It is easy to think that payments were simpler before technology created so many options. Surely there was just a choice of cash or check? Well, that is one way of looking at it. But, of course, there were also bankers’ drafts, money orders, vouchers, and postal orders before any of these shells, beads, and even leather money. How we pay for goods and services has constantly been evolving depending on the merchant’s and customer’s needs. So it might seem that there has been an explosion of what is available in recent years, and the main driver is undoubtedly technology.
The Emergence of Fintech
On the one hand, fintech is simply the use of technology to automate and facilitate financial services. It used to be regarded as the backroom workings of algorithms and specialist software, but in recent years fintech products have pushed their way into the foreground.
Fintech refers to the integration of technology into financial service products. It essentially works by unbundling financial products and creating new markets for them. Rather than payment methods being dominated by a few big names, challenger firms have disrupted the incumbents. They have done this by using technology to cut down on operational costs. Fintech applications include payment apps, peer-to-peer payment apps, crypto, and many other innovations.
Everyone has a debit or credit card in their wallet, and it has been possible to make contactless payments using them since 2007. However, as with all new technology, there was a large amount of skepticism around them. People were worried that they would accidentally get charged just by being near a terminal. Most people still preferred to put their card into the payment machine and enter their PIN. In addition, the limit for contactless was low, so they could only be used for minor transactions. In 2018 only 3% of transactions in the USA on payment cards were contactless.
However, the Covid 19 pandemic changed our relationship with payment cards, with no one wanting to touch something that had not been sanitized. The banks increased the limits on the cards, and CNBC reported that 85% of transactions in grocery stores are now contactless. Pharmacies, retailers, and restaurants reported up to 39% of transactions being contactless. The rise in their use has probably been one of the single most significant changes in recent years, and 51% of Americans are now using contactless payments
Linked very closely to contactless are digital wallets. However, the user uses their smartphone rather than plastic debit and credit cards. The details of the holders’ bank cards are stored within an app like Apple or Google Pay. Unlike contactless cards, however, these do not have upper payment limits (other than the cards’ daily limits). Users can store all their virtual bank and payment cards within the app and use them the same as they would a contactless card at any card reader. There is no need for spending limits as their face or fingerprint are the security method.
While vast swathes of the world population have bank accounts, millions of people, particularly in emerging economies, are unbanked. This was not a problem in the past because ‘cash was king.’ However, the shift to online and contactless has seen a massive uplift in the number of people who are looking for prepaid cards. Prepaid cards are also known as Paysafe cards. There are numerous reasons why people might want to use this innovation that transforms cash into digital currency without needing a bank account.
These cards come in many forms and have a wide variety of uses. They can be as simple as an old-fashioned gift token which used to be made of paper but is now a preloaded card that can be used at a specific store or website. Paysafe cards can also be used for budgeting and creating separate pots of money. For example, someone who enjoys a flutter might want to keep their stakes separate from their bank balance. They can charge up a prepaid card using either a debit card or cash and use it to play on the best paysafecard casino sites.
By Now, Pay Later
In the past, the most common way to ‘pay later’ was by either credit or store card for smaller purchases and by hire purchase agreements for more significant transactions. These schemes all loaded the cost of borrowing onto the purchaser and usually attracted high-interest rates. However, in recent years, a new innovation has allowed online shoppers to pay in installments without any increase in price or interest payments. Klarna introduced the idea of being able to split your purchase over a series of installments. Klarna is offered as a payment option at check out, and the purchaser has a ‘soft credit check’ before making an agreement to pay for the goods in regular installments. PayPal also offers a similar Pay In Three scheme. In addition, they have recently introduced PayPal credit which allows for variable payments to be made. There is zero percent interest to be paid if the purchase is cleared from the account within four months. After that, interest is applied to the outstanding balance. However, it is not for the total balance.