A common challenge for brands of all sizes is ensuring that customers have an easy and safe way to complete their transactions. But in a fragmented payments world with thousands of banks, vendors and purported solutions, a single technology has yet to emerge as a key leader.
Instead, multiple forms of payments are coming up for in-person and online transactions. Retailers as big as Amazon and as small as a farmer’s market shop are experimenting with tactics like contactless payments and mobile point-of-sale systems. There’s also a bevy of new credit and lending technologies available to shoppers as companies like Afterpay, Affirm and Klarna deploy new Buy Now, Pay Later products and retail partners.
In 2023, consumer-facing fintech — which includes lending platforms, credit and digital banking, wealthtech planning and investment tools as well as consumer payment companies — saw less investment than prior years, but deals still held steady. Data from Pitchbook shared with Modern Retail show that 2023 saw at least $32.6 billion in global fintech deals. But that’s just a third of what was seen in the fundraising boom times of 2021 at $97.6 billion. At the time, fintech platforms were raising money and launching myriad new products to grow their customer bases. Now, those companies are working on ways to reach more brands and keep up with shoppers’ habits.
Tony Walsh, vp of payment solution sales at Ingenico, which works with over 300,000 merchants via physical point-of-sale terminals and e-commerce payment technologies, said the main theme in payment technologies moving forward is ensuring that a brand’s shoppers can pay how they want to — in terms of method, product and financing.
“Some retailers like to say, a cigar box and a calculator is my dream point of sale, right,” he said. “But what we’re seeing is that the consumer has a preference and how they want to pay.”
Here’s a look at some of the payment trends to watch in 2024.
Further adoption of tap-to-pay, digital wallets
At least half of customers are using contactless payments, meaning tap-to-pay credit cards or mobile wallets like Apple Pay, according to a recent poll from Mastercard. The trend took off more during the start of pandemic as people veered away further from cash. In response, retailers with physical locations are increasingly adopting infrastructure to accept contactless payments — and experts say 2024 will see continued mainstream adoption.
Tanuj Parikh, head of sales at Block’s Afterpay and CashApp, said that small sellers are adopting tap-to-pay mechanisms, like using Block’s Square, because they can easily conduct transactions on their phone. And it’s also convenient for shoppers, with just over half of people under age 50 saying they don’t worry about carrying cash.
“Tap to pay is just taking off, but we expect it to grow,” Parikh said. “There’s a lot of flexibility and ease of use there and we think that’s appealing for businesses of all sizes.”
Nonalcoholic beverage brand Boisson has an online store and five retail stores across New York and California. Co-founder and CEO NickBodkins said about 99% of transactions at its physical store are contactless. “I”m happy we’re finally there,” he said.
But it’s not just mobile-based systems that will help shoppers pay with their phones. Walsh from Ingenico said that physical terminals to be used in stores are being made with downward facing cameras. This allows them to accept digital wallet bar codes or QR-based payment systems. This kind of software-based point-of-sale (also called SoftPOS) also allows retailers to incorporate other app or services, like a rewards program.
Mainstreaming this technology, though, will require brands to invest in upgrading their hardware. They also have to ensure systems comply with PCI (Payment Card Industry) requirements to ensure safety and security. Still, Walsh from Ingenico said he expects to see increased adoption among retailers. Otherwise, they risk losing shoppers who are looking for increased convenience.
“If you leave your grocery store that you’re probably loyalty to some extent, and move to another grocery chain because they give you the payment options you want, there’s a cost of acquisition of that consumer,” he said.
Stabilization, expansion of BNPL and financing options
Buy now, pay later services boomed several years ago as people hunkered down during the onset of the Covid-19 pandemic and shopped online. But spending continues to grow, and what was once associated as a Gen Z phenomenon has expanded to a broader audience who use BNPL for general merchandise and groceries, as well as big-ticket expenses like travel. Bankrate reported that BNPL transactions totaled $6.4 million, up from $2.6 million a year prior.
Still, that’s just a tiny sliver of the overall consumer spending market, indicating BNPL has yet to catch on with the majority of consumers. There’s also the potential for new regulations from the Consumer Financial Protection Bureau that could potentially rein in use of the services.
In the coming year, BNPL companies and financial experts say they’ll be looking to offer new categories and different financial products. Afterpay’s Parikh said the area overall has “huge growth ahead,” with Afterpay looking to do longer installment plans or bigger-ticket purchases. He also anticipates growth in the overall sector as more people shop from their phones. About two-thirds of Afterpay’s transactions are made from phone purchases, he said.
“I think this speaks to the demographics that really resonate with BNPL. Because it’s a younger audience, It’s millennials and Gen Z, and they are used to increasingly doing everything on their phones,” he said. “We think about it as we’ve got to be where our consumers are.”
Relatedly, more financing options like BNPL are likely to show up in online and physical stores — like how Affirm was recently added to Walmart’s self-checkout system. Terry O’Neil, head of connected commerce and strategic growth for Citi Retail Services, said that’s one area where the company’s Citi Pay products are expected to grow. He said the products are designed to expand from the pay-in-4 model and provide other financing terms.
“You’ll continue to see a demand for the convergence of physical and digital,” he said. “We are hearing from consumers again around expecting payment optionality online, and they are having those same expectations at the physical checkout.”
More loyalty and rewards at checkout
Loyalty programs and rewards are part and parcel to shoppers for some major brands, like Starbucks Rewards or Sephora’s Insider program. But smaller retailers are getting into the trend, too, as a way to encourage future purchases. And the best way to integrate the program often comes down to an app at checkout.
Boisson’s Bodkins said that the brand has learned into a loyalty program that gives shoppers a discount at checkout. He said it drives business and helps encourage bigger cart sizes as people experiment with new options.
“To get into the psychology around it, it’s a great way to drive customer loyalty at key moments,” he said.
Rob Anderson, partner at FTV Capital, specializes in payment and point of sale tools for small and mid-sized businesses, including B2B payments. He said that personalization in payment offerings is a continued trend, like seeing credit card offers that align with life stages.
“Rewards are a really strong driving force,” Anderson said.
Scanning a tag is slowly becoming a thing of the past, with new functionalities like Uniqlo’s RFID checkout gaining in popularity. Grocery stores are also experimenting with items like AI-powered “smart carts” that allow shoppers to pay based on what’s in their cart, with delivery service Instacart growing its footprint in the space throughout 2023.
Walsh from Ingenico said this kind of contactless scanning is continually being tested, especially in quick-serve environments like convenience stores and airports. There’s also the scanless checkout “Just Walk Out” systems deployed by Amazon, where the user scans their card upon entering and exiting the store.
“There are multiple ways to execute on that. But it’s going to be most likely driven off of bring-your-own-device type technologies,” he said.
Not be confused with a shopper paying from their mobile phone, a mobile POS means that a retailer can take their checkout with them. This strategy was employed in 2023 by GNC, the Pittsburgh-based nutrition and wellness chain, to allow shopping from events.
The mobile POS is also seeing increased adoption from the restaurant and service industry, with more table side checkout options. Square’s research from its 2023 Future of Commerce report found that 62% of restaurants have pay-at-the-table devices. Food and drink is also Square’s fast growing vertical by gross profit, with a 29% year-over-year growth in the third quarter of 2023.
Walsh from Ingenico said the company worked with AT&T on a system of 40,000 iPads across its fleet of stores. The iPads are used by store associates to checkout customers from anywhere in the store. While such a strategy might not work for all retailers, liek those who have customers with a cart full of dozens of items, Walsh said a mobile POS gives brands the opportunity to serve customers in a more personable, efficient way.
“We can remove all of this company’s tech, and just put it into the palm of the hands of the store employee,” he said.
Parikh from Afterpay and CashApp said that the company is looking at ways to continue to itnegate its products together so that in-person stores can offer payments that include Afterpay or Cashapp pay. These methods can help drive hte experience of bein
“From a consumer experience, that stuff is delightful.” Parikh said. “We think consumers are going to continue to demand that.”