Beyond Online Bookstores: What is the Future of Ecommerce?

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Jens Bader, Chief Commercial Officer of Secure Trading

Circa 20 years ago, Jeff Bezos was ready to launch Amazon.com as an online bookstore operating from his Seattle garage, a stark contrast to today where Amazon is one of the richest and most powerful companies in the world. Indeed, from humble beginnings, the e-commerce industry itself has sky rocketed. The global e-commerce marketplace was estimated to be worth $1.5tn in 2014, up by 20 percent on 2013, and this growth is likely to accelerate rapidly throughout 2015 and beyond.

Amazon is no longer just a book store of course, and a prime example of the fact that with growth comes change. The online payments industry is certainly no exception to this rule. It is currently going through a period of tremendous change, spurred on by new entrants, payment methods and channels. Tech companies in particular are increasingly examining and innovating new methods of payment with the tools available to us in the digital age. Apple is making strides with Apple Pay, and social media companies such as Facebook and Twitter are looking at how to bring payment options to their many millions of users. Finally, “alternative” payment options such as Bitcoin are slowly seeping into the mainstream, ready to disrupt not just payments, but a whole host of other industries.

Of course not all of these payment innovations will take hold, with consumers and businesses alike seeking quick and easy payments above all else. Only payment innovation which simplifies or improves a customer’s payment experience or solves a merchant problem will have a real impact and will become permanent. This fact has held true throughout history. First people bartered, and then came coinage, then paper money, then plastic. The internet is simply the newest resource, and the opportunities it provides are seemingly unending, hence the great deal of diversity we are currently witnessing in the industry.

As payment options increase in number, however, the landscape becomes ever more confusing for businesses trying to navigate the online payment landscape. Here is a quick guide to some of the current changes in the online payment industry:

Mobile payments

Few would dispute that m-commerce has been a game changer for retailers, or that the popularity of the payment method will continue to grow. UK shoppers are set to spend £14.95bn via mobile devices in 2015, an increase of 77.8 percent on £8.41bn in 2014.[1] This accounts for 28.6 percent of all online purchases in the UK in 2015, while spending using a PC will grow just 2 percent over the same period. It is clear that, with the growing popularity of mobile, the desktop’s grip on ecommerce is slipping. It is a great testament to the rapid rate of change in the digital age that, just 11 years into the history of online payments, there are already signs the predominant method of payment is being usurped.

A key driver behind this is, of course, the rise and rise of the smartphone, which has transformed the way we shop. Innovations such as improved mobile website optimisation ─ particularly on check-out and payment pages, responsive web design, improved connectivity and larger phone screens have made it easier for consumers to browse and buy products online and have eliminated some of the common problems associated with mobile transactions such as typing errors. Not all traditional payment options are easily suited for a mobile experience. However payment innovation and re-engineering of payment processes have been instrumental in driving mobile commerce over the last years. Tried, tested and clearly a growing popular payment experience among consumers, it is safe to say that businesses with m-commerce capabilities are going to feel the benefits of various mobile-focused payment options.

Wearable payments

A subset of m-payments perhaps, wearable technology could have a huge impact on the payments industry but only time will tell whether this is the case. The newly launched Apple Watch is the latest contender for dominance in the wearable space, but other big players including Google, Samsung and Microsoft will look to rival and usurp Apple in the years ahead, similar to the battle for supremacy in the smartphone industry. Wearable technology could well have implications for e-commerce – not least because it allows retailers instant access to consumers. Brands will be able to send notifications, including price changes, promotions and marketing incentives, to consumers’ smart watches. With the near field communication (NFC) technology installed on the watch, customers could benefit by paying for items quickly and easily with their device.

However, I would hesitate to say that wearable technology may be a payment band wagon that retailers should be jumping on right away. The uptake of wearable technology, and the popularity of payment with wearable technology, is still far from certain and quite possibly overhyped.

In reality, the main benefits for Apple Watch and other wearables are for the retailers rather than consumers – especially the ability to collect highly accurate, personal and applicable data on individuals. With little incentive for consumers to change their behaviours, it is unlikely that wearable payment-enabled devices will replace traditional payment options, at least not any time soon. I consider wearable payment devices a form factor and a proxy for an underlying payment enabler at this stage.

Social commerce and payments

The fact that you’re reading this on LinkedIn speaks volumes for the popularity of social media sites, the variety of activities and content that can be found on social media platforms, which themselves are incredibly varied. This immediately makes s-commerce a serious contender for changing the online payments landscape. Unlike wearable technology, this is a case of a payment solution which complements already existing consumer demand and behaviours. Already social media users post about their purchases, are guided by social media product reviews and are influenced by social media advertising.

Unsurprisingly, many social network platforms are already embracing payment options. Facebook’s recent announcement of payment functionality within its messenger service, for example, caused a stir within the industry – bypassing traditional payment apps such as PayPal. Likewise, earlier this year Barclays became the first bank to allow payments through Twitter, via the Barclay’s Pingit app.

S-commerce is undoubtedly a growing market – expected to bring in $14bn in sales in 2015 in the US alone, 5 percent of total online retail revenue for the year.[2] Social media has already had a large affect on how businesses operate, from the marketing, to their customer service. As with these areas, it is advisable in today’s social networking oriented age that businesses become “sociable” in their payments methods as well. Quick-Response code technology (QR codes) as example are a great carrier to be embedded in social networks and the simplicity of scanning them could cause a viral effect.

Cryptocurrencies

If it is difficult to predict the impact of wearable technology and social media on the payment landscape, things become trickier still in the world of cryptocurrencies. Free from any banking or state authority, and designed for the world of online payments, cryptocurrencies such as Bitcoin are arguably the next step in the evolution of money. Yet, despite the revolutionary potential, this is a payment option that many businesses are wary of. Without the same levels of regulations in place, and with no insurance, it is impossible to guarantee funds retain their value, or are there at all.

Yet, with so many benefits to be gained from the use of cryptocurrencies, we should by no means dismiss them as a payment method for businesses today. Cutting banks and regulatory authorities out of the payment process makes money transfer far easier, quicker and cheaper, as bank processing fees and commissioning charges are bypassed. Furthermore, cryptocurrencies offer exciting opportunities for businesses eager to take advantage of future online markets – especially as smartphone apps bring Bitcoins more easily into the hands of potential customers. As a result, already many large merchants including Apple, Amazon, Microsoft and Virgin are accepting Bitcoins.

As a currency uniquely exposed to speculation, with notoriously insecure exchanges and with no insurance to support businesses should the money become worthless – cryptocurrency is not yet the safest investment. Yet, if we are talking in terms of payment transactions then yes, it is perfectly safe for businesses to begin to accept cryptocurrencies. With simple in-out transactions there is virtually no risk at all.

It is hard to see a currency purpose built for the online payment age as anything other than the next stage in the evolution of payments, making cryptocurrency a payment method that businesses should very seriously consider. Technology is currently the technology driver, which is all well and good but, for customer and merchant adoption, steps to make the technology safer and simpler are sorely needed as these are still the deciding factors for new payment methods and channels.

In summary, it may sound far-fetched now but a day where people pay for goods using Bitcoins, from their smartwatch via Twitter may not be far off. It all depends on whether, in time, customer behaviour and patterns go that way. My personal feeling is that they very possibly could, and the payments industry simply has to adapt accordingly.

[1] http://internetretailing.net/2015/02/uk-m-commerce-spend-to-grow-by-77-8-to-14-95-billion-in-2015-outstripping-the-rest-of-the-world/

[2] http://www.invesp.com/blog/us-social-commerce/