By Ray Birch
BOSTON—It’s no secret the pandemic has fast-forwarded the adoption of mobile payments. But just how far forward? One expert believes it has brought closer the day when consumers will scan their arms over payment terminals—and someday even pay by thought.
David Shipper, Aite senior research analyst, retail banking and payments, told CUToday.info the six payment form factors to watch are connected vehicles, connected home devices, merchant terminal biometrics, wearables, implants and pay by thought.
Shipper’s insights come at the same time a new study from Aite Group has been released that examines how new habits created by digital devices that are more convenient, easy to use, and faster are driving forward alternative payment form factors that will transform the way consumers pay.
“In the best-case scenario consumers will pay in the most convenient way that is available when it is time to make the payment,” said Shipper. “At the point of sale, that could be waving a wearable device or seeing a pop-up and pushing ‘confirm payment’ on the dash of your vehicle to pay for fuel.”
Shipper emphasized all of the payments methods examined in his study—"Beyond Cards and Mobile Phones: Payment Form Factors of the Future”—have potential to grow.
“But they also all have hurdles to overcome,” he acknowledged. “Although these alternative payment methods can be more convenient than paying with a card or phone, they will only grow by creating a habit so that they are not forgotten.”
While “pay by thought” is certainly a longer way off, Shipper said the analysis found there is consumer interest in the payment method.
“For a payment method that does not exist, pay by thought received a decent level of interest as a future payment method,” said Shipper. “Over half of the surveyed consumers (53%) stated they are interested in paying for items by thought, indicating a market for this payment option exists if it is ever made available.”
How Would it Work?
How might that technology work?
“Brainwave and neural technology may look much like early versions of voice recognition technology,” said Shipper. “Nonintrusive hardware can sit on someone’s head and read brainwaves, translating them into simple actions. More intrusive technology can surgically create a brain-to-machine or brain-to-computer interface that can allow humans to control machines or computers by thought. And while many use cases are medical, the discoveries from current brainwave and brain interface solutions can propagate to other fields.”
What is much closer to becoming mainstream, said Shipper, are wearables.
“Wearable devices are the most available option, and are likely to see the fastest growth in the near term,” he said. “However, many experts I spoke to believe that connected card payments have the greatest promise long-term, especially as vehicles become more autonomous because there are so many consumer and commercial use cases for streamlining the process of conducting transactions from the car.”
One of the biggest hurdles for connected car payments to overcome, however, is the lack of ubiquity in the market, Shipper said.
“Car manufactures, in-vehicle system providers, merchants, and other key players are all approaching connected vehicle technology differently,” Shipper explained. “Innovation and integration will be slow until there standards are created in this market.”
Consumer Attitudes
David Shipper
Another big question is can any of these new payment forms really challenge current payment types, since consumers don’t like change.
“These form factors must find a way to be available when it’s time to make a payment,” Shipper told CUToday.info. “Waving a wearable device over a terminal is more convenient than swiping a card or using a phone. If the consumer is not wearing the device when it’s time to make a payment, they will not build that habit. However a ring, bracelet, or implant that stays on the consumer at all times has the greatest chance of becoming a new habit at the point of sale.”
As experts have long stated regarding the growth of digital wallets, consumer acceptance of any new payment method will be driven by convenience—is it simpler to use than traditional methods?
“All of these form factors provide convenience over paying with a card or phone—linking biometric information like a hand or face image to pay, waving a wristband over a payment terminal, or clicking a ‘pay now’ in your car to purchase gas or pay for a grocery pickup,” Shipper explained. “These methods can all be more convenient than swiping a card or unlocking your phone, but they still all have their own unique hurdles to overcome.
The Merchant Hurdle
One big hurdle will be merchant adoption of payment terminals to accept new payment forms.
“Merchant contactless acceptance is growing, and that will help wearables and contactless implants to gain usage,” Shipper said. “Luckily, contactless acceptance has grown significantly in the last year, and will likely reach 100% one day. The biggest merchant acceptance hurdle exists for connected car payments, because that concept is still very new and there is still weak demand for paying with your vehicle.”
Shipper said it is time financial institutions begin paying closer attention to the new payment methods, no matter how far out they may seem.
“The key for issuers is to make sure they support tokenization and card provisioning as new options become available,” he said. “For example, supporting Fitbit Pay may not seem like a priority compared to supporting Apple Pay. But a heavy Fitbit user may move their relationship if they cannot use a card on their Fitbit. And that’s just one example. Google Pay is another example because they were mentioned as a leader multiple times for connected car payments. So, not supporting Google Pay may exclude an issuer from getting into vehicle payments as that grows.”
An Option to Consider
One option, added Shipper, is to consider issuing these devices.
“Many wearable device, implant and biometric merchant terminal companies would be eager to work with issuers to help sell or issue these products,” he said. “There are many ways for financial institutions to be a part of these innovations.”
The report is based on a quantitative survey of 383 consumers in the U.S.—interviews with 18 bank and credit union executives in the U.S., and interviews with global software providers, alternative payment form factor device-makers, and automobile manufacturers in March and April 2021.