Payment industry predictions for 2012

With all the innovation in technology and business in and around Singapore, as well as new consumer behaviour, it’s sometimes difficult to separate what will shape the future of payments from what is just hype.

By closely examining where new technology and consumer simplicity intersect it may be possible to tell which payment innovations are ready for prime time – making the picture a bit clearer.

We see hundreds of great ideas, but only a few have the right combination to get traction and scale right now. With that in mind, here are a few predictions for the payments industry in 2012.

Mobile payments continue to skyrocket
We got a taste of mobile payments growth in 2011, and this growth will continue. The mobile industry is shifting into “third gear,” with smartphone penetration reaching global scale and well on the way to becoming the dominant connected device for 2 billion+ people over the next few years.

In Singapore, smartphone penetration is at 70 per cent (Nielsen Southeast Asia Digital Consumer Report, November 2011) and a recent PayPal study revealed that nearly 7 out of 10 Singaporeans said using their mobile device would be faster and more convenient because they can make a transaction “anytime, anywhere”.

Add mobile innovations like the iPad, which has already become the fastest adopted electronic device in history, and mobile is really hitting its stride. The future of computing is happening now, and quickly reaching a level of scale to enable global innovation.

Although scale is impressive, the true power of the connected mobile device lies in how dramatically it is changing consumer behaviour and disrupting existing franchises. Use a mobile application like ComfortDelGro Taxi Booking to get a taxi, and you would not like to do it the old way again. A social networking phone app like “Foursquare” can fill a restaurant in hours with a mobile offer, allowing local restaurants to skip the process of building a website.

With their innovative mobile app, local online pet store SingPet has brought the store to a customer’s pocket. Equipped with their iPhone, Singaporeans can scan the barcode on their pet's favourite food then pay with PayPal in as little as two clicks and have their purchases delivered within 48 hours.

You see QR codes in newspaper advertisements or movie websites. We foresee that in 2012, Singaporeans will start purchasing goods simply by scanning QR codes on their smartphone and buying directly from posters and billboards. Payment helps accelerate these models through convenience and accessibility, and in turn, is forced to innovate itself to keep up.

A fuller integration of the online and offline commerce worlds
As our mobile numbers demonstrate, in 2011 we entered the era of the connected consumer. All of us are now rarely more than four feet from a connected device at any given time – and we are taking full advantage of this connectivity.

We are using the internet to do everything from check store hours, compare prices, pounce on deals and read reviews in real time before we ever set foot in a store to make a purchase. All this disrupts conventional retailing, but the news is not all bad. Merchants who can cater to these connected shoppers can developer deeper, more loyal and more profitable relationships with their customers.

In the U.S., we’re piloting a new point of sale technology in 51 Home Depot stores. Consumers can make purchases at these Home Depot stores simply by swiping a PayPal payment card or by entering a mobile phone number plus PIN associated with their PayPal accounts.

But this blurring of lines between offline and online commerce is about more than just letting people use their mobile devices to shop. In 2012, we will see a rise in virtual currencies, and the ability to use them to pay for “real” goods. Imagine paying for a cup of coffee at your favourite café with Facebook Credits.

If you are 15 years old with no ability to get a credit card or bank account, this future needs to be here yesterday, and retailers looking to attract young digitally savvy consumers will welcome virtual currencies with open arms.

Social commerce has seen some exciting developments recently that show more ways that the online and offline worlds are becoming more closely integrated.

Angel’s Gate, an Asian reality TV series is providing entrepreneurs from around the region an opportunity to pitch their business idea and a crowd sourcing payment platform for investors, friends and family to fund their venture online through angelsgate.com.

Zynga just went public at a multi-billion dollar valuation, thanks to its ability to sell digital tractors and barns to its ever-expanding user base on Facebook. With exclusive offers and free deliveries, an Australian online wine merchant, Winestore.com.au, sold S$40K worth of goods through their Facebook fan-store over a period of two months.

It’s also not hard to imagine more social commerce innovation, such as person-to-person payments of non-cash currencies (“Help me fly to visit my grandmother for her 90th birthday by lending me your miles”) or creating fundraising movements (“Take a photo of me running the Singapore marathon so you can donate directly to my cause”). The possibilities seem endless — and are incredibly powerful if you think about it.

As our online and offline worlds continue to merge, the war of commerce will land right on the doorstep of Singaporean merchants who have resisted taking the leap into online. Local retailers should understand that as their customers spend more of their life online they will be increasingly comfortable buying from retailers who do not have a physical presence in Singapore – as long as they can find the best selection, the best price and the most convenience.

Singaporean merchants of all sizes will need to adapt, while at the same time making sure the online world doesn’t drown them in fraud. Those who don’t know their customers and communicate with them regularly will take a beating from competing on margins in this connected economy.

Birth of alternate commerce devices
I’m a big believer that a key driver of payment innovation is going to be the enabling of alternate commerce devices. We’re seeing requests for payment capabilities on everything from gas pumps to refrigerators. As all devices become “smart and connected,” it provides more consumer choice and enables the digital wallet in the cloud to show its true value.

I know we all can’t wait for the day that we don’t have to clip coupons and remember loyalty card numbers, and our wallet intelligently figures out how you should pay for things. 2012 will see this come to life in many forms, and the “a-ha” moment around digital wallets will make sense to many.

As payments move to the cloud, essentially anything with an “on” switch and an IP address can become a payment device. Think about Samsung’s Wi-Fi enabled refrigerator or cars from manufacturers like BMW and Audi. It’s a small jump to turn them from Internet enabled to Internet-payment enabled.

This experience is already making its way into our living rooms with commerce via your television (also known as t-commerce) for anyone with an Xbox console connected to their TV.

T-Commerce might soon become prime time
I think 2012 is also going to be the year where t-commerce expands beyond digital content to allow viewers to buy products as they watch.

T-commerce has been around for years in countries around the world and there is immense potential for it in Singapore. Imagine the ability to watch a Manchester United game with an option to buy your favourite team’s soccer jersey from the comfort of your couch. In the near future, you should be able to buy from your TV as easily as changing the channel.

These are exciting times for consumers, and it’s bringing a ferocious level of change to a payment industry that needs it. 2012 will provide enough innovation to give this industry a good shake. It’s exciting to have a front row seat! 

Elias Ghanem, Managing Director, PayPal Southeast Asia and India