Innovation in payments may seem like a new thing that has been facilitated by the emergence of new technologies, but there is a long established history of businesses finding new ways to encourage customers to spend with them.
The first merchant specific credit vouchers began to emerge in the 1800s, by the 1950s charge cards such as Diners Club and American Express where beginning to appear and then by the 1960s the credit card as we know it today began to be issued by banks and card companies.
For forty years the physical form of the card and how we used it was largely unchanged. There had been some notable changes though; there was the introduction of magnetic stripe which allowed merchants to have electronic point-of-sales speeding up transactions, there was improved security through the introduction of Chip and PIN capabilities, and purchasing habits began to change as transactions moved online.
However, in the last ten years there has been more innovation in the payment space than probably any period before, and it is advancements in other technologies that has driven this. In 2006 the first contactless transactions were processed in the UK, for the first time the customer could simply pass their card over a reader and go, no need to tap in a PIN or sign anything – quicker, easier and more convenient.
Alongside the introduction of contactless technologies developments in mobile payments opened up a whole new way of making payments and significantly, new form factors. Electronic wallets could be linked to mobile phones and apps, meaning there was now no need to carry a card to make a payment, this combination of contactless and new technologies began to revolutionise payments. New products are now emerging that have turned bracelets, key fobs, stickers and mobile phones into payment devices. Smartphones and smartwatches are also providing new solutions with e-wallets being linked to alternative payment types that are challenging the very need for credit and debit cards as we have always known them.
The major benefits for consumers is portability, convenience and ease of use – no need to carry multiple cards and chunky wallets, link them to your chosen payment device and leave the wallet at home.
For the merchant it can speed up transaction times and throughput at the tills, in itself a major advantage. Importantly by making it quick and easy to visit their store it encourages trade. One of the biggest innovations and advantages of the combination of new mobile payment technologies is that the merchant can gather valuable business intelligence about spending habits of their customers making them more competitive and responsive to their customers.
There is a dynamic future ahead in the payments arena that will see fast paced innovation for customers and merchants alike
Take a look at this timeline below of the history of credit cards from Sainsbury’s Bank.