Increased profit with digital payment

German consumers treasure their cash – and in doing so, are slowly being left behind: Whilst they pay for four out of every five purchases with cash, only half of all transactions in the US involve physical money. In Sweden, 95 percent of all payment processes already occur electronically. And although using cash has its benefits – such as having better control over personal spending and a bigger independence from technical systems – experts also anticipate significant changes for the German market.

One of whom is Michael Carl from the think tank 2bAhead. In his trend analysis, “The Future of Payment,” he formulates five theses on how payment will develop.

Digitization is accelerating the personalization and customization of products and services. This requires two things though. Firstly, an artificial intelligence customer dialogue, in other words a dialogue between intelligent digital systems on the side of both customer and company. And secondly, the in-depth implementation of this dialogue in the company’s production, sales, and delivery processes.

“There is simply no apparent reason why customers or providers in this projection of the future should attach importance to separating out the act of paying as an individual step from this integrated and digital process,” says Carl. He believes this to be one of the central driving forces behind the future of payment, which by and large will be cashless. According to Carl, payment will furthermore occur “omnichannel” in the future, as the payment service tracks the other interactions between customer and provider – or between their digital assistants.

The acceptance of digital payment solutions will be particularly high amongst new digital business models and services, which were only developed after the arrival of the digital payment option. This is because the providers need neither adapt their business processes to digital payment systems nor take into account the cost of traditional cash register systems.

For customers, the provider’s products or services are what matters, not the payment system. According to Carl, this must be integrated and, of course, easy to use: “Here, a new standard in payment convenience is growing, which cannot be achieved by either traditional cash or good old EC cards.”

The integration of digital payment solutions into the relevant company processes does not only afford the customer convenience but also generates added value for the company: Whoever can directly, and in real time, link the payment processes with their customer profiles automatically generates valuable data, which, for example, can be fed into the product development.

Carl believes digital payment will first catch on in areas where products can be particularly easily adapted on the basis of data from the payment process: “We will initially see the success of digital payment processes in the areas of customizable immaterial products.”

Payment services can produce valuable data and hence become a profit center. As such, it is becoming particularly attractive for low-margin industries with many transactions. In the B2C sector, this would involve things such as food and textile retail as well as the tourism industry according to Carl. Whilst in the B2B sector, it would include wholesalers, logistics specialists, and commodity traders. All these segments are heavily dependent on making a profit center from payment, which is a cost center.

“We can expect it to be these providers who set incentives for certain payment systems before others – mainly those who use them,” says Carl. It is those who produce a multitude of qualified data and enrich customer profiles with these data. As such, they offer the opportunity to create additional revenues.

People will continue to use cash in the future, but this will be the exception to the rule. In a driverless taxi, for example, it could become difficult to pay for the journey with cash. Therefore, those who would prefer to pay with coins and notes will have to wait for a “traditional” taxi with a human driver – complete with all its advantages and disadvantages.

Eventually, according to Carl, cash will assume a role as an identity bearer in the premium segment and show a certain mindset. As such, a business deliberately focused on traditional products and a “classical” shopping experience will accept cash payment like in the past.

More and more digital payment systems will emerge. However, that is neither necessarily a problem for the customers nor for the companies: as long as the relevant payment options are seamlessly integrated, the consolidation of the systems does not prove a hurdle for the customers, but instead a benefit. And if the providers are able to gain information from the payment service and optimize their profits with it, both sides benefit.

The complete trend analysis “The Future of Payment: How the Payment Process will be turned into a Profit Center for Companies” is available here.

Author: Editorial team Future. Customer.
Image: © Wayhome Studio – AdobeStock