For years, the familiar credit card logo has dominated e-commerce checkout screens. However, recent research suggests that bank payments and other alternative payment methods may gradually overtake Visa, Mastercard, American Express, and Discover. I have discussed these findings with analysts in the US and Europe.
Javelin is a global strategy and research firm focused on payments, digital banking and security. javelin throw report A book published in November 2023 titled “Emerging Trends and Predictions for 2024: Emerging Payment Technologies” puts card brand challenges in the same bucket as generative AI and digital ID. In short, three trends impacting consumers.
Researchers predicted that new options would supplant the default card payment method, especially in the United States.
Cards are not dying, said Christopher Miller, lead analyst for emerging payments and co-author of the report. They just fade away. “Over the years, we’ve seen all sorts of card killers, from wearables to digital wallets. Pay per app and Between accounts payment. Our research-based argument is that none of these solutions challenges cards, but that they are all collectively changing the payment experience over time. ”
Consumers have many payment options available to them beyond traditional credit and debit cards.
Rise of e-commerce, decline of cards
Miller proposed that a cardless world will gradually transition from terminals to e-commerce checkouts through incremental advances in technology.
“In e-commerce, cards have very little effect on reinforcing behavior,” Miller said. “For consumers, virtual options are easier to choose than physical environments, providing opportunities for a variety of payment types.”
For example, he explained, e-commerce merchants can put bank payments next to PayPal or Apple Pay and let customers decide. Merchants can also encourage customers to shift some of their spending from cards to cheaper bank payments. This strategy works best with repeat shoppers, rather than first-time shoppers who may never visit an online store again, he said.
Merchants aim to remove friction from the checkout experience. They want to avoid inconveniencing shoppers, especially those who don’t want to set up an account or provide payment information.
Add value to bank payments
Matt Jones, a consultant and advisor at UK-based fintech and payments consultancy Payment Culture, said that a 2022 study by Plaid, a software provider of banking payment apps, found that incentives can increase consumer adoption of bank payments. It has been found that there is a possibility of promoting
“Plaid research found that consumers are more likely to pay with a bank rather than a card if offered a discount at checkout, with the optimal discount being around 1%,” he said. Plaid researchers added that they found that even modest discounts can have a promising effect. Convince first-time users to initiate bank payment transactions.
Freelance fintech writer Tom Sullivan shared highlights of Plaid’s research in the following article: Posted in December 2023note that a bank payment transaction is a three-step direct transfer from the consumer’s bank account to the business’s bank account.
- Step 1. Account verification (or authentication) verifies the customer’s account and ability to send money.
- Step 2: Fraud and risk checks protect consumers and merchants.
- Step 3: Funds transfers are supported by Automated Clearing House (ACH) in the US, real-time payments, and in the UK by the Federal Reserve’s FedNow through Faster Payments Service (FPS) and Clearing House Automated Payment System (CHAPS).
Matt Jones added: “The average interchange fee in the US is over 2%, and the total cost of card payments is over 2.5%. Incentives for e-commerce merchants This is to encourage customers to switch to bank payments. ”
He cited The Information as an example. The US technology news publisher is offering $5 off its $399 annual subscription to users who pay with a bank instead of a credit or debit card.
