The three waves of payment innovation: access, choice, optimisation

• Digital payment innovation has followed two distinct waves to achieve mainstream adoption.
• Now, many retailers are left with bloated payment channels that are expensive, complex, and overwhelming.
• The next wave of payments will see this move towards optimising payments solutions based on customer data that will increase ROI and the retail experience.

The payments industry has exploded in the last ten years – with much of the expansion and innovation coming from the African continent. This means merchants and customers currently have more choices than ever. And despite room for growth, the numbers are staggering.?

In recent years, Africa’s electronic payments industry generated approximately $24 billion in revenue, the majority of which came from roughly 47 billion domestic e-payment transactions. This has led to more than $650 million invested in payments within the fintech sector since 2011. These billions of transactions have travelled through dozens of recognised gateways or channels that emerged as fintech companies focused on increasing access.??

In its first-ever Payments Study Report , the South African Reserve Bank (SARB) says the local landscape is experiencing “significant changes”.

“The advent of mobile payments, the discontinuation of cheques, the entry of non-bank payment service providers and the emergence of new forms of retail payments that do not directly draw on bank accounts, such as e-wallets, are some of the recent changes that have been observed,” the report says.

As access expanded, it evolved into “choice”, and businesses sought to offer customers the largest possible selection of payment options in an effort to increase conversion rates. This strategy was based on the widely cited research that 56% of customers who do not see their preferred method at checkout “would be permanently put off shopping on a site” – representing a lost sale and lost potentially loyal customer.

“As a consequence of the choice era, many businesses have far too many payment methods that are seldom used by their customers. These merchants are often reluctant to retire payment methods, even when they deliver negative returns on investment,” says Precium COO Nicole Dunn.

As retailers see value in optimising payment solutions and sunsetting those that are underutilised, payments can transform into strategic revenue enablers rather than cost centres.

?“The operational cost and complexity of managing multiple methods is now frustrating many businesses – and ironically, at Precium we have found that too many methods on a checkout page actually decrease conversion,” says Dunn.

The future of payments is dynamic and optimised?

Through optimising the checkout and payments experience, retailers can increase conversion rates by 10-20% and customer satisfaction by up to 20%. Mature businesses are already adopting solutions that help abstract the technical complexity of managing multiple payment options and offer greater checkout functionality – like selectively exposing payment methods based on predefined parameters. Many are recalibrating payment options to focus on payment performance, customisation, and reliability, in an effort to build consumer trust.?

Inevitably, this leads to sunsetting payment methods with low ROI. In doing so, businesses are not only streamlining their checkout pages and saving costs, they’re also avoiding the pitfalls of the paradox of choice, which argues that the more options customers have, the less satisfied they feel with their decisions.

This paradox suggests that facing too many options, especially in a pressurised environment like a store checkout phase, requires unnecessary cognitive effort. This can lead to decision fatigue and, in the case of payments, abandoned carts.?

?“Consumers are increasingly showing strong appetites for personalised experiences across various business touchpoints, and it’s important not to leave payments behind. A well-crafted payments strategy is more than just a nice-to-have — it can help businesses focus their efforts on the initiatives that will drive business value, improve cash flow, enhance customer experience, mitigate risks, and remain competitive,” ends Dunn.

As consulting firm McKinsey & Company points out, fintech in Africa is now at the end of the beginning. For payments, this means an unavoidable shift away from offering every possible payment option to data-driven payment optimisation that signals good news for both businesses and consumers.