By Michael Orlando, CEO, Fit Pay, Inc.
How consumers pay, and what they pay with, is changing. The growth of contactless and mobile payment options and new attitudes about payments among Millennials are forcing the traditional payment paradigm to evolve. The way in which people pay is now being driven more by how they live and less by what’s in their wallet. This new payment ecosystem will introduce a whole new level of convenience and security for consumers, and tremendous benefits for retailers.
Evolution can be slow, but we’re closer to a new payment paradigm than you might think, and we have the Millennials to thank for that. They want to be able to grab a coffee after a run, and pay with their smartwatches, or foot the bill for a night on the town with their phones, and many of them already do. Twenty-three percent of Millennials use contactless payments at least once a week. That’s second only to higher income individuals, 38 percent of who tap and pay at least once a week.1
Millennials are also driving greater acceptance of alternative payment options by virtue of their aversion to credit cards. Only 33 percent of people 18 – 29 have a credit card, as opposed to 55 percent of adults ages 30 – 49, and 62 percent ages 50 – 64.2 Millennials are using alternative payments to avoid debt and manage spending, and in the process, forcing change.
Millennials may be driving the market, but all consumers will benefit from the new ecosystem. Contactless payments are faster and easier, and because many new payment methods don’t share credit card information at the point of sale (POS), they’re more secure.
Contactless payments also produce significantly less “friction” at the POS than traditional payment methods. While the overall payment experience has yet to be transformed into something completely frictionless (If you’ve ever felt the ease of stepping out of an Uber car without having to pull out your wallet, or experienced the joy of the MagicBand at Disney World, you know what I mean by completely frictionless), more mobile and contactless payment options are making the consumer payment experience better and better.
So what does that mean for business? Today, contactless payments are at $6.70 Billion and they’re estimated to grow to more than $17.56 Billion by 2021.3 The mobile payments market as a whole is estimated to exceed $1 Trillion by 2019.4 That kind of rapid growth means opportunities for retailers: faster checkout lines, reduced risk of data breaches, the ability to make paying a positive experience, and, perhaps most importantly, greater opportunities for consumer engagement.
Consider Starbucks. They tied their customer loyalty program into their mobile app so that customers could not only use the app to pay, but earn rewards when they did it. Payments through their mobile app went from 2.1 percent of US retail sales to 21 percent in one year.5
It also means opportunities for new entrants to capture a piece of the trillion-dollar payment industry. With the ability to add secure payment capabilities to a wider range of devices, more players can now participate in the payment ecosystem, enabling them to not only build a stronger, more sticky relationships with their customers, but also to create new and recurring revenue streams.
It may take time before we say, “goodbye” to our cash and plastic credit cards, but mobile payments today look a lot like ecommerce circa 1997. The snowball has started to roll down the mountain. And for those are willing to step into the payments space, it means the opportunity shape this transformation.
Michael Orlando is Co-Founder and CEO of Fit Pay, Inc., a white-label technology platform that adds contactless payment capabilities to wearable devices—with very little start up time, no investment in software development and instant access to the leading card networks. FitPay was named a Gartner “Cool Vendor” in consumer financial services for 2016. Learn more at www.fit-pay.com, or follow Fit Pay on Twitter.