Alternative payment form factors of the future

Payments are an exciting and ever-changing part of the financial services ecosystem. Before mobile wallets entered the stage, cash, checks, cards, and money orders were standard forms of consumer payments and, in many ways, are still very important today. However, the growth of contactless payment acceptance and the tokenization of card data has enabled the rise of new, creative, and secure payment form factors that could not have existed in the past.

New payment form factors

Aite-Novarica Group recently published a report titled ‘Beyond Cards and Mobile Phones: Payment Form Factors of the Future’ that discusses six payment form factors that consumers and businesses may use to pay in the future. Although the paper focuses on how these payment methods are alternative form factors for debit and credit card payments, any digital payment network, such as Request to Pay, ACH, and cryptocurrencies, could be integrated. While most of these form factors exist today, their usage will likely grow as the technology improves and becomes more ingrained into consumers' everyday lives. Below are the six payment form factors identified in the report:

1. Smart home devices – Smart home devices include any internet-connected device in the home. For example, printers can store payment information and automatically reorder ink when they’re low, refrigerators can place grocery orders, and devices like Google Home and Amazon Alexa allow you to order items using your voice.

2. Connected cars – Connected car payments allow consumers to pay for fuel or parking without handing over a card. Functionality such as GPS location and other in-car data can be integrated into the experience to notify a restaurant or grocery store upon arrival and initiate a payment. Additionally, payments unlock other unique capabilities as vehicles become more autonomous. Imagine a car that drives for Uber and can pay for maintenance, parking, and tolls, plus receive and store payments for the rides it provides. 

3. Merchant biometrics – Some merchants allow consumers to link card data to a face image, handprint, fingerprint, or other unique biometric identifiers so that consumers can authorize payments without their card or phone. Merchant biometrics can create a very convenient checkout experience and, unlike other alternative payment form factors, are always available and cannot be forgotten.

4. Wearables – Almost anything a consumer wears (e.g., watches, wristbands, and rings) can become a contactless payment device. While wearable payment devices precede mobile wallet payments, contactless acceptance has increased their usability, and tokenization has made it easier to integrate payment capabilities into a device.

5. Implants – While no company issues an implantable payment device, some options exist that allow consumers to convert a contactless card into an implant to be inserted under the skin. While many consumers will be hesitant to implant a payment device under their skin, Aite-Novarica Group surveyed US consumers and found that 45% showed some interest in implantable payment devices, indicating that a market exists for such a product.

Consumer interest in alternative payment form factors

Aite-Novarica Group surveyed 383 U.S. Consumers in Q2 2021 to understand consumer interest in these various forms of payments (Margin of error of 5 points at the 95% level of confidence). Even the most unique payment form factors (e.g., implants and brainwaves) received some level of interest, indicating that consumers are open to trying new, innovative, and convenient ways to pay. 

Note that interest and actual usage are different, and a high level of interest will not overcome the importance of ease of use and accessibility. For example, using a refrigerator to order groceries is very interesting, but if the user interface is complex and adding payment card information is difficult, no one will use it. At the same time, a payment bracelet may be great, but if it is removed every night before bed, it will eventually be forgotten. In other words, interest, by itself, is not enough to secure success. Only the alternative payment methods that add convenience and fit into everyday life will win.

Final Thoughts

Ultimately, time will tell which alternative payment form factors gain widespread usage and which will not. And there may not be a single winner if consumers choose to pay with multiple form factors throughout the day depending on what is the most convenient at a single moment in time: a car to pay for gas, an implant to pay for coffee, and a refrigerator to pay for grocery delivery. Regardless, as contactless acceptance grows and digital card issuance with push provisioning to a digital wallet becomes more common, the availability and use of alternative payment form factors will likely increase as well.

About David Shipper

David Shipper is a Strategic Advisor in Aite-Novarica’s Retail Banking & Payments practice. His focus is on debit, credit, and prepaid cards. Based in Phoenix, Arizona, David brings to Aite-Novarica Group more than 15 years of experience leading card and payment strategies for financial institutions in the US. Prior to joining Aite-Novarica, David managed the debit card and mobile wallet initiatives at Bank of the West, where he led a variety of projects to improve the customer experience and card production timelines, reduce fraud write-offs, and increase overall debit card program profitability. 

About Aite-Novarica Group

Aite-Novarica Group is an advisory firm providing mission-critical insights on technology, regulations, strategy, and operations to hundreds of banks, insurers, payments providers, and investment firms - as well as the technology and service providers that support them. Comprising former senior technology, strategy, and operations executives as well as experienced researchers and consultants, our experts provide actionable advice to our client base, leveraging deep insights developed via our extensive network of clients and other industry contacts.