How do you think the payment industry will evolve over the next 5 years?

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How do you think the payment industry will evolve over the next 5 years?

Asked at Stripe over a year ago

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productmanager1644 · Answer 1 · 2021-02-08T23:18:51+0000

CLARIFY:
1. Is there a specific aspect of payments you want to focus on (ex. B2B v. B2C)? You choose.
2. Is there a specific channel (desktop, mobile, in person)? You choose.
3. Is it OK to focus on the US? Yes.
STRIPE BACKGROUND: Stripe is a payments start up that offers a suite of payment capabilities for online and in person payment transactions. It is mainly known for its payment processing software and APIs used in eCommerce and mobile payments. It servces as both a payment processor and payment gateway. As a gateway, Stripe captures a customer's credit card payment information and sends it to the processor, which processes the transaction. A customer's payment is temporarily routed to the merchant account / its aggregated account with Stripe where card fees are deducted from the sum before funds are sent to the merchant.
PAYMENT CLASSIFICATIONS: There are two broad classifications of payments: 1) B2B and 2) B2C. For this answer I will discuss themes within each type of payment space I've noticed.

STRATEGIC THEMES:

B2B: Within the context of B2B payments, I am focused on small businesses.

Theme	Description	Example Now
Payment Journey Automation	Companies do not want to spend a lot of time managing AP / AR. Being able to automate portions of the payment journey is very important / reduces manual time / cost / errors. Automating aspects of or the entire payment journey like sending an invoice will grow in importance as we become more digital. (AP Automation will be a growing area for other businesses too though it's likely bigger in the middle / large segment.)	QuickBooks, common accounting software used by SMBs, allows small businesses to pay bills, track expenses and create automatic invoices for unpaid work. Greater degree of automation will be very important for both sending and receiving payments.
Working Capital Optimization	Cash flow is very important to small businesses. They usually are on very tight budgets and cannot afford any delays in payment. In 5 years, there will be greater ways for small businesses to access capital more quickly.	Taulia is a supply chain finance company that facilitates dynamic discounting. Suppliers take an early payment in exchange for a discount to the buyer. Other solutions are coming into the space, like American Express's Early Pay.
Cross Border / Faster Payments	Companies are focused on wanting their money faster. SWIFT if the most common network for cross border payment but its facing growing competition to accelerate payments over teh network. Cross border payments take a while due to many intermediary banks / insight where your payment is can be difficult.	Ripple is a blockchain start up that processes interbank, cross border payments in seconds due to the distributed ledger set up. Ripple offers bi-directional messaging capabilities between banks (unlike SWIFT) which helps banks communicate details on payment. (Ripple is being sued by the SEC re. regulating its cryptocurrency but the idea of faster cross border payments is here to stay.
Spend Insight	Companies will want a greater degree of insight into their spend to help with spend management.	QuickBooks just launched a Cashflow Management tool that pulls in AP / AR data. Other cash flow insights tools include Finagraph and Clockwork.

B2C: In this segment, I will discuss some important trends I see happening with individual consumer payments.

Theme	Description	Example
Digital Friendly	Particularly with COVID, we have seen a number of stores close physical presence in exchange for online shop presence. More consumers are purchasing items online, so more businesses will up their digital presence.	Mastercard's CEO said that in 2020 online shopping increased about 20%. This trend will continue as big stores move their businesses online. Shopify, which helps you build a business online, is growing in popularity.
Checkout Automation	The standard check out process for a user when they are in a store in person is usually very slow (depending on the number of people in line / # of cashiers). You've seen more stores offer self-check out. As time goes on, you'll see not only self check out but potentially no check out options.	Places like CVS offer self check out, but the real game changer has been Amazon Go, which allows users to skip the check out process entirely. A user walks in, grabs their items, and leaves. You may see more on the go, chain stores following this method.
Payment Automation	Electronic, automated payments are growing in popularity in the eCommerce space. More online retailers will support systems that allow for these automated capabilities.	Google Pay is integrated into Chrome, Safari and Firefox. Apple Pay is integrated into Safari. Both capabilities allow a user to skip inputting their payment details in web applications instead allowing for a quick authentication (via pin for Google Pay and fingerprint for Apple Pay).
Mobile / Contactless Pay	COVID has accelerated the need for contactless payment. The ability to accept contactless pay is in part dictated by a merchant's POS system. You will see more merchants switching to POS terminals that allow for contactless pay.	Google Pay, Apple Pay, Samsung Pay all offer contactless payment methods via phone or watch. A growing number of merchants are accepting it. The NYC MTA just rolled out mobile payment across most train stations and buses.
Crypto	Users are becoming increasing interested in crytpo currency - especially bitcoin. Although I don't see it being a standard method of payment, major plays may begin supporting the ability to purchase / trade it.	PayPal may be bringing cryptocurrencies into Venmo. It launched the ability to buy, hold and sell cryptocurrency with its partnership with Paxos Trust Company. PayPal has told investors in a few months users will be able to do the same in Venmo.
Electronic Receipts	Digital first is becoming an important trend in payments. We see this movement affecting receipts. Many businesses are starting to offer electronic receipts either via Square or their own systems. More businesses will begin moving from paper receipts to electronic ones.	Square offers a way to send electronic receipts to consumers via email or text. Other companies, like CVS or Ulta, offer electronic receipts to users. These receipts are all on different formats, so we may also see a standardization of receipt format.
Spend Insights	Similar to the small business space, spend insights are growing in importance for the individual consumer. Consumers are moving spend insights from paper receipts to web / mobile. Additionally, you will likely see the importance of capturing line item details / transaction details from merchants to help with classification of spend.	MInt offers an online budget tool for consumers to help manage their spend and pay off debt. Google Pay just launched a new Insights tab in Google Pay - a lighter version of the insights you see in Mint. Venmo just launched budgeting / saving too. More electronic wallets and banks will invest time into their insights for users.
Data Security / Privacy	A growing number of consumers are concerned about their data security / privacy. Companies in the payments space will have to invest in greater levels of protection to ensure a user's payment details remain private. You will see increasing notifications on what companies use your data for and why / consents for consumers to opt in.	Apple has been in the news lately for enforcing App Tracking Transparency standards. Apple owns its own Wallet and tells users they do not track their spend data (unlike Google Pay). The battle between ensuring user privacy v. gathering sufficient data to tailor experiences for the user will be very important

IMPORTANCE TO STRIPE: Below are a few examples of how some of these ideas are important to Stripe
1. Terminal: More companies are going to like the idea of centralizing sales in a single place. They'll also need to be able to accept mobile payments. If Mobile Wallets evolve (ex. we went from magnetic stripe to NFC for contactless pay), Terminal will need to evolve its capabilities to accept new mobile payment methods.
2. Connect: The importance of an online presence is growing and will continue to grow. More businesses will look to platforms like Connect to help them facilitate online payments.
3. Reoccuring Billing: Stripe will likely see more companies interested in their reoccuring billing SaaS. A 5 year focus may be to build this system out to be more flexible / work with more business needs.
SUMMARY: Very broadly, I think the payments industry as a whole will be moving towards faster, digital first payments and automating where possible. Mobile payments will be of increasing importance to consumers. Additionally, concerns re. data security / privacy will be upfront and companies will need to invest in technology that protects customer data.