How the rise in mobile payments will affect businesses in 2024

In the last few years, the financial transaction landscape has seen massive changes that are continuously becoming more prevalent: digital transformation, generative AI, sustainability, Open Banking and of course, the rise of mobile payments. 

As the demand by consumers increases, businesses need to take advantage of this new tech to optimise growth and customer experience. 

Let’s take a look at the different ways a business can implement the various mobile payments technologies.

1. Buy now pay later

Buy now pay later, or BNPL, took centre stage during the pandemic due to the rise in online shopping and of course, financial instability. It’s a bit like a loan, or a form of short-term financing that gives consumers the option to pay for things over a period of time rather than all at once. 

It’s much easier to get approved for, compared to bank loans, and a lot of retailers even offer the service. Or buyers can use a third-party app.

How does it work?

When buying something at a participating retailer, the consumer goes for the BNPL option when checking out. They make a downpayment of say, 30% of the total amount, and pay off the remainder in instalments over a period of a few weeks or months.

But what should you be aware of when opting for BNPL for your business?

Pros

Including a BNPL option for your customers can offer a wide range of benefits, including:

1. Competitive advantage: Businesses can attract customers who prefer more flexible payment options, and improve customer loyalty and retention in the process. And getting promoted on the website of the BNPL partner is an added bonus. 
2. Increased sales: Some people are budget-constrained or simply don’t have the money to pay for certain items up-front. Offering the BNPL option opens your business up to a wider range of customers who might not have made the purchase otherwise. 
3. Risk management: Most BNPL services take on the risk of non-payment. Which means that in the event of a customer defaulting on their payment, the business is still safe. 
4. Better customer experience: BNPL makes shopping more accessible, less financially draining and more flexible for customers.

Cons

BNPL pitfalls can involve the following:

1. Cash flow challenges: Not receiving the full payment up front means that businesses have to be on top of their cash flow. But with higher customers due to more flexibility, the lower payments can be offset by higher volume.
2. Added fees: BNPL providers generally charge fees to merchants per transaction which businesses need to consider when thinking about profits. 
3. Customer defaults: Even though providers take on the risk of non-payments, a significant number of defaults might have a negative impact on the business’s finances.

2. Money transfers

Mobile financial service transactions (or mobile money transfers) have been steadily growing in popularity. In fact, they’re expected to increase by 80% over the next five years.

Consumers are constantly demanding convenience, security and efficiency. And for businesses, leveraging the mobile tech space not only expands customer reach, but allows them to capitalise on what benefits digital payments have to offer in a world that’s becoming more and more interconnected. 

Why the growth?

It’s no secret that technology is a key component of scaling up business operations. Couple this with advancements in the finance industry and you’re left with larger money transfers across multiple sectors and markets. 

And with globalisation driving interconnectedness; increased international trade, more investments, larger supply chains and bigger cross-country transactions are a big side-effect. And they all need easy and convenient access to digital processes.

Mobile money transfers also enable businesses to send and receive payments easily and cheaply even across borders, which can sometimes be a pain for large companies operating across multiple countries. 

Pros

1. Convenience and accessibility: Being able to send and receive payments anytime, anywhere and with any mobile device makes mobile payments the go-to. And businesses of all sizes can employ them. 
2. Cost efficiency: Lower transaction fees, reduced overheads and less paperwork mean more cost-effectiveness. 
3. Better cash flow: The speed of mobile payment processing leaves much to be desired for traditional banking. Which is particularly good for small businesses who are subject to seasonal ups and downs.
4. Inclusion: Many businesses operate in regions where technology is less developed or underserved, so being able to transfer money remotely is particularly helpful to those operating in emerging markets with limited banking infrastructure. 

Cons

1. Security risks: Fraud, identity theft, cyber attacks - some of the many vulnerabilities of mobile money transfers that require businesses to invest in encryption and authentication for protection. 
2. Internet reliance: As with much of today’s technological world, network connectivity delays or disruptions can mean roadblocks for mobile devices. Which means interrupted money transfers and transactions. 
3. Technology dependence: Some countries, phones or devices might not have certain transfer apps available. And of course, all technology is subject to outages at times, which means disruptions to payment processes. 

3. Biometric authentication 

Forgetting passwords, misplacing keys: it happens to the best of us. 

But in a time where passwords and keys are a thing of the past, we can use our own bodies to access accounts. 

That’s exactly the ability that biometric authentication provides. 

How does it work?

It’s hard to buy a smartphone in 2024 that isn’t biometric enabled. But what exactly does that mean? 

Biometric authentication is a way of verifying a person’s identity based on unique physical or behavioural traits. The most familiar form being fingerprints. Most smartphones, laptops and tablets today are enabled with fingerprint scanning technology. And it doesn’t end there. 

Facial recognition, iris or retinal patterns, voice recognition, and even behaviours like typing rhythm can be captured and analysed to confirm who a person is. 

But how does that affect businesses, and the way people buy for a service or product?

Pros

1. Enhanced security: Perhaps the leading bonus of biometric authentication is the higher level of security it provides over passwords or PIN codes. Since biometrics are unique to each individual, they can’t be stolen or replicated. Making hacks and breaches near impossible.
2. Better user experience: In industries like banking, e-commerce and healthcare, the seamless and convenient use of biometrics gets rid of the need for tedious verification processes. 
3. Integration with technology: Emerging technologies like AI are likely to become much more enhanced, requiring processes like biometric authentication to improve accuracy and security. 
4. Financial transactions: Preventing fraud will always be a priority for financial institutions. Which makes methods like biometric authentication for the authorisation of payments, accessing accounts and completing transactions helpful to both the customer and the business in staying safe. 

Cons

1. Privacy worries: Storing information about fingerprints, facial features and behavioural patterns of individuals can be a huge concern for people when it comes to identity theft. Which means businesses need to have robust security measures in place for data handling.
2. High cost: Buying the hardware and software to implement the system can be pretty hefty up front, especially when considering the integration with your current tech stack. 
3. Regulatory compliance challenges: Navigating regulatory landscapes isn’t easy, and when it comes to GDPR (General Data Protection Regulation) it’s certainly no walk in the park. For businesses to hold certain data on clients, data protection policies and consent for data collection must be a necessity when using and storing an individual’s data. 

4. Digital wallets and the cashless society

Automatic transfers, Google and Apple pay, recurring payments – it goes without saying that cashless transactions are on the rise.

As consumers start to embrace more digital payment methods, cash is slowly taking a back seat. And retailers are also taking the change in stride: nearly 60% of businesses plan to only accept digital payments rather than cash. 

Why the rise?

Digital wallets provide safety, security, convenience and serve as a virtual counterpart to a physical wallet. Which, let’s be honest, we all forget to bring with us half the time. 

Digital wallets can store your debit or credit card details to facilitate phone or smartwatch purchases. But like their physical twin, they can hold much more than just cards and money: gift cards, event tickets, loyalty cards, membership cards and plane tickets are some of the many things that can be kept in a digital wallet. 

​​Not only are they more efficient, they’re more secure. No physical cash means no theft: it’s pretty hard to rob a virtual account. Which adds an extra layer of security to an already safe method of payment. 

Yet, the dependency on technology will always be a caveat to the cashless society. Disruptions, failures and cyber attacks make it vulnerable, plus: some people just prefer cash!

Pros

1. Better security: Digital wallets are encrypted, which means the risk of fraud and hackers is greatly reduced compared to traditional plastic cards which are easily stolen or copied. 
2. Customer insights: Businesses can gain valuable customer data from digital wallets like purchase history, or consumer behaviour and preferences. Making it easier to improve the customer experience and cater to their needs based on customer habits. 
3. Faster transactions: With digital wallets, businesses can process payments in real-time. Which means less cost, time and effort normally associated with traditional methods. 

Cons

1. Regulatory compliance: Businesses that accept digital wallet payments have to be aware of data protection and privacy laws across different countries. 
2. Cyber attack risks: Even though they’re safer than their physical counterparts, little to no online payment methods are immune to cyber attack risks. Which means that businesses need to implement strict protection against potential hackers. 
3. Data safety measures: Collecting and storing the consumer’s data is a necessary evil for mobile payments, which means that businesses need to have robust data safety measures in place to prevent security breaches that can result in financial and customer losses.

5. Recurring payments 

We all know the struggle of remembering to pay for a certain good or service on time, especially if it’s a regular purchase. 

Thankfully, recurring payments make life much easier.

They can be used for subscription payments, utility bills, loan repayments, memberships, or any other regularly occurring payment you may have to make. Many businesses have monthly recurring payments, but they can vary from weekly to yearly and anything in between. 

So, why should businesses consider setting them up?

Pros

1. Predictable revenue streams: Being able to know for certain how much money the business has coming to it is excellent for predicting how the quarter will turn out. By providing a steady stream of reliable revenue, businesses can forecast cash flow and plan for future investments much more effectively. 
2. Less late payments: Since they’re automated, recurring payments aren’t subject to human error. Digital tools rarely make mistakes, so relying on automation to do the heavy lifting helps with time and cost saving. 
3. Subscription-based business: Building long-term customer relationships and improving retention rates are just a couple of the benefits of implementing subscription models. Spreading out revenue over time allows businesses to better forecast and control their revenue streams. 

Cons

1. Subscription overload: While subscriptions are great for businesses, the consumer can sometimes experience fatigue and get lost in all their recurring payments. It’s easy to become overwhelmed when signing up for too many subscriptions, so delivering significant value and experiences to customers is a priority for subscription based companies in standing out from the competition.
2. Payment failures: Some people might have insufficient funds, expired cards or frozen bank accounts which can cause the payment to fail. Additional costs can sometimes be a side effect of this for businesses in resolving the issue with the customer. 

Looking ahead 

As we prepare ourselves for the rest of 2024 and beyond, making room for mobile payments technology in business is becoming more important than ever. 

Innovative solutions like buy now pay later not only give customers more flexibility, but open up accessibility and affordability to a wider range of buyers. Money transfer technologies make e-commerce more efficient, while biometric authentication and digital wallets make things like recurring payments safer and more trustworthy. 

And embracing mobile payments can help ensure your business is offering all the latest and greatest ways for your customers to pay and use your products or service.