PayPal, Google Wallet Contribute to Digital Payment Evolution: Forrester
Merchants have a growing set of payment options that do not adhere to the traditional interchange or processing fee model.Digital disruptors are at work in the payments arena, removing friction along the path to the moment of payment and creating products and services that are stirring up a transformation in the consumer payments industry, according to a report from Forrester Research. The study noted merchants and consumers will wield their influence in picking winners and losers as the array of alternative payment options becomes more abundant, more accessible and begin to deliver greater value and ease to the commerce experience, as evidenced by MasterCard's new fee structure for “staged” digital wallet providers such as Google Wallet, PayPal and Square. Under this structure, the merchant of record and other transaction details are masked from others downstream in the transaction flow. "As the digital wallet wars continue in 2013, leading competitors will drive adoption by integrating capabilities that remove friction and transform the payments and commerce experience in contextually relevant ways," Denée Carrington, a senior analyst with Forrester, wrote in a blog post. "2013 will be a pivotal year in consumer payments. It will be marked by an increase in digital disruption by nimble, tech-savvy competitors. Payments incumbents will leverage their market power to battle disruptors." While the report said traditional economic models will not disappear overnight, it would be a mistake for payment incumbents to dismiss the growing number of unique pricing schemes and the disruptors who are moving aggressively to gain a foothold in a rapidly expanding, but still nascent, market.
As trends in digital payments evolve, merchants can expect to see a growing set of payment options that do not adhere to the traditional interchange or processing fee model, and as merchants adopt these new payment methods, their expectations will reset and they will expect lower costs and greater value from incumbent payment service providers.