When Apple announced in February that it is launching Tap to Pay, its own payment collection system, it was easy to be blinded by what this news really meant for retailers. This is not to say that having the world’s largest business launch a payment system that can be used on millions of devices already out in the world isn’t big news. However, the main story is what is going on behind the scenes, and the explosion in payment innovations that Tap to Pay is putting a spotlight on.
Payment innovation is not a new trend. The fact is payments are constantly evolving and developing. From bartering to cash, cheques, payment cards, and now mobile payments, how we complete transactions is an ever-changing process. By creating excitement and helping consumers adjust to new payment devices, however, Tap to Pay will accelerate the adoption of the latest payment method to join this list – alternative payment methods (APMs).
APMs – the new kid on the block
With no need for a credit and debit card, APMs are a new setof payment technologies that offer significant advantages to retailers. For instance, once set up and in place, APMs can provide features such as instant bank-to-bank transfers as a form of payment. This form of transaction works by not requiring a payment card and consequently allows retailers to access reduced processing fees. These savings can then be put towards supporting business growth or passed on directly to customers as incentives in a loyalty programme.
Additionally, APMs can also help facilitate other transaction methods like instalment payments such as Buy Now Pay Later (BNPL). An increasingly popular payment method, the BNPL market alone is projected to be worth $20bn globally by 2028. Making this feature easier to access, increases the customer experience (CX) as consumers can easily spread the cost of large ticket items while enjoying products sooner. All of which help drive up sales volumes and revenues, enabling businesses to grow faster.
However, while the launch of Tap to Pay will put a spotlight on payment innovation and APMs, it is worth remembering that the trends powering these changes have been going on for a while. In fact, in some ways, the US and UK are playing catch up to other regions. Anyone who has taken a trip to China recently will no doubt have seen the ubiquitous use of systems like Alipay and WePay. Already these QR code-based APMs make up over 90% of all third-party payments in the region. Similar solutions then can be expected to see high levels of growth in UK and US markets.
Changing consumer behaviours
At the heart of what is driving this growth and change – and the big drive behind why Apple has decided that now is the time to become a payment solutions provider is the rise of mobile phones in the transaction process. Data from UK Finance highlights that over 17 million adults in the UK alone are now registered for mobile payments. This represents over a quarter of the UK’s population! While the impact of the pandemic has certainly accelerated its adoption, mobile payments had seen significant growth beforeit took place.
Thanks to the growth and adoption of mobile payments, consumers are more willing than ever before to try new payment methods. While there are naturally still lingering concerns around security, these are gradually decreasing as consumers become accustomed to paying securely via their mobile devices.
This increased consumer willingness to try new payment methods, combined with the latest payment innovations is great news to retailers. For any new form of payment to take off and enjoy widespread adoption, it will need to appeal to customers andnot damage the retail experience. By tapping into the power of smartphonesand using the latest technology to enable terminals to connect to them via systems such as QR codes, APMs offer advantages over card payments, but without creating any additional friction in the transaction process. Whether a retailer is looking to improve their CX, reduce processing fees, or increase sales, APMs then are perfectly placed to help.
Consequently, the arrival of Apple’s Tap to Pay is good news for all retail businesses, as every new entry into the payment space helps increase the choice and control on offer. However, by further helping consumers adjust to paying by differentPOS devices, Tap to Pay will increase the adoption of new payment methods including APMs. For retailers wanting to offer the best CX and increase revenues, it’s time to add APMs to their payment infrastructure.