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THE CONVENIENCE DIFFERENTIAL – WHY SIMPLICITY IN PAYMENTS IS THE NEXT BATTLEGROUND FOR CUSTOMER LOYALTY

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By Ian Johnson, Head of European Growth, Marqeta

It used to be that convenience was a thing of luxury for most consumers. Paying for one’s shopping needs with cash, or bank cards, was the absolute norm. Today you’ll find that consumers now expect convenience, and businesses of all types are starting to take note. Technology has introduced consumers to anywhere and anytime commerce, and with such fierce competition existing amongst today’s tech giants the challenge of providing consumers with that much sought after ‘convenience’ factor is turning the payments landscape into the next big battleground. This has been helped along by people’s changing attitudes towards digital banking, combined with a change in consumer expectations.

Changing consumer expectations

Consumers expect their customer experiences – how they shop, and how they pay – to be just as efficient, practical and convenient as everything else in their lives these days. The popularity of contactless bank cards has surged in recent years, thanks to increased adoption from users and merchants. Between June 2017 and June 2018, in-store contactless card payments in the UK surged by​ ​30 per cent​, with​ ​81 per cent​ of debit cards offering contactless capabilities by October 2017, up from​ ​68 per cent​ the previous year. 

Brands and retailers are noticing the importance of convenient payment methods. Our own research at Marqeta found that ​75 per cent​ of people expressing that a smooth payment experience made them feel more positively towards a brand.

Expansion and enablement has gone hand in hand with consumer adoption. People in this digital age expect more because they know that more is possible. This hasn’t gone unnoticed among today’s tech giants looking to infiltrate the payment sector and bring in a whole new meaning to the word convenience.

Next generation payment methods

Technology is already changing how consumers shop both inside and outside the home, with the numerous technological solutions available in today’s payment landscape making it possible for the average consumer to shop from anywhere and at any time. 

Outside of the home, Apple and Google (among others) have earned themselves a reputation as trailblazers that have managed to infiltrate various different sectors. In recent years they have made an attempt at sewing up the payments and mobile wallet markets with​ ​Apple Pay and​ ​Google Pay​, muscling in on territory currently occupied by the likes of PayPal and WePay. Since its launch at the back end of 2014, Apple Pay has slowly but surely been replacing people’s physical wallets and making the process of on-the-go commerce a seamless experience. Its contactless feature capability enables users to pay for their shopping on the go using its secure biometric Touch-ID feature. This has proved popular among millennials, with more than half​ of them in the US and UK being claiming to be comfortable using TouchID and FaceID to authorize mobile wallet payments. It has simplified mobile spending, and with approximately​ ​8.3 million​ people in the UK expected to use mobile payments this year, it is evident that customers are turning to their smartphone devices to shop.

It doesn’t end there for the tech giant, as Apple is joining forces with Goldman Sachs to launch its own credit card. The Apple card will integrate with Apple’s Wallet app and give existing users access to new features and capabilities. This is another example of Apple’s burgeoning influence within the payment space and its ambitions to dominate the market.

One new area of shopping destined to reshape retail is checkout free shopping. Amazon recently laid out its bold plans of revolutionising the in-store shopping experience for consumers with plans to open​ ​3,000 checkout-free stores​, signalling its intent on moving into brick and mortar shopping. For some time now, ecommerce has been position as a direct rival to physical stores, but ever since​ ​Amazon Go​ first introduced us to this new shopping concept when it opened its first checkout-free grocery store in Seattle, US at the beginning of 2018, it is seemingly acknowledging that brick and mortars have their own benefits too.

Convenience is what’s at the heart of this new innovative approach to in-store shopping as customers would be able to link their Amazon accounts to their bank cards via the dedicated Amazon mobile app and purchase their desired products before walking into a store, picking up the prepaid items and then leaving again without having to stop. This hassle-free, cashier-less shopping experience was designed for the ever-busy, time-pressed shopper who wants that added convenience and efficiency when shopping for items in store.

With the convenience differential, it will be up to the payment companies to find ways to standout in an increasingly saturated market. They need to start by appealing to the new demands for convenience and ease at the heart of what’s driving the market forward and delivering effective solutions that can effectively meet these needs. 

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Finance

HOW TO TELL IF YOU’RE OVERPAYING TAXES

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HOW TO TELL IF YOU’RE OVERPAYING TAXES

Paying taxes is a necessary act in our world, and with good reason. Our governments use taxes to build the infrastructure we use, improve our children’s education, and fund the societal safety nets we all end up needing at least once in our lives, like Social Security, unemployment insurance, and welfare.

There’s a difference between paying your fair share and paying too much because that money could be used to better your situation instead of sitting in a government account. But how do you know whether you’re paying too much and what can you do about it? We’ve got a few tips below.

 

The easiest way to tell if you’re overpaying: Do you get a refund every year?

Does your yearly tax filing fill you with a sense of excitement because of the refund you’ll receive? Unfortunately, that excitement is a clear sign you’re paying too much in taxes.

Try to see your taxes like a loan you give to the IRS. If you pay too much, then you’ve given them above and beyond your fair share, interest-free. Yes, you get it back by April (if you file on time and there’s not an extension for a global pandemic) of the following year, but you’ve lost the opportunity to make that money work for you by either accruing interest, getting rid of debt, or improving your lifestyle. This is known as “opportunity cost” and removing as much of it as possible is a critical part of having a solid financial plan.

Balancing how much you pay in taxes works both ways. Underpaying taxes amounts to an interest-free loan from the IRS to you that will need to be paid in full by Tax Day on April 15. If you can land into a sweet spot where you owe $0 and are refunded a trivial amount, then you’ve adjusted your withholdings correctly. It’s a tricky situation to get just right, though, so let’s cover a few adjustments you can make.

 

How to adjust the amount of taxes withheld from your paycheck

Taxes in the U.S. are complicated, so don’t feel bad if you’re just now realizing you’ve been overpaying.

If you have an employer, the first step is to figure out which department handles your payroll and taxes. Typically this will be HR, though it can fall on the accounting department, too. You can update your withholdings at any time, though it’s better to adjust it when new life circumstances come up. These include:

  • Getting married or divorced
  • Having a child, either from birth or adoption
  • Changes in income

To adjust withholdings, you’ll submit a new W-4 that includes your updated tax situation. You shouldn’t need to send any additional verification, but check with the payroll department to see what the latest requirements from the IRS look like.

 

What to do after you’ve adjusted your withholdings

If you’re able to adjust your withholdings, you should see a bigger paycheck after your next pay period. While it can be exciting to have more money coming in, it’s important you use this opportunity to get into a better financial situation. Consider putting that “extra” money toward paying down your debt or putting it into a retirement account. Using that new infusion of cash responsibly will not only help your financial situation now but ensure you have a stable source of income in retirement, too.

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Finance

WHY THE EXPLOSION IN LOCAL RETAIL DEMANDS NEW PAYMENT METHODS

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Kasper Enggaard Krog, CEO at mobile payment and business technology firm, Vibrant, explains why micro businesses are being badly let down by contactless payment providers while local retail has boomed.

 

Before the pandemic, between 40[i] and 47[ii] per cent of micro businesses didn’t accept card payments, depending which statistics you prefer. This includes everything from corner shops to cafes and builders to barbers. They relied on cash, cheque, or where suitable, perhaps the laborious process of an invoice and bank transfer.

This is despite there being 6 billion contactless cards in the world and 47 per cent of people preferring to pay with one when at a physical point of sale[iii]. At first glance, it might seem that these small traders were cutting their noses off to spite their faces. Customers wanted to pay them with cards, why wouldn’t they just allow them to do so?

 

What was stopping merchants?

The answer is simple. Because for the smallest of merchants, accepting a card payment has always led to expensive ongoing fees, results in slow settlements, requires admin and calls for an up-front investment in cumbersome and basic technology.

It won’t be news to anyone in the industry that the recurring costs all add up. Transaction fees are typically between 1 per cent and 3 per cent, not to mention authorisation fees and merchant service charges[iv]. A credit card reader might be about £20 and the same for a receipt printer. This all eats into profit, not to mention time.

 

Kasper Enggaard Krog

The pandemic changed it all

Yet the pandemic has forced micro businesses to reassess their reticence to take card payments. Two reasons are behind this. Firstly, there has been an explosion in people shopping where they live. When lockdowns swept across Europe, it became hard to get to larger retailers. Local merchants of all sorts became a lifeline[v].

Not only that, but many people were forced to reconnect to their communities and realised they enjoyed shopping on their street and wanted to support independent businesses. The data proves this. According to research, the convenience store sector grew by 6 per cent in 2020[vi].

This led to the second factor, contactless payments were considered safer than handling cards or cash. The overall impact of more shoppers and the threat of infection led to a boom in contactless payments. In fact, the number of purchases made in May 2021 via contactless technology doubled compared with the same month a year earlier and was up 50 per cent on May 2019[vii].

 

Woefully underserved

This shift to accepting card payments among the smallest of businesses should be applauded. There are currently £2.25 trillion in cash and cheque payments made in Europe[viii]. They’re now opening themselves up to this huge market.

This is undoubtedly good for consumers and merchants alike. But it does beg the question, why did it take a pandemic to cause the change? Why did they have to face the prospect of potential infection or financial ruin to make the move?

Simple, the existing model is broken. The barriers to accepting card payments remain – high cost, poor tech and slow settlements – but they’ve been overcome through necessity rather than benefit. These businesses remain woefully underserved yet have been forced to accept what is on offer. There must be another way.

And there is. For the first time, the technology now exists for market traders, stall holders, car washes – any number of micro businesses – to take contactless payments using only their phone. No additional tech. No annoying dongles or readers that take up space and will ultimately add to the vast rubbish bin of obsolete, single-function peripheries. These will soon join calculators, MP3 players and digital cameras.

Furthermore, this tech not only takes payments, but within months is expected to allow merchants to run their whole business on their phone. They will be able to add product lists, inventory details, accounting tools and much more. It’s like a mini enterprise resource management system for the tiniest of firms. And the fees are transparent, predictable, lower than the market rate and don’t have binding contracts. Importantly, it also has the backing of Visa – and Vibrant is leading the roll-out.

The business is proud to do so and sees a huge opportunity. Micro businesses are now worth £1.85 trillion to the European economy[ix]. Their importance will grow, and they need the payments sector to take note of their needs and do better. It’s no longer acceptable to foist poor products and services upon them and allow the pandemic to drive change rather than innovation.

The explosion in local retail demands new payment methods – and they must be made available. In many ways, it’s a scandal that it took a pandemic to force change.

 

[i] 40% of the UK’s micro businesses do not accept card payments
[ii] Visa data
[iii] 40% of the UK’s micro businesses do not accept card payments
[iv] Credit card processing fees
[v] Local heroes: The retailers benefiting from the rise of localism
[vi] Lumina Intelligence UK Grocery Data Index for 2020
[vii] Contactless payments dominated as lockdowns eased
[viii] Visa data
[ix] Visa data

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