Evolution of Payments with E-wallets

episode Transcript

Intro

You're listening to Gateway to Ecommerce a podcast by ClearSale. In this series, global ecommerce leaders discuss challenges, best practices, new tech and secrets to success. And now your hosts, Sarah and Denise.

Denise Purtzer

Hello, and welcome back to the Gateway to Ecommerce podcast. Today. I'm back with Sarah Elizabeth, our senior marketing director here at ClearSale. Today I'm super excited because we get to dive into the evolution of payments with e-wallets because this topic of payments is near and dear to my heart. I've been in payments for almost two decades now, prior to coming to ClearSale. And during this time I cannot, I'm continually just amazed at how many changes occur, not only on an annual basis, but on a daily basis these days. And it continues to blow my mind. So we're going to delve into a little bit about that today. Mobile shopping has grown quickly. From that digital native only group, that we all think about. And now it's a trend that, even your parents are doing it. So, Sarah, I know your finger’s on the pulse of consumer behavior with our annual survey. What do you think about all of these improvements and innovations to the payment industry?

Sarah Elizabeth

Yeah. That's really interesting. Start by the fact that we have market data that shows, that more than 80% of millennials they're shop online on a weekly basis. And 10% of them, they spend more than 10 hours a week shopping mobile phones, which is kind of crazy when you think, right? More than one hour per day.

Denise Purtzer

I wish I had that time. Yeah.

Sarah Elizabeth

That's true. But this is not limited to young shoppers anymore. We have our own 2021 global ecommerce consumer behavior analysis that is published on a resources era for website, in case you guys are interested in diving more into it. That reviews that when shopping online, more than one-third of people, 25 and plus they are most likely to use their tablets or mobile phones. So even the older generation, they are not limited to their PCs anymore. And while paper was the main forefront of online payments, now it has to fight against some innovators like Google, Walmart and new examples give coming up, which is something that we're going to talk more about today.

Denise Purtzer

Absolutely. We've got a ton to cover today. We're going to talk about e-wallets. We're going to talk about mobile commerce. We're going to talk about a little bit about voice and social commerce, mobile payment platforms. And in tying that all together with the consumer behaviors and the threats to merchants. So a lot to cover today, as I mentioned. But before we dive into the platforms, we can't have these conversations without talking PayPal because they were at the forefront. But before we dive specifically into this platforms, let's talk about e-wallets and the mobile payments industry. And a little bit about how social and voice commerce are entering the game in full force. And what threats, merchants and consumers alike should be aware of, as these payment options become more mainstream. So talking e-wallets, do you have any good stats on e-wallets that you want to share, Sarah?

Sarah Elizabeth

Yes. Yeah. In fact, I do have. We have an estimation that more than 100 million, we have more than 100 million mobile payment users in the U.S. with about 140% of them using e-wallets for a purchase from the phone. And this number is expected to grow to 125 million mobile payments users by 2025, having the mobile wallet usage of more than 50%. This is a lot. And this comes to a few reasons. I don't know, Denise, do we want to share a little bit of why you think that it's growing?

Denise Purtzer

Yeah. So in looking at what's happened to us in the last year, obviously with the pandemic, there has been a huge push in this last year to not handle cash money. Paper is no longer or paper, money or cash is no longer king, right? So looking at ways to do touchless payments has really come to the forefront. And I think in addition to that, millennials, we look at them and they account for four out of 10 mobile phone users. They have this concept of no cash in hand, all of their lives. And so that's a very easy transition for them and they're the heavy users in the segments. There was a cornerstone study back in December that was done, that said eight out of 10 smartphone users have at least one mobile payment app on their phone. And they're using it as you say, on a regular basis. So it is interesting to look at the stats that you shared and the huge amount of growth that's going to happen in Justin few years.

Sarah Elizabeth

Yeah. That's impressive. And speaking about the apps, what would you say are the main major players that we have in this industry nowadays? The ones that people should know about?

Denise Purtzer

Absolutely. So of course, we're going to talk about PayPal. PayPal historically, they've been there from the forefront, as we mentioned earlier. They're installed on nearly two third of all the smartphones with about a 65% market share overall, but then they're followed by other contenders. We've got Apple Pay with just over 43 million users and they have about 26% market share. This is an interesting one for me because obviously, we have a lot of coffee drinkers in the United States and around the world because Starbucks makes that list with over 31 million users. And that's more than Google Pay, which is the next one at 25 million users and 25%. And then it starts to trickle down with some smaller players, but Samsung Pay has, has definitely entered into the ring with about 16 million users and about 8% of the market.

Sarah Elizabeth

Yeah. And when you combine those two, like Google Pay with Samsung Pay, they're both based on Android for most of the people. We have almost the same amount of users, Apple Pay. So you can say to the markets divide.

Denise Purtzer

And when we start looking at usability, you had mentioned some of the stats, but 45% of our users are using their payments on a weekly basis. So that's definitely, not only are there more adopters, but there's more use in adoption and that's increasing obviously, steadily year over year. Let's look at the average spend because that's also increasing. And I think that's intriguing too, because if you think about just buying a piece of, or a cup of coffee, does that really add up? And absolutely it does. Do you have any stats around spend, Sarah?

Sarah Elizabeth

Yes. We actually do. We have estimations that shows that the average spending it's going to grow about 25% in 2021 to almost $2,500. And this is expected to surpass $3,000 by 2023, which is kind of crazy. If you think that this has been constantly growing for the last years and we don't see this coming. We believe, and our data shows that, this amount is going to be over 40K by 2025, all of these data, according to eMarketer research on March, 2021. They are really good on their ecommerce research.

Denise Purtzer

They are. That's somebody that I definitely go to for stats all the time.

Sarah Elizabeth

Yes.

Denise Purtzer

So that's really interesting. And as you're saying those numbers, I'm thinking, oh my gosh, that's a lot of money being spent through e-wallets. But then I started to think about the purchases that I've made over the last couple of months and it does add up. So I guess I'm, I'm right in there too.

Sarah Elizabeth

And sometimes we, even if we know you, we don't consider you have a preference about PayPal. Sometimes we see PayPal and those other e-wallets in some much easier, right? Because we not always have our credit card or their information with us. And some merchants, they either required to type everything again or you can simply use a e-wallet to check out, which is good enough.

Denise Purtzer

Absolutely. I'm a lazy shopper, as most people are getting to be because we're spoiled these days. So that's precisely why that growth is happening. Let's talk about PayPal. They launched way back in 1998. And they've been public since, gosh, I think 2002. And during that time, when they went public, they got acquired by eBay for, at the time it was billion and a half, one and a half billion dollars. And they continue to grow faster. They grew faster than eBay at that time, which was their parent company. And then they split from eBay just more recently in 2014. So given all this, you look at the founders behind it. You've got people like Max Levchin, Peter Thiel, Elon Musk. And these are names that you recognize not only in payments, but the technology space yet today. So it's interesting that they were forerunners in that space. They continue to do other things and launch other companies. They dominate the space. I think you've got some numbers around PayPal users. Don't you, Sarah?

Sarah Elizabeth

Yes, I do. And it's kind of a crazy to think, because when you're seeing numbers that are so big that people, most people they cannot actually visualize what they mean. I think we have some of them here. They have almost 400 million users. They have more than 1 trillion, total sales volume and more than 15 billion transactions annually. We know that those numbers are huge. Maybe for people they're not in the industry, they just, okay. They are big, but how big they are. And we can say they really dominate the market somehow.

Denise Purtzer

And you were talking when we were preparing for this, about a study that we came across. About payment options and what makes them successful. Do you want to share a little bit about that?

Sarah Elizabeth

Yes. It's a really interesting study from that shows that there's research on the benefits to mobile payment app usage. And we have some of the main drivers, why people choose it, it's because ease of use, of course has really talking securities. Sometimes people, they don't know the websites they’re buying from, but once they see a well-known e-wallet, they are okay with going forward. For example, I can say by myself yesterday, I was buying something online and the website looked shady, but as I saw Shopify Pay and PayPal, I said, "Okay, I already have an account here. I don't have to type my data, my info again. So I think I'm safe." So I think this really plays a big her.

Of course, convenience. You can pay everywhere. It's international. For me, by first hand and being a Brazilian and traveling a lot, for sure this helps a lot. Lots of countries. They don't accept international payments and international credit card payments. So e-wallets for sure, they help a lot. And we also have to talk about the rewards for some of these payment methods, right? So they have really, PayPal has really interesting stats and they score most favor in seven out of the 10 items that we share. So it's really cool to see.

Denise Purtzer

So that's interesting. So people like PayPal. People use PayPal. There are a ton of people using PayPal, but as we take a look at where they've come from, and I think that, that's why it was important to share some of that historical information. I think it's more important to look at where these payments companies are going and we're starting to see an advancement. I mean, part of the space I was in was Buy Now Pay Later, prior to coming to this company. And we're starting to see a huge surge of innovation and more convenient payments happening all the time. So as we talked about it's, super easy. You don't have to put in your information. The basis of that, holds true for a lot of these payments. And interestingly enough, the CEO, current CEO of PayPal, Dan Schulman said that credit cards will not exist in 20 years is what he predicted, which I find quite compelling and intriguing, coming from a company that that is based on credit cards and its core.

What are your thoughts on that one, Sarah?

Sarah Elizabeth

That's a hard one because on one side, I do agree with him, but on the other side, it's so convenient and people are so used to the way the things are now. And we don't have, especially in the U.S., any big issues with people paying in credit cards. It's easy. People are already used. I don't think we can think about 20 years, especially after we saw in the last three years, we see that things can change way too fast. So I think agree, but I wouldn't put all my money on that.

Denise Purtzer

I would agree. I think the VISAs and the MasterCards of the world might cringe a little at that, but at the same time you see things are changing, right? So when we look at some of the alternative payments in that space, like Affirm, for instance, or Future Pay, they are companies that do not use a credit card. It's a virtual line of credit for portions of their business. So you start to look at that and you think maybe there's something to it. But then there are companies like After Pay, Sezzle and Split It, which are still that buy now pay later foundational offering to the consumer where they can break it up in payments, but it is using a credit card. But then you also juxtapose that, with the fact that millennials are a little bit adverse to credits, they don't want to have to owe somebody. So given that if you can give them something that's not as credit cardy, it may be accepted and it has been accepted by that segment, for sure.

Sarah Elizabeth

That's really interesting. Yeah. That's an interesting perspective.

Denise Purtzer

Well, let's also look at, you know, the buy now pay later forecast, Cornerstone, who I'd mentioned prior said that the spending on buy now pay later is about 24 million for 2020. And for this year it's projected to leap to a hundred million dollars. That's a huge leap. What do you think is driving that, Sarah?

Sarah Elizabeth

That's a four time jump. That it's really interesting. It's super interesting for me that because coming from Brazil, buy now pay later, it's the norm. And it's like, what do you do? Because people they, the price is the same. You don't pay interest rates. Usually if you're buying one installment or five settlements or buy now and pay later or whatever. So that's what usually we do. And it's funny to see that something super new for the U.S. market, which in general, we think that it's ahead of the other countries. So I find this really interesting. But this is a result. I think of more people, younger people getting to the market, they're more open to try new methods and alternative payment methods. And also the technology changing. Now we have open banking and things they make much more room for, alternative methods, right? Like things to come new. We even have visa now, on the installments, which is something super new here. And lots of people, they don't think that's going to work. It's a lots of risk, but I think they don't have an option. Right?

Denise Purtzer

Exactly. And I think it's precisely, you hit the nail on the head because it totally leaves room for more options to come in and for more innovative ideas to come through. We've got a new partner coming on board called YouPay. And what they're doing is allowing not only you to fill a cart, but then you send it to somebody else and they pay for it for you. So it's again, changing the infrastructure. Absolutely kids and spouses, trying to figure out things. What do you think about this? Instead of bookmarking and sending a link, you could send it like, assume the sale and say, here you go check out. So I think it's very cool.

Sarah Elizabeth

It's an interesting thing, it's a lot of... Sorry, and I think what is interesting to all of them, they are like a gap around the easy, right? Has to be easy and convenient. So it's pretty cool. Like when you solve an issue like this idea of sending a tab for someone to check your card and eventually may place the payment, it's really cool. It reminds me also of something much more simple. But like with Uber Eats, now that you can share your purchase or you can create group orders and things like that, you'd see more and more alternatives coming up to the market.

Denise Purtzer

Absolutely. Those P2P payments. Those group payments and splitting them up. That's interesting. Google Pay also does some cool convenience type stuff with, like get food and get gas, easy buttons. And we all know that Gen Z likes to make things convenient and easy. And that's being adopted majorly by that segment right now.

Sarah Elizabeth

Yeah. I remember when Amazon started with those buttons for you to refill a laundry detergent and things like that, it was super innovative. And now it's this things happening payments. How fast things change, right?

Denise Purtzer

That's true. And that ties into the internet of things as well, because it might be a scenario that's tied to a different machine, like a washing machine in that case, with detergents. Things are tied together. It makes the decisions for you and tells you when you need things. So that's so true. I think also that, that generation also expects more transparency and the ability to control finances because they are hyper aware of the fact that they don't want to be in debt.

And a lot of these payment options are giving activity insights and tracking. And like Google gives through Gmail, you can scan for receipts and tie everything together. So that you've got your finger on the pulse as a consumer, as to how much you are spending, which goes back to that whole thing. When you mentioned the stats on how much people are spending per year. I guess, if I was truly, had my finger on the pulse, I would be able to log into my account or be aware of the fact that I had spent X number of dollars on my PayPal account over the course of the year. But these things are happening.

Sarah Elizabeth

Yeah. I'm just, I just wonder if at some point you're going to scale back. People are having many apps and different choices, like which ones are going to dominate the market, if any, or if this is going to be a market that it's going to be all over with different players, and it's going to be a smaller place for everybody.

Denise Purtzer

How many apps can a person have? And when we look at how many apps are installed, the focus on that study was just on that one app. But do people have 10 payment apps? I don't think it's ever going to come to that because I think that that's not convenient. It's anti to the behaviors that we're seeing and those trends that we're seeing. And I think that, given that, that is something that PayPal has to think about because are they entwining the needs of the future shoppers? Are they going to be able to maintain that base and grow that base over time? And I think what we're seeing is that other payments are starting to erode from that base and people are starting to adopt to other measures.

Sarah Elizabeth

Yes. And how do you see this connecting with the ecommerce platform market, which is, you talk to commerce platforms on a daily basis, right? How do you see this connection happening and what are the key highlights for people here?

Denise Purtzer

We do talk to platforms and we partner with them. And it's very interesting to see. And that kind of flips things over to the merchants point of view. And I think from that perspective, you've got Shopify and BigCommerce and Salesforce Commerce Cloud, other ecommerce platforms that are allowing merchants to be a little bit more fluid and flexible and have more control over their payments. One of the trends that I'm starting to see is that merchants want more data themselves, and they want to be able to see from start to end, what that consumer trail is, and where the bailout rates are and the completion rates and things like that.

So in working more directly with the payments companies like Stripe, Square, or some of these other payments options that sit behind the ecommerce platforms, I think they're able to get a higher level of detail. Maybe than the wallets, which seem to be a little bit more of a black box to the merchants, and that gives them more control. So I think over time that's a trend that we're going to see. And that's going to factor into the consumer experience as well, because what our merchants selecting and choosing and offering to their shoppers, that benefits them as well as the shoppers. So it's that balance between those two.

Sarah Elizabeth

Yes. And it's interesting that you mentioned merchants being able to understand their data, right? Because a complaint that we hear from all of them, it's like when they are trying to analyze payments data, it's like, they simply cannot understand. And I think that lots of them, they accept this as a fact like this is market, how it is and which is super unfair. So another advantage of this market being more competitive is that companies are going to have to be a bit more clear, more transparent on what they're offering and what has happened on the merchants. So we see lots of merchants that they lose lots of transactions due to different of creators in the payment side and they have no clue, which is really frustrating for the merchant.

Denise Purtzer

Absolutely. Because as we even tie in marketing, which is your forte, you want to be more targeted in your marketing and be more valuable to the end user. And you can't do that if you don't know what's happening. Right?

Sarah Elizabeth

Exactly. And it's like, this has to change, right? Because the data it's from, who owns the data? It's a merchant. The merchant should be allowed to understand and see everything.

Denise Purtzer

Absolutely. And we talked about that data protection and that security piece as well. And I think that both merchants and consumers are starting to demand more on the security level. And that's a tough balance because we're talking about making it easier. Not having to enter information. Automatically passing information. All of those things can make security and compliance teams cringe on some levels. But really at the end of the day, it's finding that balance between making sure that it's easy for the consumer. It's accessible for the merchant. They have data information, but we're securing it at the end of the day.

Sarah Elizabeth

Yeah. This is a tough balance, especially with the younger generations that they are okay with taking more risks. So they are placing more and more transactions on alternative payment methods. So which forces, merchants to pay attention because they are growing. And we don't know all the security issues that we might have yet. So the interest is going to learn all together.

Denise Purtzer

Absolutely. And then you had briefly mentioned Uber, which has to come up in every conversation around payments because that concept is so intriguing to me. Because if you think about it, it really takes the whole payment process away and it makes it invisible and invisible payments are accepted and desired these days. The consumers can have an experience and walk away without having to ask for the check and pay for the bill. Right? It's that convenience. And I think that the mental shift psychologically behind that in how people are buying it makes it easier for people to buy. And I think ultimately it makes it easier for people to spend more money.

Sarah Elizabeth

For sure. You don't feel right. When you have cash and you're giving someone, you can see and realize that we're spending. When you just clicking a button on your cell phone, it's like, sometimes you do it without even realizing that you're doing.

Denise Purtzer

Absolutely payment is an afterthought. And merchants love that. Right? Because it means more sales.
Sarah Elizabeth

Yes. That's true.

Denise Purtzer

So the beautiful thing is we're talking about these payments and we've talked about the security behind it. I love the fact that we have a partnership network that's almost 200 partners strong. In which case we can help our clients, whether they're small, medium businesses just starting out and they don't know where to begin and how to get a payments partner or which platform to choose. Up to our enterprise clients, where we get a little bit more definitive with different tools that we can give them on the consulting side and helping them maximize all of their sales, as well as keeping them safe throughout that time. So Sarah, I know you worked on some of the consulting side of things. Can you share a few examples of things that we've done with some of our enterprise clients?

Sarah Elizabeth

Yeah. Sure. We have services that have clients that they ask us for help from creating KPIs dashboards so they can evaluate their payment and fraud results and see if they're heading the right direction and where are there opportunities from merchants that we do, like a hands-on work on creating procedures and scripts for many analysis. And also help them to set up fraud rules and scoring and things like that, because the same way that they have many alternative payment methods, we also have many fraud prevention tools in the market, right? Sometimes you get lost on how to use them. And we have a great team at ClearSale that can help merchants navigate that environment and find the right tools. Can they be, they can be ClearSale’s tools or it can be market tools. We work with everything.

Denise Purtzer

We do. And I think that that partner network has been something that's been a great benefit to our merchant partners because they're not having to worry about solving all the problems. Not only our resources section, where they can read about different information on the cleared out sales site, but also the fact that we have a team of people behind them that are doing quarterly reviews and finding out what their pains are and helping them solve that. So that's a big part of what's satisfying for me and my job, is being able to help solve those problems and seeing them move forward and grow their business at the end of the day.

Sarah Elizabeth

Yeah, it's really interesting. I think we are in a privileged position being at ClearSale. We have all those partners that we talk to and you also have a market data and market overview. Because we have lots of merchants working together we can have a better understanding of the market than when you are a merchant playing alone. So I think that's really interesting that the industry talks more and more with each other and they share more data in a secure way of course, and a shorter way. So together merchants and companies, they can understand better what's happening and play together to make improvements.

Denise Purtzer

That's true. Even things like Merchant Risk Council, which is the MRC, is an organization that we take part in and sponsor and take part in there shows, that are now starting to happen again. There's one coming up, hopefully. And those are, it is a think tank. And it's a sharing experience to benefit the merchants and to give them the information and data that they need. So I think the neat thing about ClearSale, it's all in the name. We are very transparent in what we offer and what we do. And we share that information so that the merchant can give a better experience, a more secure experience. And at the end of the day, the person that benefits is that shopper. So we all win.

Great. Well, we've covered a ton today. I just wanted to share with you that we do have those resources available. You can take a deeper dive into this topic and visit our website, clear.sale.com to learn how the online payments process works. It's also linked with the description of this podcast with another resource, bunch of links to get you started. So thanks for listening again, to the Gateway to Ecommerce Podcast. We hope you continue to listen to our upcoming episodes. And if you like what you heard today, please be sure to stay connected and subscribe or follow on all your major platforms like Apple, Spotify and iHeart. If you have a question and you would like us to cover a topic, please email us, reach out to us at podcast@clear.sale. We love to hear from you. To learn how to prevent ecommerce fraud, visit our websites. Again, we have a ton of resources there. So thank you for joining us today and have a great day

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