A lot is being said about the importance of payment technologies for any business selling its products or services on the market. Yet words are empty without the practical illustration of the efficiency of such solutions. Therefore, today we’ll take a look at the most prominent use cases of payment tech which prove that going along with the digital progress is really worthwhile.
What Is Payment Technology?
To understand what we are dealing with, precisely, let’s explore the terminology in the first place. Payment technology is a broad term that refers to the technological tools and systems that facilitate electronic payments between buyers and sellers. It encompasses a wide range of technologies used to process, authorise, and secure financial transactions, from mobile wallets to payment terminals and NFC-enabled devices.
Valued at approximately $8.97 trillion in 2023, the global digital payments market is projected to reach $28.16 trillion by 2032, reflecting a compound annual growth rate (CAGR) of 13.55% from 2024 to 2032. The growth will be driven by government initiatives, fintech advances and further development of digital infrastructure.
Some of the most widespread and popular digital payment technologies include digital wallets, which have over 1 billion users in China alone, contactless payment methods, and Buy Now, Pay Later (BNPL) solutions.
How Can Payment Technology Improve Business Operations?
As with most tech innovations, modern payment technologies significantly reduce the need for manual processes, such as paper cheques or cash handling, help businesses lower transaction costs, enable faster, seamless transactions, reduce checkout time, enhance customer satisfaction, and accelerate revenue flow for e-commerce businesses – the sector responsible for the largest share of digital payments.
Merchants get an opportunity to offer their customers multiple payment options. Added convenience boosts customer satisfaction and loyalty. It has been proven that merchants offering multiple payment methods and, more importantly, choosing the ones their target audience prefers can increase conversion rates up to 30%. If the payment method mix includes some flexible payment options, like BNPL, they can cater to the needs of nearly 60% of consumers across all generations who prefer these methods over credit cards due to the ease of payments, the simple approval process and lack of interest charges.
Furthermore, advanced payment technologies do not only make transactions easier, faster and more affordable. They incorporate advanced security features like encryption, tokenisation, and multi-factor authentication, reducing the risk of fraud, protecting customer data and building trust.
In today’s globalised world, payment technologies that support international payments, currency conversion and cross-border payment processing allow businesses to tap into new markets and expand their customer base beyond local borders. International shipping is an important growth avenue for many businesses. It unlocks more profit opportunities too. According to 2022 statistics, the average order value of an international sale is $9 more than the average domestic sale.
Besides, payment technologies are indispensable in daily business operations beyond transaction processing. For instance, payment platforms can provide businesses with valuable data on customer spending patterns, transaction histories, and purchasing behaviours for targeted marketing, inventory management, and optimising pricing strategies. Such technologies can also help customise standard payment software, able to scale to accommodate increasing transaction volumes or be integrated with other business systems like accounting, CRM, and ERP platforms. All that helps in streamlining operations and providing comprehensive insights into the corporate performance.
Real-Life Business Transformation Stories
All those words sound good, but to understand the true transformative power of payment technology you should see it in action. Therefore, we gathered some inspirational business cases for you to admire and get some insights.
IKEA & Afterpay
IKEA’s integration of Afterpay’s BNPL solution has significantly enhanced payment flexibility, aiming to attract a broader customer base and boost sales. U.S. shoppers have been able to access the new budget-friendly payment option since September 2023, just in time for the Black Friday and Christmas sales periods. Although there is no available information about the particular share of BNPL sales in the total volume, IKEA’s U.S. sales reached $5.65 billion in 2023, marking a 3% increase from the prior year.
This year, the service also launched in Australia. Even before the official launch, over 50,000 attempted Afterpay transactions were recorded, indicating strong consumer interest. Upon the launch, the company witnessed “an incredibly strong response from IKEA customers, with around 600 orders via Afterpay per day,” according to Erin Falconer, Marketing Communications Manager, IKEA Australia.
Mastercard & Poland SMEs
In one of the early SoftPOS initiatives, Mastercard struck an industry-wide partnership in Poland to pilot tap-on-phone solutions among local small businesses. The market was chosen as many of Poland’s SMEs did not accept electronic payments despite the high adoption of bank cards and other contactless payment means among consumers. The alternative to dedicated POS solutions which require upfront investment and ongoing maintenance expenses were tap-on-phone mobile terminals (smartphones) offered at no cost to the acquired merchants for 12 months.
During the project, 160 local merchants installed 272 tap-on-phone terminals. Most of them (88%) continued to use the innovative payment acceptance solution. Furthermore, Mastercard recorded a 63% growth in SoftPOS terminal deployments upon the pilot project, driven by the marketing campaign as well as successful use cases. Today, SoftPOS solutions are offered in Poland not only by a few local fintechs, but also by major financial institutions like Santander Bank which has the tool integrated with Elavon merchant services.
Sephora & Klarna
Another example of a successful collaboration between a BNPL provider and a retailer is the partnership between a beauty store network Sephora and Swedish Klarna fintech. Sephora offers a mix of Klarna’s interest-free payment methods in the US and Canada at in-store checkout, online and in-app. The integration of a new delayed payment program brought incredible results in terms of customer spending.
Customers utilizing Klarna’s installment payment option in physical stores spent approximately 65% more per transaction compared to other payment methods, while the average order value increased by 36% when customers chose Klarna’s payment solutions within Sephora’s mobile app, and by 35% when they used Klarna on Sephora’s website.
Amazon Smart Shopping Tools
Amazon has a range of revolutionary frictionless checkout options enabled by high-tech which help customers make their purchases in a quick and effortless manner. These include AI-driven automated checkout system Just Walk Out, Amazon’s smart shopping Dash Cart, and Amazon One – the company’s palm recognition service for entry, identification, and payment. Over the years, these tools have brought both businesses and consumers a lot of utility, convenience, and shopping experience improvements.
Let’s look at an example of Lumen Field stadium, which can host more than 68,000 fans for NFL games. In 2022, the first store with the automated Just Walk Out system brought the venue a 60% increase in customer throughput and a double growth of the total transactions per game compared to the traditional concession stand. By the end of the season in early 2023, transactions per game in that location increased even more – by 85%, while total sales per game increased by 112%. Today, Lumen Field has 9 automated stores powered by Amazon’s technology.
Delaware North, which has its stores located in large sports and entertainment stadiums and arenas that serve thousands of fans, also successfully uses the Just Walk Out solution with its a combination of computer vision, sensor fusion, and artificial intelligence employed, noting that automated stores in such crowded venues serve 20%-30% more customers than traditional concession stands. That translates to increased revenue and more satisfied fans. Therefore, the company considers its payment technology investment being very worthwhile.
Market Express at ExCel London, hosting 400 events and welcoming over 4 million visitors annually, is another successful representation of Just Walk Out technology implementation. The service has boosted its capacity to serve customers by 300% during peak days and helped the venue achieve a 56% increase in annual revenue.
Meanwhile, smart Dash Carts used in Amazon Fresh and Whole Foods Market grocery stores leverage not only the same advanced computer vision technology as Just Walk Out but also feature an on-cart screen with store maps and navigation, personalised shopping experiences, and real-time expenditure tracking. Amazon reports that shoppers using Dash Carts spend 10% more than those who don’t, with over 80% of daily Dash Cart transactions coming from repeat users, driven by a 98% customer satisfaction rate. Research also indicates that customers are willing to travel farther to visit a store that provides Dash Cart.
Last but not least, Amazon One biometric payment and identity verification service is another popular technology offered by the e-commerce giant. It has been utilised over eight million times for entry, payment, and loyalty linking, indicating growing consumer acceptance. Moreover, over 80% of shoppers who use Amazon One at over 500 Amazon and Whole Foods Market stores, and over 150 third-party locations in stadiums, airports, fitness centers, convenience stores, etc. become repeat users of the service.
Final Thoughts
The examples we’ve discussed today are the mere tip of the iceberg of payment technology improving daily business operations, customer satisfaction levels, profitability and client retention. These illustrations come from the big brand names in the retail industry, but surely every small business in your local neighborhood which has transitioned from legacy commerce methods to tech-driven innovation will have a nice story to tell.
Bottom line is modern payment solutions streamline operations, reduce transaction costs, and enhance customer satisfaction through faster, secure, and flexible payment options. Businesses leveraging them can see conversion rates increase and profits grow, witness increases in in-store transaction values and average order values, and boost customer loyalty. All the given indicators can grow anywhere between 3% and 300%, signifying amazing opportunities for any business.
