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August 26, 2024
Understanding invoice payments and billing solutions in 2024
September 2, 2024The landscape of payment systems has drastically changed over the past four years. This is largely thanks to the COVID-19 pandemic pushing many businesses to incorporate futuristic and innovative yet simple payment solutions. During this time, cash payments proved difficult while we were all locked inside.
This was true worldwide, not just in South Africa. As consumers have become used to these fast, efficient, and safe payment options, the use of cash has declined globally.
But when using cash goes out the window, what remains to fill the void? Well, payments have changed, and right here is where you’ll find out what the future looks like. We’ll also dive into the 10 top trends emerging in the world of e-payments to help keep you and your business ahead of the curve.
How payment systems in South Africa are changing
Over the past few years, there have been multiple major disruptions in the traditional payment industry. Banks are being forced to rethink their entire payment infrastructure and technology.
In the past, consumers mostly needed to pay at brick-and-mortar locations, which meant South African bank cards and cash did the trick. In more recent years, customers have evolved and now need to pay for purchases on the web, their phones, smart watches, gaming consoles, and physical stores.
Furthermore, consumers expect the payments to be instant and seamless. This is largely due to the explosive growth in the popularity of eCommerce and mobile payment apps.
Best-in-class electronic payment portals, such as the Netcash Payment Gateway, have met these needs by offering a wide variety of payment options. What lies beneath these needs, and how is the world of payments adapting? Welcome to the world of alternative payments; there’s a lot to unpack
Why alternative payment methods in South Africa are on the rise
Alternative payment methods have been growing rapidly alongside new banking methods such as open banking. This has been fostered by companies becoming even more globalised and looking for more simple and unified solutions to their payment service provider needs.
Companies that serve international markets prefer a singular payment service provider that serves all of their markets over having different providers for each region. Multiple pay services make things complicated for businesses. Additionally, it can prevent them from offering flexible and state-of-the-art payment options to their clients whose payment needs will change as technology develops.
In the past three years, there has already been a shift from traditional payment methods to e-payment and mobile payments. South Africa is no different, as we have seen an increase in online payments over cash payments.
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How consumer needs are changing
South Africans are becoming ever more comfortable with non-cash payment options. These can range from mobile electronic payments to real-time payments. The most popular options are Buy Now Pay Later (BNPL), such as Payflex, and digital wallets. Digital wallets such as Samsung Pay, Apple Pay, and Google Pay allow customers to simply tap their phones or smart watches as a payment method.
A big reason BNPL has grown so rapidly is that it promotes financial inclusion in South Africa. BNPL offers every South African the opportunity to participate in events like Black Friday sales, for instance, regardless of their socioeconomic background.
How retailers are adapting to meet demand
Retailers worldwide have seen a decrease in in-store purchases and cash payment methods and a radical increase in online purchases and the online transactions that accompany them.
Making your choice of the right eCommerce platform is a vital one as it will offer an all-in-one solution for multiple modern payment options.
Another way retailers have adapted to meet clients’ demands is by offering in-house BNPL solutions. Alternatively, companies have also partnered with established credit providers such as Payflex and PayJustNow.
The four methods of payments you need to offer your clients to stay relevant
We briefly touched on these a little earlier. But now is the time to get intimately familiar with these payment options, as they will serve as the future lifeblood of your eCommerce business. Each one of these options has already shown to be popular with consumers. So, let’s take a look at what each option is, how they work, and what made each one popular.
Contactless payments
What are contactless payments? The most popular version of this payment method is the tap-to-pay functionality on your bank card. The card machine and cards usually have a Wi-Fi symbol on them to indicate that they are capable of processing this kind of payment.
According to bizcomunity.com, a staggering 75% of South African consumers use contactless payment methods. Additionally, 45% of Mzanzi consumers say that they have swapped out their old bank card for one that offers contactless payments, and this is evident in the surge in the use of PayShap in 2024.
These numbers make it extremely clear that consumers are looking to ditch cash as a payment option. Contactless cards are more secure and convenient for customers as they use a one-time, unique digital code to facilitate secure communication between your card and the machine.
Mobile payments
Mobile payments are the next most popular payment option for customers as it doesn’t require anything other than their cell phone. Equally as convenient and possibly more secure than contactless payments, mobile payments are also a simple tap on a card machine, but with your phone.
Your payment data is securely stored in an encrypted digital wallet on your phone. As briefly mentioned earlier, these wallets are powered by some of the tech world’s biggest companies, such as Google, Apple, and Samsung. The biggest draw to this payment option has to be that if you forget your wallet at home, you can just tap your phone.
Of course, there are other digital wallet apps that have made paying faster and easier, such as Zapper, FlickPay, and Masterpass. LinkedIn reports that a GSMA survey has revealed that these apps and wallets are empowering up to 477 million Africans to make fast, convenient, and secure payments.
Digital payments
Digital payments can refer to any kind of payment in this list, but for all intents and purposes of this guide, this section will focus on crypto wallets and the meteoric rise of cryptocurrencies.
Crypto wallets such as Meta Mask are an absolute must when dealing with cryptocurrencies, as they are the bridge that allows consumers to spend their traded or mined cryptocurrencies.
According to statistics done by Triple-a, 86% of South Africans are aware of crypto in some capacity, and a whopping 46% of South African crypto owners have more than R10,000.00 in crypto assets. Consumers love crypto because it offers them anonymity as well as several layers of security that Fiat currency just can not offer.
The benefit of supporting cryptocurrency for retailers is that cryptocurrency spenders are usually more wealthy, as the technology has few barriers to entry for consumers with lower incomes. By supporting crypto wallets in your checkout process, you can accommodate customers who may be willing to spend a little more than your average client.
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Buy now, pay later
Buy Now, Pay Later is perhaps the fastest-growing alternative payment method in South Africa. The previously mentioned alternative payment solutions all have some sort of technological requirement, whether that is cutting-edge card tech, the latest smartphone or watch, or a working knowledge of cryptocurrencies.
BNPL, on the other hand, even offers a new way to pay for those Mzanzi residents who opened their bank accounts decades ago and haven’t upgraded anything. The only requirement is a minimal amount available in their South African bank accounts or credit cards.
The more appealing aspect of BNPL is that it empowers customers to buy items they vitally need right now without necessarily having the funds available. Not offering a BNPL option will only serve to harm your business in the long run, but by offering one, you can smash your eCommerce goals.
Imagine the following scenario: Jane Doe has a very important interview for a new job, but her webcam broke, and she doesn’t have the funds to replace it, but she would if she got this job. What a paradox, right?
Now, imagine she comes across your killer eCommerce store, and you offer her a BNPL option. Not only will you make a sale, Jane will see your company as a lifesaver and undoubtedly return with more business.
Voucher payments
Voucher-based payments have been around for a long time, and especially in South Africa, it’s a popular payment method for millions of people. There’s no getting past the rapid push for digitalisation worldwide, and to match this call, voucher payments are proving their worth to eCommerce businesses.
At its core, this method of payment functions on a basic methodology. During an online checkout, your customer simply selects to pay via voucher.
Depending on the voucher brand selected, they are then presented with a voucher code that can be printed or displayed on a mobile device (such as SCode). Using a similar service, such as 1Voucher at checkout, with the physical, preloaded voucher’s unique code online will result in it being debited in full or in part.
Keep in mind that voucher payments are at the forefront of hybrid payment solutions, and options are widespread, like Flash 1Voucher or OTT.
The dawn of a new payments era
The 2020 COVID-19 pandemic may be over, but its impact is still felt throughout the world today. One of the ongoing symptoms caused by the pandemic is that the payments world has been thrust into a new era. This era has been dubbed the 4.X era, coined by Capgemini in their World Payments Report 2021.
In this new era, the focus has shifted to experience. The goal is that retailers become invisible and embedded while creating a collaborative and omnichannel consumer experience. This is placing pressure on traditional banking institutions to either adapt or be left behind in the annals of history.
10 most exciting payment trends on the horizon
Now you know what payment options your business should offer your clients in addition to the traditional ones. After accepting these payment options on your online store, the next step is to stay ahead of the curve. This is a daunting task, to say the least, but luckily, you can find the 10 most interesting trends that are setting the payment world ablaze below.
1. Accelerated growth through next-gen payment methods
As online purchases have become more and more prevalent, the traditional methods of payment have sharply decreased. Paying with cheques, credit or debit cards, as well as paying with cash, were consumers’ only choices just a few years ago.
In recent years, as digital payment options have become available, consumers have shown that they prefer to pay quickly, securely, and conveniently. Now is the time for traditional payment providers to sink or swim. Consumers are increasingly dictating the payment methods they want businesses to provide – a trend that shows no signs of slowing down anytime soon.
Bulky leather wallets are being replaced by digital ones as consumers continue to adopt online shopping, online payments, and other digital transactions. Boku Inc.’s future prediction, based on a study they conducted, shows that around 60% of the world’s population will have a digital wallet by 2025.
2. Customer journeys and loyalty will move front and centre
A customer’s journey has always been important to retailers, but going forward, the time spent at the till or, more specifically, the digital checkout is going to become more and more important.
Paying close attention to how customers shop and what they expect from their shopping experiences is the key to meeting those expectations and driving online sales. This needs to be done in conjunction with a loyalty system that will help retain clients and generate repeat business.
Returning customers is vital for any business in the modern era, as consumers have virtually limitless options on where to spend their hard-earned money. The best way to guarantee your business’ future is to offer what your target market wants and how they want it. Rewarding them with special offers and discounts for repeatedly buying from you will further galvanise their willingness to return.
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3. Blockchain technology’s popularity will continue to grow
One of the fastest emerging payment trends is that of blockchain technology. You have already learnt about how quickly Cryptocurrencies are being adopted by consumers and the benefit of catering to those clients, but are there any downsides?
Yes, there are a few. The biggest is the volatility of a given crypto coin’s value. Bitcoin and Ethereum are the most popular coins and lead the charge as payment options, but they can drastically change in value overnight. The next issue facing cryptocurrencies is the severity of regulations they are facing or, in some cases, the lack of regulations around them.
That being said, the e-gaming sector has seen massive growth in how people play and bet on sites that support blockchain payments. Lighting the way for their eCommerce counterparts to include them as payment options during checkout.
4. Digital identity infrastructure will become a priority
Consumers are always looking for their payments to be more secure. In an ideal world, payments should be completely free from the risk of payment fraud or identity theft. Unfortunately, the current payment processes are fragmented and inconsistent, leaving consumers and retailers frustrated.
Moving forward, the payment world is seeking to overhaul how they authenticate digital IDs and make payments as secure and frictionless as possible in the 4.X payment era. The private sector is not the only one working on this, though.
Even governments have stepped in by launching national identity initiatives which make creating digital IDs mandatory. Countries such as Australia, New Zealand, and Canada have already or are in the process of legislating these initiatives.
5. Biometric authentication will replace PIN codes
Another security-driven trend is that pin and signature authentication is set to be replaced by biometric authentication methods. This will allow clients to use their faces, fingerprints, or voices at the point of sale instead of punching in a pin or signing a receipt.
These measures will also be able to be implemented in digital stores as consumers continue to purchase more and more online on devices that have biometric systems built into them. KBV Research estimates the global contactless biometrics technology market size will see a compounded 19.1% increase by 2026.
6. Real-time payments will continue to skyrocket
Real-time payments have substantially increased since 2021. Payneteasy estimates its market value to be over R57 billion and that it will continue to increase going forward.
An interesting side effect of this is that many financial institutions can not keep up with this demand and have outsourced the bulk of transactions to cloud-based Payment-as-a-Service (PaaS) solutions. It has also been projected that 8 out of 10 financial businesses will use these outsourced cloud services by 2025.
The agility, affordability, and scalability of PaaS cloud solutions offer banks the foundations they need to offer their clients reliable real-time payments. PaaS Cloud services will also allow banks to offer real-time payments to their clients who need to make international payments.
Considering the continuous demand for real-time payments, on the business level, this same demand is ever present and being met well with various examples available such as PayShap. Real-time Clearance (RTC) effectively manages high-volume payments (in the millions), and while the concept for both individuals and corporations is the same, the flexibility of these payments makes them a champion to everyone.
7. The emergence of central bank digital currencies
What are central bank digital currencies? Essentially, they are cryptocurrencies, which we touched on earlier, but with many of the drawbacks removed as they are backed by central banks.
This will potentially solve major issues such as money laundering and the regulations surrounding other cryptocurrencies. It may even help equalise financial inclusion. As recently as 2021, up to 86% of the world’s central banks have started looking into developing digital fiat currency.
8. Online sellers will continue to develop flexible online payment methods in South Africa
The ways consumers shop and pay online are forever changing. Online retailers’ only hope is to continue to adapt and offer multiple flexible payment options. Just a few years ago, when shopping online, your only option was to pay with a credit card. If you were lucky, you could make an EFT payment.
Fast-forward to today, and the number of payment options continues to grow. Retailers will have to continue monitoring their customers’ favourite ways to pay and adapt to changes quickly to stay relevant in their clients’ eyes.
Currently, you are able to pay with QR codes and the simple tap of a phone. In the future, you may be able to pay using biometrics. Whatever the payment solution, retailers will need to continuously change with consumers’ needs and expectations.
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9. Augmented reality (AR) is set to expand as brands look to offer new experiences for shoppers
As Gen Z becomes a more dominant buying force, online sellers have needed to look at some new innovative window-shopping and buying experiences for the tech-driven generation.
That is where VR and AR, that is, virtual reality and augmented reality, come in. These technologies allow stores to offer similar experiences to brick-and-mortar stores but in the comfort of a consumer’s own home.
Adopting these technologies will help businesses bridge the gap between traditional sales and making purchases in virtual gaming worlds, which Gen-Z is more accustomed to.
10. Business models such as PaaS and data-based APIs will continue to rise
Traditional revenue models are becoming less and less profitable for financial institutions, forcing them to seek new revenue streams. Each and every bank and financial institution will need to create strategies that leverage data-based APIs and open banking.
The 4.X payment era has made streamlined APIs and the monetization of data the top income streams for banks. This means banks are being forced to invest in new data-led services.
Furthermore, banks need to lower capital expenditure whilst increasing flexibility and the ability to offer new functions. These need to include payment schemes and clearing access, alongside launching new products faster.
For example, Klarna is a Swedish financial tech company that offers payment plans popular with younger consumers. These plans include social shopping and finance. Klarna recently partnered with Simon, the largest shopping centre operator in the US.
This business collaboration gives Simon shoppers access to Klarna’s unique in-store payment solutions, making it easier for them to pay and crucially driving younger shoppers to the malls.
Final thoughts on the future of digital payments
The world of payments has developed at glacial speeds up until 2020. The pandemic kicked off a lightning-fast race to develop fast, secure, and simple payment methods. Keeping up with this segment of business may prove to be tricky, but you can cut out all of the stress by subscribing to Netcash’s best-in-class payment platform.
Author:
Candice Sergeant
Product Manager
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Candice Sergeant is a digital dynamo at Netcash, where she’s on a mission to help South African businesses level up their online game. As an eCommerce Product Owner, she’s got her finger on the pulse of the latest trends and technologies, constantly seeking out ways to boost sales and streamline operations. With a knack for spotting opportunities and a passion for innovation, Candice is your go-to guide for taking your e-commerce business to the next level.
