Online Payments - The Present, The Future and The Opportunities Ahead
Pragati Rai is the Chief Technology Evangelist for PayPal, an eBay Inc. company, and author of the book "Android Application Security Essentials" published by UK-based Packt Publication. With over a decade of experience in the mobile domain, Pragati is an active contributor to the development of PayPal's mobile offerings. She is an expert and recognized frontrunner in the mobile field, including mobile operating systems, mobile security, mobile payments, retail and commerce. She works at the PayPal India Development Center in Bangalore.
The 21st century has witnessed the Internet placing a strong foothold across markets, its ease of use and connectivity breaking stereotypes especially in the payments industry. With 152 million active accounts over 203 markets, PayPal enabled 9.3 million payments globally, every single day in the second quarter of 2014. The growing global commerce market and changing consumer preferences has been the pivotal reason behind this development.
In India, the online payments industry has seen an average growth of 60% over the past five years. These numbers are staggering and an affirmation of the growth of online payments in the coming years; an indication that consumer confidence in online payments has increased, with the customers choosing online transactions over conventional payment options.
A key factor influencing the growth of online payments is huge advancements in technologies such as cloud, mobile, carrier, and proximity tools. The confluence of these advancements has created simple, delightful, and rich experiences that have the power to become part of everyday lives. Wallet in the cloud is no more a futuristic proposition. Almost every bank has a mobile app and online presence. And even without realizing it, most of us use online payments one way or another. Downloading a ringtone, paying utility bills through SMS, making a railway reservation or booking a movie ticket online or on mobile are all part of online payments.
However, security and privacy in online payments has always been a major concern. Even today, customers hesitate to trust e-commerce sites with their card details and prefer options such as cash-on-delivery. Keeping this apprehension of customers in mind, PayPal functions as a closed-loop network by maintaining an exclusive relationship with the consumers and merchants, in markets where PayPal is offered. Consumers don't share their personal information with the merchants directly. PayPal acts as a mediator in ensuring that consumers receive their goods without sharing their personal information. At the same time, PayPal ensures that the merchants receive the money for their service in a timely manner. At the end of the day, it is a win-win situation for both parties.
If the growth of online payments is a field to ponder on, the increased use of smartphones has facilitated the development of yet another convenient mode of payments that is on-the-go and fast - mobile payments. Technology has fueled this possibility with the mobile payments industry expected to reach $721 billion by 2017. As a testament to this growth, PayPal processed $27 billion in mobile payments in 2013, up 99% from 2012. In the last seven years or so, the mobile revolution has changed consumer behavior and expectations. Payment systems are evolving to support this model of ubiquity: anywhere, anyhow and anytime.
For example, consider PayPal Here, PayPal's card reader. The reader fits into a mobile phone's audio jack and converts the mobile phone into a mobile point of sale, enabling a merchant to accept card, cash, and cheque payments. Using the accompanying mobile app, a merchant can even send an invoice in the absence of any payment method. This empowers the merchant to accept payment anywhere, anyhow, and anytime. That's how simple payments have become using PayPal.
In India, mobile phones have reached locations where a physical bank has not yet ventured. Not everyone has access to a credit or debit card. In this scenario, carriers have a huge opportunity for facilitating payments. Direct Carrier Billing (where consumers use their balance on the mobile phone for purchases) is a viable payment method.
With increased convenience and ubiquity comes a greater expectation. Today's consumer is more engaged than ever. They are aware and are asking for experiences that are beyond traditional methods.
Simply put, in today's world, time is money. Consumers want to use their time effectively and get value for their money. Payment systems have to adapt to support rich in-store and online experiences that bring convenience, fun and value in people's lives. Proximity technologies, QR-Scanning, mobile and cloud help create communication systems that have the power to create powerful experiences like order-ahead, hands-free checkout, and aisle checkout. No lines, no signing, just grab, scan and go!
So, what does the future look like? Let me share what we are trying out at PayPal. We have a pilot running in our on-campus cafe that combines Beacon (PayPal's Bluetooth-enabled device), with an app built for the Samsung Galaxy Gear 2, and Gear Fit devices. This is how it functions: customers walk into the area covered by the Beacon, their watch notifies them that they have checked in, the barista greets the customer by name because their photo shows up on the point-of-sale system, and when the barista rings the customer up, they get another push notification on their watch. The customer taps on the watch to confirm the payment. That's it! No wallet, no phone, and the customer is still in control! Such transformational experiences are what I see happening in the future.
Payment is the backbone of commerce and the reason why any commercial activity happens. Payment is also that essential piece of commerce that both the merchants and the consumers want to spend the least amount of time on. It will be an interesting road of disruption and innovation as payment systems evolve to satisfy consumer expectations while keeping them safe and secure.