The Growing Role of Invisible Payments in Consumer Transactions

Frictionless payments are a win-win for both businesses and customers.

Now, we’re entering a new era of invisible payments—a frictionless experience taken to its peak. This evolution shifts from simply reducing steps in a transaction to payments happening without direct initiation.

While invisible payments are rapidly gaining traction and winning over customers for speed and convenience, they also raise questions about privacy, security, and trust.

In this blog, we’ll dive into everything you need to know about invisible payments—what they are, real-world examples, how they work, and the common challenges in adoption.

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What are invisible payments?

Invisible payments are transactions that aren’t initiated by the customer. There isn’t any trace of manual interaction between the customer and the payment interface which generally requires customers to click or tap, enter the payment details, and later validate them.

The process happens automatically at the end of a transaction and in the background without the active role of a consumer, with the assistance of payment methods like mobile wallets, biometric authentication, and connected devices.

Current use cases of invisible payments range from e-commerce, brick-and-mortar stores, and subscription services, done via mobile payments, contactless payments, and even voice-commanded payments.

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What are the benefits of invisible payments?

Here are some of the benefits of invisible payments:

Better convenience

The process is built to be frictionless and effortless. This means customers do not need any physical items like credit cards, debit cards, smartphones, etc to make a purchase. They can forget to carry their smartphones and payment details and still make a payment. Also, there are no manual entries of payment details or payments done by customers.

Speedy payments

Checkouts are faster for invisible payment transactions in retail, ride-sharing, and online shopping because they happen automatically in the background. The process is also devoid of manual confirmation of any kind.

Improved customer experience

Customers prefer no friction at the point of purchase. Merchants can create a smooth experience and incorporate automated tailored recommendations, discounts, or rewards to offer an unmatched experience. An effortless experience encourages customers to keep returning.

Accurate payments

Manual payments done by customers are more prone to errors, like entering in wrong payment details/amounts/dates, and so on. Automated payment systems on the other hand are designed to provide accuracy with little room for errors.

Enhanced security

This technology is safeguarded with security protocols like biometrics, encryption, and tokenization to protect transactions. They also come integrated with automatic fraud detection that detects and flags unusual activity and user behavior.

Future potential

This technology has the potential for disruptive innovations when coupled with mobile apps, IoT devices, and wearables. Such integrations will bring solutions that move beyond automated subscription services to make a consumer’s life better.

Operational efficiency

With quicker payout and no payment disputes, merchants can maintain a better relationship with their suppliers. Moreover, quicker payments and predictive transactions mean a better hand at inventory tracking and fewer cash-handling requirements.

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How do invisible payments in consumer transactions work?

The process of physically using a card at a point of sale or entering your card details on a payment terminal is swapped with a process that needs no customer action. This means a visible process is replaced with an invisible one, and here’s what it looks like:

1. User enrollment - Payment details such as credit card, debit card, or mobile wallet are securely stored within a platform or app using encryption or tokenization.
2. Payment authorization - The user authorizes the platform with the desired action like a prompt to a virtual assistant, tapping a contactless card, and so on, and provides consent to automated payments.
3. Payment initiation - Payments are triggered at the end of a transaction like when customers end a ride or walk out of a cashier-less store. Sensors, GPS, or other technologies detect that the service has been extended and initiate payment.
4. Payment processing - Payments are automatically processed with reference to any discounts or terms and conditions, via the opted payment method.
5. Notification - Customers are prompted at the end of the transaction via an SMS, email, or in-app. The status is updated and the receipt is sent to both parties.

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Examples of invisible payments

Subscription services are by far the most common and a prime reminder for us all. The auto-debit and auto-renewal nature of these payments are the best examples of invisible payments. However, there are many more advancements in this space that merchants must be aware of: 

Checkout-free stores

Amazon Go already offers a checkout-free experience without the need for a traditional checkout. Users can check into the app, simply walk into Amazon Go stores, collect the items they need, and leave.

The sensors and cameras track the items picked and bill them when the customers leave, triggering an invisible transaction as set up by customers. At the end of the transaction, a digital receipt is sent.

E-commerce and apps

Uber is the early adopter of invisible technology. The app automatically charges the customer at the end of a trip via the chosen method of payment.

Amazon has also launched an e-commerce pivot which is invisible payment’s close second. The one-click buy button allows the customers to purchase with a predefined address and payment method.

Biometric payments

This method uses a customer’s unique biometric features to initiate a transaction, which is a deviation from the traditional method of selecting a payment method after every transaction.

For example, customers can wave a hand and authenticate purchases via Amazon’s payment system - Amazon One. Some stores in China also have facial recognition-triggered automated payments at checkouts. Smile to Pay has been adopted by a lot of China’s convenience stores.

Connected cars

With this technology car owners and drivers can pay for fuel via a car’s touchscreen. Similarly, some airports have invisible parking where the number plates of vehicles are detected and automatically billed.

Here again, the car must be registered for invisible payments with a chosen mode of payment.

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Barriers to the adoption of invisible payments

Multiple industries have been quick to adopt invisible payments such as retail, transportation, and hospitality, but it hasn’t gotten stern traction.

Here are some reasons for slow adoption, and factors that merchants should be aware of if they wish to incorporate invisible payments in their ecosystem:

Multiple account creations

There are no universally accepted single sign-in options for invisible payments yet. So, merchants adopting this technology are building their processes in-house, each with their unique steps and processes.

For example - Amazon Go store users need the official app to shop at the store and then have to switch to another app if they wish to shop from another store.

The hassle of multiple account creations across multiple mediums is real. Customers using the traditional method to checkout from multiple stores using one card is a lot more convenient than downloading tons of apps and registering or authenticating each one.

Privacy issues

Just like contactless payments, customers are worried about the security of their sensitive payment data. Invisible payments store customer data to process automatic transactions and customers are worried about the misuse of their data or breaches.

Biometric data is another invisible payment security issue. Not all customers are comfortable sharing their personal data like biometrics and prefer to validate or initiate transactions via traditional methods like cards and pins or passwords.

Scaling-up

Bringing the invisible payments infrastructure is not ideal for all businesses, and many have resource limitations that hinder adoption. Plus, the technical infrastructure implementation is a huge challenge that businesses should be able to navigate.

For instance, a larger store with a diverse range of products needs more time, effort, and costs to adopt the invisible payment infrastructure compared to a smaller store with a limited set of products.

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Conclusion

The idea of an invisible payment infrastructure ultimately boils down to providing a frictionless experience to customers.

Merchants can come up with innovative ways to incorporate invisible payments ensuring no friction or offer better payment options and experience.

For business owners experiencing resistance to adoption, offering a similar frictionless process and a better choice of payment methods can work like a charm. Listen to your customers' preferences and oblige.

But it shouldn’t have to be your responsibility. Partnering with payment solutions like Payby helps you focus on your core business, while we handle your payment needs and keep you ahead of the curve.

Payby offers secure omnichannel digital payment solutions. Our advanced fraud detection and prevention mechanism is built to keep you secure. We leverage AI-based fraud monitoring, 3D secure authentication, and transaction risk analysis and offer robust integrations with the best CMS platforms.

‍Get in touch with Payby today.