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The Rapid Evolution Of Online Payments Systems

Virtual currency transactions make it increasingly easy to quickly move money around!

In the days of yore, Aristotle envisioned a time when physical currency would replace the simplistic system of bartering. To Aristotle, the use of coins would determine how transactions would be conducted. Fast forward to the present time and things look a whole lot different. It appears that our technological prowess has once again shifted expectations. Nowadays, physical currency has largely given way to digital currency. This presents merchants, consumers, banks and other financial institutions with myriad challenges and many exciting opportunities.

The Evolution of e-Commerce

For many of us, PayPal is the poster child of e-Commerce payment systems. However, our rapid technological progress has allowed electronic commerce payment systems to mature to the point where costs are being driven down left, right and centre. To remain competitive, e-Commerce payment systems need to reduce their costs and expand their base of operations. Business models will undoubtedly have to factor in the competition, in the hopes of retaining or growing market share.

PayPal Perched Firmly at the Top

In the US, an estimated 90% of all business to consumer transactions are conducted via Electronic Data Interchange (EDI). This includes credit cards, debit cards and PayPal. The latter payment processing option has for a long time held a virtual monopoly on e-Commerce transactions, owing to its global popularity and its preferred currency status on eBay. PayPal’s net total payment volume for Q3 2014 amounted to $56.58 billion. Compare this to its Q3 2013 net payment volume of $43.84 billion, and it is clear how popular this e-Commerce giant really is. However e-Commerce transactions are slowly shifting away from PayPal owing to the high fees that it charges merchants and consumers alike. PayPal’s average transaction fees are 2.9% + $0.30 for the transfer of goods/services. This represents a significant cost to companies and individuals when multiple transactions are factored in. It is free to send money to friends/family via bank account on the PayPal platform, but transactions can take between 2 - 4 days to process.

The Future of e-Commerce

It is clear from market activity that mobile is fast becoming the ranking payments platform. Younger consumers have a preference for making payments on their mobile smartphones and tablets, on both iOS and Android-powered devices. Mobile commerce has assumed the moniker of m-Commerce. PayPal was instrumental in bringing PC-based users into the e-Commerce arena. Mobile users are looking for ways to maximize payments options via QR codes, apps and card readers. In 2013, mobile transactions accounted for 2% of total US debit/credit card volumes. Globally mobile transactions account for 4% of all debit/credit card volumes. However in the 5 years leading up to 2013, the average annual growth rate of mobile electronic transactions grew by almost 120%. New innovations in mobile payments are coming in the form of Near-Field Communications (NFC), Apple Pay, and even Google Wallet.  These ground-breaking innovations in mobile payments processing are sure to experience rapid growth and rapidly eat away at PayPal’s dominant market share. 


Payments Platform Ranking

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