When it comes to payments in e-commerce, most European countries, the US, Canada and Australia strongly rely on online banking (iDeal in the Netherlands for example) Credit Card (Visa or Mastercard) payment or usage of PayPal (Adyen, 2015). The future of digital payments looks very interesting, there are many different solutions coming from all kinds of directions.
Alipay
In China, only 1% of the e-commerce payments are processed with Credit Card, whereas 48% of transactions are completed with Alipay. Unlike credit cards or PayPal, Alipay is completely integrated in Chinese lifestyles – which make it irreplaceable for a Chinese citizen. For example, you could split bills with QR codes, pay utility bills, get food delivered with WeChat, top up phone credit and buy train/metro tickets (Hendrichs, 2015). Even during Chinese New Year, people can use Alipay to send each other “red envelopes”, a traditional gift during Chinese New Year.
TechFin companies
Another new payment solutions comes from the big tech companies, with solutions such as Apple Pay and Google Pay – called TechFin solutions (Krishnakumar, 2018). These companies have enormous user bases, making it easier to penetrate to existing users of their user base. Based on their network effects, they can pose a real threat to current payment methods.
Blockchain payment methods
Also, blockchain based solutions may prove to be competition to PayPal. Solutions such as Request Network – often praised as the ‘new PayPal’ on internet fora or blogs (Levenson, 2017) – are still in its early stages. Using blockchain based solutions is also very beneficial for merchants, providing automated accounting and less need for expensive accountants or expensive accounting systems (Levenson, 2017; Yermack, 2017).
All in all, in my opinion it’s not a question if digital payments will change, but rather how it will change. With so many different new possibilities, I’m curious to see where this goes.
References:
Adyen. (2015). The Global E-Commerce Payments Guide. Retrieved from: https://www.adyen.com/blog/the-global-e-commerce-payments-guide
Hendrichs, M. (2015). Why Alipay is more than just the Chinese equivalent of PayPal. Retrieved from: https://www.techinasia.com/talk/online-payment-provider-alipay-chinese-equivalent-paypal
Krishnakumar, A. (2018). From Fintech to TechFin – Who should banks be more worried about?. Retrieved from: https://dailyfintech.com/2018/03/16/from-fintech-to-techfin-three-trends-that-banks-will-be-worried-about/
Levenson, N. (2017). Request Network is more than just PayPal 2.0 — It could revolutionize the finance world. Retrieved from: https://hackernoon.com/request-network-is-more-than-just-paypal-2-0-it-could-revolutionize-the-finance-world-87b54bb455
Yermack, D. (2017). Corporate governance and blockchains. Review of Finance 21, pp. 7 – 31.
If I understand it correctly, Alipay, Google Pay, Apple Pay, etc all work on a similar bases that adds extra functions and easy to use UI to electronic payments, but still uses our bank accounts. I think the system that will gain the most market share will be one which will be free to integrate and not use any proprietary solutions. For example, different payment terminals in stores support different payment methods – Google, Samsung, Apple pay systems but not all of them support all the payment systems. If someone would develop a system, which is supported by every payment terminal that supports contactless payments, I believe it would catch on very quickly.