Beyond Plastic: The Payments Revolution

Mobile Payment Apps

Americans like their credit cards so much that even the smallest of purchases are now paid with plastic rather than cash. A survey of small purchases among U.S. adults in 2017 by reveals that 17 percent of adults with credit cards use them in physical stores to buy items with a price tag of less than $5, up 11 percent from last year.

That said, cash and debit cards are still the preferred payment method for small purchases. While 24 percent of adults in the survey used debit cards and 55 percent used cash, the increase in credit card usage may be because shoppers are maximizing their reward schemes: frequent small purchases can add up to a lot over the course of a year.

However, cash is still the preferred payment type for lottery transactions in the U.S., and some jurisdictions expressly prohibit any form of cashless payment. Fees associated with cashless payments are also a barrier for lotteries, as previously discussed in Lottery and the Cashless Consumer. But what’s next for the future of payments?

Contactless cards, digital wallets, peer-to-peer and peer-to-merchant payment apps, and biometric authentication are transforming the future of payment methods. Italian peer-to-peer payments app Jiffy now claims to have more than 4.2 million subscribers who can send and receive money in real time to individuals their contact lists using just a mobile phone number. Now deployed in 150 retail stores in Rome, Milan, and Turin, shoppers can use the app to make a payment by scanning a QR code generated by the retailer at the point-of-sale. The transaction is then authorized using a fingerprint or PIN. The payments industry expects to see a host of peer-to-peer apps aiming to create a multi-functional and pan-European mobile wallet capable of initiating payments online, in bricks-and-mortar retail, and from peer-to-peer via a direct connection with the customer’s payment account at a participating bank.

Venmo, a mobile payment app popular in the U.S., is not only an easy way for people to send money to one another and make purchases from merchants; it also has a unique feature – a social network. When Venmo users send money to a friend, they can include a message or emoji to show what the payment is for, such as pizza, or beer. If users opt in, these can be seen by other Venmo users. If a user buys a product from a merchant, that is also shown in the Venmo social feed, offering businesses the opportunity for social exposure.

We are also seeing the rise of invisible transactions where a payment is taken as the customer leaves the store. Amazon Go “Just Walk Out Technology” allows the retailer to detect what products a shopper has picked up, and charges their Amazon account on exit, completely bypassing any physical form of payment. In this world, retailers recognize consumers by their devices and biometric identifiers, completely eliminating the pain of waiting in line.

As consumer expectations about the ease, speed, and social significance of payments are reshaped, retailers will be challenged to eliminate delays due to payments altogether. IGT’s trendspotting partner The Foresight Factory predicts that within five years, one-click payments will become no-click payments, and seamless payments through biometrics (e.g., fingerprint), or mobile and wearable devices, will be ubiquitous. IGT works closely with The Foresight Factory, and our Innovation team are well advanced in developing a future beyond cash and plastic for our lottery customers.

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