts and finally, we see mobile devices taking the internet literally everywhere.
As consumers increasingly use their mobile phones, tablets and computers to shop anytime, anywhere, this trend is pushing retailers to adopt increasingly complex and powerful technology. A very good example is Amazon, which has managed to transform itself from an online-only bookseller into a retail giant. Amazon enables its customers to buy products no matter where they shop: online, on mobile, via voice command (Amazon Alexa) or checkout-free grocery stores (Amazon Go), or ‘dash’ buttons.
In the fintech world, competition and innovation go hand in hand, and the US landscape is solid proof, with global internet giants of the likes of PayPal, Google and Amazon as well as the card networks constantly testing new propositions. It will be interesting to watch how these industry players will approach the digital opportunities in the years to come, how they will defend themselves against competition and the way such initiatives will impact the US consumer adoption.
Upcoming event: IRCE, 5 – 8 June. We will be there, getting more insights from the relevant discussions. Reach out to our team for an on-site meeting or stay tuned for more US market coverage.