For Fintech Month here at TechSPARK, our wonderful editorial sponsors & the smart payments experts, Dojo, has put together this thinkpiece on what makes the future of payments so exciting. You can check out our other features on what is fintech and fintech for good companies in the South West.

Payments touch everyone. We all need to make payments multiple times, every single day. You can talk to anyone about how they enjoy making card payments— Phone? Card? Watch?! — or whether they still carry cash. It’s ultimately about a transaction, and everyone makes transactions to get what they want or need in their daily lives. With payments being such an integral part of our society, it’s fascinating to work out how to optimise and improve how we’re currently doing things to benefit consumers and businesses.

The payments space is incredibly innovative, and the speed of innovation has increased through the last two decades or so. Until the turn of the century, it was all about cash and cards. Since then, the growth of the internet has changed the payments world completely. There have been significant advancements with digital payment experiences, including faster and much more secure card transactions.

Beyond this, new, short-term credit products in the Buy-Now-Pay-Later space and big moves in the account-to-account payments have enabled consumers and businesses to complete transactions using payment methods that suit their needs.

The blurring of face to face and online payments has created new, efficient and valuable experiences for customers and businesses alike. There are now products where you’re making a payment online but in a face to face environment – like ordering your drinks from your table and paying immediately – and while this is a different ‘type’ of transaction, for customers and businesses the difference is unnoticeable. 

Simply put, the outcome of reduced friction in payments has so many benefits for both businesses and consumers; it takes the hassle out of things that always should be easy.

The Pandemic Effect

In the last couple of years, a lot of people have stopped using cash altogether. While this trend was already apparent, the pandemic sped it up significantly. A recent report from UK Finance has predicted cash transactions will make up only 7% of all in-store transactions by 2024. Even now, as restrictions have lifted in England, some businesses remain card-only, and we expect they will stay that way.

There will always be people who naturally have a preference for cash because that’s what they’re used to, but we don’t see people who have got used to making card payments or payments from their card going back to taking cash out of a machine and handling it.

The pandemic hasn’t just accelerated the shift from cash to card; the blurring of lines between remote and face to face payments has also made leaps forward. The deliberate move away from having staff take your order face-to-face came overnight, at scale, as restaurants were scrambling to use new payment products to take payments more safely and flexibly.

Traditionally table service was all about the card machine, and suddenly we were all making payments in these environments using a device, app or website for online-based payment. QR codes, for example, existed for 26 years without breaking into the mainstream until we had to scan them everywhere we went to log in or pull a menu up — now a QR code starts an ordering flow. As a result, it’s not a surprise that over 50% of consumers have tried a new payment method since 2020.

In a post-pandemic world, these payment products will remain. They can now be part of a story that enables restaurants to focus more time on the experience they’re providing rather than worrying about how they’ll get paid.

That’s a hugely positive move for businesses and how they can interact with their customers – which can ultimately turn these payment transactions into relationships that result in repeat sales for the business, higher customer satisfaction, and increased customer loyalty.

What’s next for payments?

There’s a massive amount of funding in the FinTech space, propelling innovation further. It’s such an experimental environment. Card payments are still the most popular way of making payments, but we will increasingly see the encroachment of alternative payments methods.

Buy Now, Pay Later is beginning to challenge the traditional credit card model where consumers face long, obscure terms and complicated interest rates. For short term debt, buy-now-pay-later is going to continue to grow. For online transactions, this represents 5% of the market.

In Australia, up to 20% of all online transactions were buy-now-pay-later—an impressive figure. People enjoy using these products, and it is proven to drive more spending from consumers, which is attractive to businesses. It unblocks that high bar of a high cost by spreading it out over multiple months.

The increasing usability and reliability of account-to-account payments through initiatives like Open Banking in the UK, has meant that some businesses will accept this account-to-account payment as a preferred payment method.

Nutmeg, and other players in the Wealthtech space, have these payments as their primary method of consumers funding their accounts. The benefit for these consumers is a feeling of a secure, authenticated payment experience through your mobile banking app – and the benefit for businesses is a drastically lower cost-to-serve. However, this payment method is not yet ready for more simple transactions that require speed.

We’re also beginning to see people accept cryptocurrency payments online or even in-store. The fluctuating value is a real issue for anyone trying to sort cash flow planning or understand the value of the coffee they’re buying. It’s not a standard way of buying a coffee to pay 20% more or less day-to-day, but crypto’s technology has real, practical applications for consumers and businesses alike.

With any alternative payment methods, consumers drive the demand. Ultimately they’re where the money’s coming from and who’s buying the products. It will be up to the payments industry to keep an eye on that and make sure they’re moving in the same direction as consumer spending habits and expectations.

How does Dojo fit into this?

We’re doubling down on helping businesses create great experiences for their customers. We’re making payments as frictionless as possible and providing tools to help businesses understand their cashflows, and manage great consumer journeys to thrive in the experience economy. We’re focused on best-in-market usability, outstanding operational support, and a seamless consumer experience. We’re not just consolidating ways of making and taking payments —we’re looking beyond this to help businesses succeed now and into the future.

Author

Charlie Masters – Head of Product, Payments at Dojo

Charlie is a Product Leader with experience across Fintech, Adtech and consumer software products. As Head of Product for Payments at Dojo, he leads and empowers a team of Product Managers to deliver valuable outcomes for our customers and theirs. Charlie enjoys the rate of innovation, the complexity of the challenges and the breadth of the impact that can be made in the Payments space.