The way customers pay and transact is undergoing a huge change. Today, most financial institutions have a trail of the payments, spends or usage in their transactional systems thro' many traditional payment methods. But, as these trends below show, there is a huge new revolution underway. If you are in the business of customer data & insight mining or in marketing to these customers, then get ready for paradigm shift in tracking & influencing their purchases.( Thanks David for this post)
Take a look at the trends:
1. Digital money
According to AC Nielsen, 90% of transactions in
the US will be cashless by the year 2020. PayPal already has 63 million
accounts, which makes it larger than most national banks,while in Korea
during the month of June 2004, 300,000 people purchased cellphones into
which you can insert a memory card containing all your financial data.
So will physical money soon be a thing of the past? Most observers say
yes, but don't underestimate the power of human nature and tradition.
2. Contactless payment
McDonald's is testing 'contactless' payment technologies in the US (and
elsewhere). Just drive-in, grab your goods and drive off. Payment is
made automatically by a wireless device on your windscreen linked to
your bank account. Mobile phones can and will do much the same thing.
3. Pre-pay and stored value cards
10 million households in the US don't have bank accounts and many of
these use their pay cheques to buy pre-paid credit cards. Around 8.5%
of households without bank accounts own pre-paid credit cards but this
figure is expected to rise to 25% by the end of 2006. This is one
reason why companies like Visa and MasterCard are getting into the act
by signing up Rap moguls and singers like Russell Simmons and Usher to
put their names on prepaid cards.
4. Private currencies
Pre-pay is a type of private currency in that you can restrict where
people spend their money, in some cases to a single brand, outlet or
service. This is good news for loyalty and also good (or bad) news for
privacy depending on your point of view. For example, parents can give
their children pre-paid cards with certain categories or locations
locked off. However, the big news in private currencies is what's
happening in the air and in cyberspace. According to the Economist
magazine, airmiles are now technically more valuable than the US dollar
while over in cyberspace gamers are exchanging cyber dollars for the
real thing.
5. Debt
The level of credit card debt in Britain has increased by 73% since
1997. The UK now holds 60% of all credit cards issued in Europe and has
75% of all European credit card debt. Spending on credit cards now
represents 11% of GDP and 40% of people say they expect to use their
cards more with the advent of new technology. Meanwhile, the amount
owed to credit card companies in the UK now stands at GBP £53 billion.
Figures for other countries such as the US and Australia are following
a broadly similar trend. So what happens if (when) interest rates
really go up? Trouble, that's what.
6. Everyone is a bank
If everyone from supermarkets and
search engines to phone companies and airlines offer banking services
where does this leave the banks? The answer could be as back office low
margin sub-contractors or maybe banks will re-frame themselves as
'wealthcare' businesses.
7. Micropayments
Once upon a time people used credit cards for big purchases like
holidays. Not any more. Now you can buy a 99cent song on i-Tunes with
your credit card or charge your hamburger at McDonald's to your
plastic. In 2004 the average credit card transaction in the US was
$67.81. Back in 1999 it was $72.83. Add to this the possibilities
created by contactless payment, stored value cards and pre-pay and you
have a recipe for radical change in the financial services sector.
8. Proof of identity
With cases of identity theft going through the roof in most countries,
there will be a boom for companies and technologies offering electronic
and other forms of identity verification. There will also be an
increase in products and services aimed at helping people get their
identify back after its been stolen.
9. Mobile phones becoming wallets
Have you noticed how fewer people are wearing watches these days? Under
the age of 21 a watch is almost a novelty as people use their mobile
phones to tell the time instead. And so, the theory goes, phones will
replace wallets too as people find it more convenient to carry their
cash digitally inside their phones.
10. The death of cheques
Seriously, who under the age of thirty uses cheques these days?
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