Remember the days of credit card signatures?Yeah, neither did I...

Remember the days of credit card signatures?

Yeah, neither did I until I came across a 2014 (!) article whilst researching the state of POS terminals in 2022. It’s looking like those terminals may be going the way of the humble credit card signature, and even the magnetic strip thanks to ‘pandemic trends’ that have become very much the norm.

The pandemic saw eCommerce leap 10 years in a matter of months. We were housebound and bored, with income to spare thanks to the lack of happy hours to splurge on.

Many companies benefited from our digital shift including those providing the infrastructure for late night online shopping and grocery orders.

Despite the expansiveness of our landscape, Australia is the eleventh largest eCommerce market in the world where traditional cash economies have seen a rapid decline in line with the rise of smart devices. Currently sitting at a comfy $60 billion, GlobalData forecasts our eCommerce market to reach $91.5 billion by 2025.

“The pandemic accelerated e-commerce activities in the country as wary consumers are staying home to avoid exposing themselves to disease vectors. This trend will continue, driven by the rise in new online shoppers,” says Shivani Gupta, a senior analyst in the banking and payments sector at GlobalData.

“The pandemic has brought a permanent shift in consumer buying behaviour from in-store to online shopping, which has accelerated the adoption of digital payments and benefited alternative payment solutions.”

Despite our return to relative normalcy we still prefer to do our shopping from the couch. And why not? No vying for car parks, no queues, no closing times and no pants.

Unfortunately some digital payments providers have suffered due to the decline in foot traffic. Despite being synonymous with merchant credit, debit and EFTPOS acquiring, Tyro Payments (ASX: TYR) has had a rough run recently. Their misfortunes were solidified with a marked share price tumble after the release of their earnings report for the first half of the 2022 financial year. Although the Company reported record transaction values and merchant numbers their EBITDA decreased by a whopping 67%.

One reason for the patchy period is the change in consumer behaviour and consequent limited physical card transactions. Tyro is Australia’s fifth largest merchant acquiring bank by terminal count, however having over 100,000 terminals doesn’t do much if they aren’t being transacted through.

Compounding this are the big tech firms disrupting the payments industry. Google, Apple, Facebook, PayPal and Amazon all have their hats in the ring. And it’s no wonder when the global digital payments market is expected to exceed $7.6 trillion by 2024.

As the shift towards digital payments accelerates there will be less use for point-of-sale terminals, a trend that digital payments company Novatti (ASX: NOV) is keenly aware of.

PwC predicts a few trends to emerge over the next few years, all of which Novatti are already tackling. Digital currencies and private sector cryptocurrencies are forecast to have the largest disruptive impact over the next decade. Novatti is already facilitating the use of digital assets through their partnership with CryptoSpend, launching the first Bitcoin-enabled card last month.

In a key milestone for the Company, Novatti announced merchant acquiring licenses from both Visa and Mastercard, in addition to adding 51% to their sales revenue year-on-year for the first half of the 2022 financial year. $4.9 million in revenue from the December quarter was purely derived from their payments processing division. With new acquiring licences from Visa and Mastercard, Novatti will be able to attract bigger clients and see increased margins for its services, all without the need for a Point-of-Sale terminal, as Novatti is targeting the online space.

However, covering their bases, Novatti can still issue cards that can be used at terminals in store and online. They don’t carry the expense of leasing or maintaining the POS terminals, giving them a ‘hands off’, fully digital advantage which has long been forecast by the Company’s product design and services.

Foreseeing the changes in the payments space has allowed Novatti to develop products that don’t just keep up with trends, but will actively shape them.