Worldwide retail ecommerce sales in 2016 reached a staggering $1.95 trillion1 and is expected to grow exponentially every year. In the US alone, mobile and ecommerce payments are projected to surpass $27 billion2 in 2016. Nobody could have predicted this rapid pace of change in the payments industry. But throughout history, the advancement of major technologies has changed the way we live and interact with one another. The evolution of commerce is no exception. Starting with the bartering system to the first bank note in 600 B.C., we have been consistently searching for the most convenient transactional methods for the payment of goods and services. To understand this journey, we will take a look at some of the key innovations and breakthroughs that have had a major impact on the world and revolutionized the payments industry.
Medieval merchants created the tally stick—an early version of credit cards. In 1946, the first bank card, “Charge-it"3 was issued. Think back to the commerce landscape before the internet was widely used to charge transactions on our cards—it was a vastly different world in terms of access to information and payment capabilities. Payment technology companies introduced card authorization services as early as 1969 and in 1972, students from MIT and Stanford conducted the first ever online transaction via “Arapnet"4 —the forerunner to the internet.
Pizza Hut reported the first-ever online purchase in the 1990s and a lot has changed since then with the widespread adoption of the internet. With approximately 45 million users by the mid 1990's5 , a number of businesses saw the opportunity to reach a broad audience and started selling goods online. Consumers could now utilize a vast resource to buy products and services without having to leave their home. These factors resulted in expedited purchasing cycles and ecommerce flourished. By the late 1990s, in part due to the introduction of ecommerce giants such as Amazon and eBay, total retail sales on the web climbed to nearly $25 billion6.
Once this trend started, there was no stopping it. Traditional brick and mortar merchants, who had previously relied on word-of-mouth and traditional marketing tactics within a regional area, could now showcase themselves to a global audience via the worldwide web. Ecommerce had taken off. With more than one billion online consumers projected by 2018, it has become increasingly important for businesses to not only have their ecommerce websites but have the ability to offer their customers seamless payment technology solutions to suit their business needs.
Two decades ago, the notion of paying for something with a mobile device would have seemed implausible, but after the first mobile purchase in 19977 , the payment industry technology evolved quickly. In 20038 , 95 million cell phone users worldwide were making purchases through their mobile device. But it was the introduction of the smartphone in the late 2000s—which provided real-time access to online information—that revolutionized the way we interact with the world.
In recent years, the transaction of funds via mobile devices has become a widely accepted practice, involving minimal effort and time. Nothing could be more convenient than having the ability to pay from a central source, wherever and whenever needed. Users control, monitor and take immediate purchasing action in real-time, with a variety of payment options. They have the convenience of paying within applications, mobile point of sale, online, person-to-person or through Bluetooth or Near Field Communication (NFC) technologies, all through a smartphone.
With the expansion of memory and processing power on smartphones, businesses are fully capable of managing the data necessary to process payments via a mobile device as well. With fully supporting mobile wallet applications, the digital wallet ushers in even more ease and convenience—in the near future, you might not even need it to wave or tap your phone at a cash register. Technological advances like beacons, Bluetooth Low Energy transmitters, are able to detect the mobile app user’s presence in the store, and soon you will be able to walk in, shop and walk out. With these revolutionary payment capabilities, mobile payment sales are expected to reach $60 billion by 20179 . But as we’d expect, the evolution of payment interconnectivity never stands still…so where is the trend heading?
The Internet of Things
Is “the next big thing” the Internet of Things? In our houses, offices, cars, the mall, we’re surrounded by the devices that capture data about us—who we are, what we do and how we live. Internet of Things (IoT) is the proposed development of the internet in which everyday objects have network connectivity, allowing them to send and receive data. The IoT is not a new concept—it has been around for nearly 20 years in one form or another, but as we experience its growth, we’re seeing a shift in the way that businesses interact with people. By simply connecting “things” and the data they produce, companies can gain deeper insights to enhance their business.
At its core, the idea of IoT is simple: your alarm clock is connected to the coffee pot and to your house thermostat settings—once the alarm rings, your coffee starts to brew and the heating in your bathroom increases at the same time. The true value of the IoT lies in the interpretation of and execution on that data. Industry sectors such as automotive, healthcare, public transport, education and home market are all developing innovative and convenient ways for users to engage and make payments through the IoT. For example, consumers can reorder goods and services via voice commands through their IoT connected device at home—you’re running low on laundry detergent… your washer senses this and orders more for you automatically. It’s a seamless experience and the possibilities for use are endless.
There are 194.9 million global machine-to-machine connections today10, reinforcing the opportunity for better and more convenient payment methods. Technology like eWallets or stored value payments securely save credit card information so consumers will not have to think or take extra steps when making IoT purchases. With access to more information and data, breakthrough technologies continue to create the path of innovation in the payments space and beyond.