Consumer payment habits are in the middle of a digital revolution. Ninety percent of U.S. consumers say they use multiple devices to make online purchases. Forty-six percent of smartphone owners use peer-to-peer payment apps regularly. In brick-and-mortar stores, the changes are just as great, thanks to advances such as mobile point of sale (mPOS) and personalized checkout experiences. It’s safe to say that payment trends have come a long way since the birth of the “credit card,” a humble piece of cardboard that, in store, let you buy on credit in the 1940s.



The revolution in payments brings opportunities and challenges for both bricks and clicks retailers. How retailers react to changing payment trends will directly influence short-term revenues and long-term survival. That’s why the team here at Bread created a list of five digital-payment trends to watch in 2019, plus some ideas on how retailers can stay ahead of the game.

mPOS Systems Will Give Retailers New Opportunities to Boost CX & Loyalty

Payments via mobile point of sale—a smartphone or wireless device that replaces the traditional point-of-sale terminal—are likely to hit their stride in the next couple of years. In 2013, there were only 5.8 million mPOS devices in action worldwide; that is expected to rise to 42 billion in 2022, according to Grand View Research.

Certain brands have already embraced the mPOS payment trend. Walk into any Apple store worldwide and you won’t find a traditional cash register. Instead, Apple sellers roam around stores with devices, taking payments on the spot. The same happens at Gap stores over busy holiday periods: The fashion retailer deploys “Swiss Army knife” mPOS terminals that can carry out a range of tasks previously restricted to the cash register.



We predict that 2019 will be the year when smaller retailers catch on to this payment trend. mPOS systems can prevent long lines at cash registers and distribute payment locations throughout a store to prevent overcrowding. Sellers can close a sale anywhere in the store, even in the changing room or on the warehouse floor, enabling them to capitalize on consumer desire in the moment. If the right size or model isn’t in stock, an mPOS device allows sellers to check inventory right in front of the customer and order it to be sent to their home address. This makes for better customer service and higher sales.



It’s not just retailers who will benefit from the rise in mPOS systems. Customer experience (CX) will be improved, too. Less time waiting in line, faster service, and more personal attention from store staff make for a more pleasant in-store experience. mPOS systems are also better equipped to deal with the increasing number of people who want to use alternative payment methods, such as mobile wallets.



Looking beyond the basic CX of mPOS payments, savvy retailers will also see the systems’ loyalty-boosting potential. mPOS systems can be integrated with a brand’s loyalty program, allowing the most faithful customers to skip lines and rack up points automatically. Beyond 2019 payment trends, biometric-enabled mPOS systems could boost loyalty even further, with customers scanning their fingerprints on the mPOS device to get rewards.



Alternative Financing Will Continue to Attract Debt-Wary Young Consumers

Millennials and their younger counterparts, Gen Zers, are driving digital banking. Sixty-nine percent of Gen Zers uses banking apps daily or weekly, according to Accenture, compared with only seventeen percent of baby boomers. But being open to digital banking doesn’t equate to comfort with racking up debt. In 2016, Bankrate found that only thirty-three percent of millennials owned a credit card, and fifty-one percent of Gen Zers claim they won’t apply for one.



Whether their wariness springs from having grown up in the financial crisis or dealing with burdensome student debt, one thing is clear: Up-and-coming generations are open to alternative ways to pay. They are more likely to use peer-to-peer payment apps like Venmo or Zelle and are more likely to consider alternative financing, such as interest-free, pay-over-time options like Bread.



These alternative financing services will probably not be provided by traditional banks in 2019, but by tech disruptors. A Raddon report found that forty-four percent of Gen Zers say they’ll replace traditional banking with tech company solutions; only twenty-six percent of Gen Xers make the same claim. Over thirty percent of Gen Zers expect they won’t have to rely on banks at all to manage their finances.



Here at Bread, we saw this trend reflected in the data from 2018’s Black Friday and Cyber Monday campaigns. Millennial consumers applying for Bread’s pay-over-time financing options formed just under forty-five percent of total financing qualifications over the weekend. When it came to revenues over the 2018 holiday weekend, millennials generated thirty-six percent of total revenues. Younger shoppers are wary of the traditional high-interest-rate loans offered by banks but are open to frictionless alternative financing options with better conditions.



Retailers tapping into consumers’ desire for tech-driven financing options can make big wins in 2019. Bread’s recent data shows that alternative financing increases average order value by 3x, as well as reducing checkout friction.



Consumers Will Expect Better Omnichannel Payment Experiences

The majority of U.S. consumers display omnichannel payment behaviors, even when retailers don’t offer dedicated omnichannel customer journeys. For example, forty-six percent of shoppers in the U.S. confess to “showrooming”—checking out a product in store before buying online—and an impressive sixty-nine percent say they “reverse showroom,” looking online before heading to the store to buy. Globally, up to fifty-two percent of shoppers seek out price comparisons online while browsing products in a brick-and-mortar store. Consumers want to shop and pay on multiple platforms, both online and offline.



2019 will see more retailers working with rather than against these bootstrapped omnichannel consumer behaviors. Retailers should look to Amazon Go for inspiration. In 2018, the company’s first cash-free store opened in Seattle. Consumers just need to scan their phone on the way in, add items to their basket, and walk out. Amazon sensors identify the user via their phone, and cameras track what items they add to the cart. Charges go directly to the shopper’s Amazon account.



Few retailers will have the tech to back up a seamless omnichannel checkout like Amazon Go’s. But there are alternative fixes to meet the consumer desire for convenience. “Click and collect,” which lets the consumer buy online and pick up in store, ensures that shoppers who reverse-showroom are more likely to stay in the sales funnel. “Endless aisle” experiences, where retailers provide mobile devices in-store for shoppers to search out-of-stock products and have them delivered to their homes, mean retailers can expand their product range without extending floorspace. Both of those solutions cater to consumers’ desire to shop and pay across multiple locations and are realistic for stores with both bricks and clicks market presence.



Implementing click-and-collect and endless-aisle experiences is more realistic for the average retailer. A new delivery option to an online checkout page, in-store inventory and a pick-up point are the basis for an effective click-and-collect experience. Endless aisle can be similarly implemented via a mobile point-of-sale device and an integrated inventory management software, such as Salesforce.



App-Based Payments Will Move Beyond Mobile Wallets

After a slow start, mobile wallets gained greater acceptance among users in the last 12 months. Data from Bluesnap shows that mobile wallet spend rose 114% between the last quarter of 2017 and the first of 2018, and global usage of wallet apps is expected to reach $14T by 2022. Consumers are increasingly comfortable paying for items via a mobile wallet.



But the trend for app-based payments doesn’t stop at the mobile wallet. Peer-to-peer payment apps are also seeing a boom in popularity, particularly among younger users. These apps, which allow the transfer of small amounts of money between friends, bring us a step closer to a cashless society, further weakening the position of established banks and their heavy transfer fees.



We predict that 2019 will see retailers taking a proactive approach to the consumer demand for app-based payments. Take the example of Starbucks. The coffee store’s payment app leads the field in mobile payments, ahead of Apple Pay, Google Pay, and Samsung Pay. Around 23.4 million people used the Starbucks app to make a point-of-sale purchase in 2018; compare that to Apple Pay’s 22 million.



ZDNet attributes the app’s success to its combination of convenience and a loyalty program. Customers see real benefits—such as points and discounts—as well as the convenience of ordering coffee via the app and having it waiting in-store upon arrival.



Consumers are already open to app-based payment methods from nontraditional outlets, including retailers. Retailers will need to respond to that desire in 2019 and going forward, even if they don’t have a Starbucks-sized budget.



Alternative Payment Options Will Improve CX But Challenge UX

From tokenization to cryptocurrencies, greater freedom gives shoppers greater control over their finances, and more convenience at the point of sale. Payment flexibility results in shorter lines in stores, more convenient pick-up methods, and more personalized checkout experiences. For shoppers, paying and financing purchases the way they want improves the customer experience.



The growing demand for alternative payment methods presents great opportunities to online retailers, but some challenges too. Not least is the challenge of checkout-page design. Checkout-page UI has a direct impact on conversion rates: Back in 2016, a Baymard Institute study found that 26% of U.S. online shoppers abandoned their carts because of a “too long / complicated checkout process.”



That means retail UX teams need to provide online shoppers with the breadth of payment options they crave, while still keeping the checkout experience streamlined. It’s a fine line: Give users too many options and decision-making becomes difficult; too few and cart abandonment can rise.



White-label alternative financing options, like BBQguys uses, help create frictionless shopping experiences and increase AOV.



Online retailers should ensure that they present payment options intuitively, grouping payment types if necessary. They should also choose alternative-payment providers with white-label features that integrate with the ecommerce site’s branding. White-label payment options maintain shopper trust in the checkout process.



Digital Payment Trends in 2019 . . . and Beyond

Alternative ways to pay and finance purchases are only going to grow in the next 12 months. From mPOS innovations to app payments and financing disruptors, both retailers and customers look set to be profoundly impacted by the payment revolution.



Approached the right way, these payment trends create big opportunities for ecommerce merchants like improved customer loyalty, higher average order values, and integrated customer experiences. Retailers just have to go out there and make the payment revolution work for them in 2019 . . . and beyond.

