The rise of electronic and mobile payment methods has been well documented in the payments industry in recent times, but what has been the driving force behind this? Dave Yohe, VP of Marketing at BillingTree, explains how consumer demand is having an effect on the types of new technology lending organizations are offering their customers.
Dave Yohe, BillingTree
Consumer demand and technology is changing the way lenders are doing business. A recent BillingTree webinar, reviewing the findings of the 2015 Consumer Finance Business Strategy and Technology survey, looked at the adoption of payment technologies in small and large vendors. Bank-deposited paper checks were still higher on the list of customers’ payment methods than electronic or mobile payments – but that gap is closing.
Paper still popular 85% of those surveyed said they still process bank-deposited paper checks - a more popular method with the older generation as they are often perceived to be a safer option than digital services. Another possible reason is that smaller vendors do not have the technology that larger vendors can offer. Bank-deposited checks were actually more popular amongst smaller vendors, with 88% of those surveyed offering this method compared to 83% of large vendors.
The survey also found that while 43% of participants were taking mobile or electronic payments, 80% said they wanted to use the technology. This view is supported by Bank Director magazine's 2015 Banking Industry Growth Strategy Survey, which reported 60% of banking executives felt they didn't have the right products, services or delivery methods to address a “decidedly untraditional digital generation.” The demand is there, but the technology adoption isn't always keeping pace.
Rising demand for electronic payments That will soon change. 67% of the webinar attendees said they already offer online payments, with the other 33% saying they were planning to add them to their services.
The number of paper checks processed will drop and make way for a greater number of digital payments, as more millennials start to seriously enter the payments arena and the demand for technology rises even further. The Consumer Finance Business Strategy and Technology survey suggests that the number of bank-deposited payment checks used in 2016 will drop to around 65% from the current 88% in smaller vendors, while the use of ACH mobile payments will rise from 35% in 2014 to 49% in 2016.
Compliance is key As more organizations start to adopt electronic and mobile forms of payment, proper compliance will be key. The top concerns for institutions surveyed by BillingTree were fraud/data security and compliance procedure, which was also reflected later in the survey, as the two most sought-after categories organizations look for when choosing a payment provider.
This comes as no surprise – in 2015 we have seen a number of high-profile data hacks and theft of personal information. Vendors are right to be wary as consumers demand more electronic forms of payment.
Payment Card Industry Data Security Standard (PCI DSS) compliance will become of even greater importance for vendors adopting new payment technology, since security, as well as technology, is vital for business growth. By complying with the latest PCI DSS regulations, organizations can greatly reduce their chances of data breaches and subsequent fines, as well as offering more protection for customers.
The bottom line: This latest evidence shows paper payment methods are hanging on, but digital payments are set to overtake in the near future as the technology becomes more widely available to smaller and medium sized vendors. But organizations must ensure proper compliance or risk losing business.
Download BillingTree's industry report 2015 Consumer Finance – Business Strategy and Technology Survey.
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