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Online Payments: Then and Now


It’s hard to imagine a world without the conveniences of Amazon or Uber at our fingertips – it’s even harder to imagine that it’s been 24 years since the first online payment was made, paving the way for these conveniences that we’ve come to rely on every day. There is some dispute, however, about the true pioneer of online payments. Some say the first online transaction was an order for a pepperoni and mushroom pizza from Pizza Hut, while others credit a 21-year-old entrepreneur who sold a CD of Sting’s Ten Summoner’s Tales album to his best friend who paid with his credit card that was protected by encryption technology. Regardless, e-commerce and online payments have come a long way since 1994 and sales are expected to surpass $4.6 trillion globally in the next four years.

A Blast from the Past

The e-commerce boom truly kicked off in the nineties. Amazon launched its online bookstore in 1994, PayPal was founded in 1998, and Alibaba launched in 1999. By the early 2000s, e-commerce had taken off and by the end of the decade, consumers were shopping (and paying) from all devices.

In 1999, Ericsson and Telenor introduced mobile purchasing by enabling consumers to use their phones to purchase movie tickets. Other companies quickly capitalized on the trend; Amazon launched its mobile site in 2001 and by 2003, 95 million people worldwide had made a purchase using their mobile device.

That prevalence of mobile shopping also led to advancements in digital wallets – Apple Pay, Android Pay (now Google Pay)  and Samsung Pay shook up online payments in 2014 and gained millions of users in just a few years. Fast forward to 2018, and nearly 40% of U.S. consumers have used at least one digital payment service this year and Apple Pay is now accepted by nearly half of all retailers in the U.S.

But the growing popularity of digital wallets in the U.S. pales in comparison to its widespread usage in Asia. Launched in 2009, Alibaba’s payment service, Alipay, now boasts 500 million monthly active users and Tencent’s WeChat Pay, launched in 2013, currently pulls in 900 million active users each month. To put this into perspective, Apple Pay has 127 million users globally. The influence of digital wallets is only expected to increase with some estimates predicting its usage will account for just under half of all payments around the world by 2022.

If You Can’t Beat ‘em, Join ‘em

Amazon has recently taken the shopping experience one giant leap further with the launch of Amazon Go, their grab-and-go stores that extend their e-commerce technology to the physical world. Their “just walk out” system eliminates checkout lines altogether by allowing customers to tie their shopping session to their Amazon app – once the shopping is done, customers can just walk out and they will receive a charge and receipt through their Amazon account. This merging of electronic and physical buying experiences signifies an important milestone in commerce. Experts predict that retail spend from checkout-free technology is set to grow from $253 million in 2018 to over $45 billion by 2023.

Like Amazon, other merchants will need to leverage their creative muscle in order to keep pace with the next generation. Gen Z, those born starting 1995 and a generation that has hardly known life before Google, will make up over 40% of customers in the U.S. by 2020. Merchants and payment providers alike will be under pressure to cater to the demands and expectations of this group who are tech-savvy and accustomed to fast, efficient and convenient ways to shop. Additionally, as this generation makes its way into the labor force, their spending power will largely benefit those who have adapted to their habits.

The Future is All About Convenience

The advancements in how customers pay for goods and services are underpinned by payment technology, which has undergone a revolution of its own. But increasing pressure for e-commerce retailers to provide better, faster access to their goods and services have also given rise to many innovative payment concepts and financial services.

Need to borrow money? Lending services like Prosper and SoFi have revolutionized loans and financing. Want to straighten out your personal finances? Companies like Credit Karma and Mint are ready to help with credit management and budgeting. Ready to dip your toe into the stock market? Fintech services like Betterment and Acorn will help customers kick-off their investments. There is now a technology-driven, convenient-centric company for every financial need.

Speaking of convenience, subscription services have come a long way towards providing the smooth experience that shoppers increasingly crave. Not only does it act as a form of invisible payment, but many popular subscription businesses today act as another form of convenience with door-to-door delivery of everyday products like clothing, groceries, beauty items, or at-home dining kits, making purchasing even more effortless.

In terms of security, continued technological advancements in biometric authentication and tokenization will only continue to build greater confidence for customers and make shopping and paying even easier.

The Future: Unified Payment Processing

E-commerce has been able to grow exponentially due in large part to the advances in the payment processing technology that it depends on.

At one time, merchants wishing to process payments online needed to work with three distinct parties: a payment processor, a payment gateway and an acquirer. Nowadays, the most sophisticated payment solution providers, like, offer an end-to-end payment technology stack consolidating three platforms into one, which ultimately provides greater speed, efficiency, reliability, security, and adaptability to the e-commerce landscape. As an added bonus, this means that merchants can simply work with one point of contact for any requirements or issues, providing merchants with streamlined communications, more visibility, and better data accessibility into their transactions.

PSPs today also need to be equipped to handle processing of alternative payment methods like Apple Pay and regional payment options in addition to other popular forms of payments like credit cards, local payment methods, and direct debit.  

Ready to future-proof your business with best-in-class payments technology? Contact our payment experts today.