Online payments have become a widely accepted method of barter.
Companies are going out of their way to ensure that they have a system set up for accepting electronic purchases. How Stuff Works defines an online payment as a non-cash payment that does not involve a paper check. We can extend the definition further to cover such payment systems that deal solely with the transfer of funds through an intermediary company.
Online payment processing services have become widespread thanks to the rise of online shopping. Some of the more common online payment processors that exist are PayPal, Apple Pay, and Google Pay. These companies have followed the trend of offering payment services because of the massive demand that exists for them.
“Payments Cards and Mobile” estimates the global online payments market will reach $14 trillion by 2022, but the rise of online payment systems should come as no surprise since it directly mirrors the growth of e-commerce.
Online payments are not only limited to consumer-to-business transfers. Online payment systems extend into B2B commerce, and general consumer mobile applications that utilize the internet as an intermediary for money transfer. All transactions done through these applications can be considered online, since the money moves from one mobile phone account to the other. Inc. states that mobile payment options may be the future of commerce.
The Rise in Popularity of Online Payments
Why have online payments become so popular in recent years? There are several reasons why online payments have come to replace face-to-face cash payments. Many of them stem from a societal preference for doing business. Among the most popular reasons users chose online payment over actually visiting a retail outlet are:
Convenience: As far back as 2013, a study done by Javelin Strategy and Research showed that as much as 80% of respondents had used online payments to take care of a bill the previous year. The convenience of not having to line up to pay for goods and services appeals to most consumers.
Security: While there does exist a chance for hackers to get ahold of financial information through online purchases, the victim isn’t likely to end up with grievous bodily harm in addition to losing their funds.
Not Restricted by International Borders: Some companies refuse to ship outside of their national borders, and for users to get these products, they must be able to pay for them through the internet.
Online Payments Affect Consumer Habits
Online payments have become widespread and have changed how consumers view and interact with money. Science Daily mentions that paying for goods with a mobile app affects how much people spend and how often they buy things . Consumer spending is likely to increase as more and more people turn to mobile payments as a method of buying goods and services. These methods are not the only way that online payments affect how consumer behave
Phys.org reports that the way consumers perceive a product may also be affected by their payment method. Consumers that purchase goods through online means tend to have more of a focus on the benefits that the product provides to them and the included features that may impact their lives. Cash purchasers, however, prefer to focus on the cost of the item and other associated value-based concerns. In essence, online purchasing changes how consumers view the value of a product, which could be either a negative or a positive, depending on which side of the advertising argument one stands.
The Future of Online Payments
As the internet continues to expand, companies have been looking to get in front of the next trend in financial technology – the blockchain. The Verge mentions that Facebook is developing a cryptocurrency based on a blockchain for use with its social media platform, along with a handful of other companies in a consortium. Additionally, The Balance SMB notes that blockchain is significantly changing how banks consider payment technologies in the twenty-first century.
The critics of blockchain and cryptocurrency are many, and while the future use of the technology for payments and finance is likely, it could be a while before entering mainstream commerce. In the interim, we may witness the future of online payments in the broader adoption of mobile payment systems, particularly for consumer-facing businesses. Some companies have already embraced the method of mobile payments to great success with the likes of Apple Pay . Only time will tell how the technology is adopted in the long-term.
Moving Away from Paper
The history of currency is fascinating. People initially used paper as a store and representation of value, and now thanks to online banking methods, bits and bytes have replaced paper for that purpose. In time there may be a dynamic shift away from how we consider money.
Society is on the road to combining multiple stores of value into a single one. The dream of a global single currency may be a while off, but it would greatly simplify commerce across the entire globe. If everyone trades in the same coins, then values will be simplified. Electronic payments are a start to seeing that happen. The future may be nearer than we think.