Amid the ups and downs of e-commerce over the years, online payment technologies continue to evolve and thrive — and lately they’re nothing less than a thriving scene of continued innovation and transformation, thanks to a series of converging trends and a continuing series of corporate acquisitions.

This progress has been helped by several factors. First, the pandemic made online shopping even more popular, even preferable, and it has become the new default purchase method for many consumers and for a wider selection of purchases. We have gone from buying books online to just about everything else, spurred by a mushrooming, multidimensional full-service menu of online payments options unimagined just a few years ago.

Second, retailers have improved their online payment processes and integrations significantly in the 30 years or so of online purchasing. Back then, the websites were wacky, the software shaky, the tools touchy and troublesome. Somehow, consumers managed to make it through these challenges and actually buy stuff online.

Finally, the payment technology vendors have expanded their feature sets, increasing the scope of their back-end software integrations, and are beginning to consolidate their offerings into more cohesive packages of services.

Two evolutionary payment moments from the 1990s

There were two major evolutionary payment steps that began in the 1990s. First were digital wallets. Back in 1999, I wrote an op/ed for Computerworld (reproduced on my own blog here) where I said that these digital wallets weren’t ready and consumers should avoid them.

Remember the e-wallet app included in Windows 98? Exactly my point. I suggested that frustrated shoppers using them would go back to their local malls.

Thankfully, that didn’t happen. However, digital wallets have had a rocky ride since the turn of the century. It helped that consumers got comfortable – some might say too comfortable – with these wallets thanks to the cryptocurrency boom of the past decade. It also helped that digital wallets became the go-to containers for more than financial-related data, such as a convenient storage spot for airline boarding passes, identity and vaccine documents, and other sensitive things.

Another incentive is that consumers are increasingly using wallets and other payment apps, such as PayPal and Venmo, to perform peer-to-peer cash transactions such as splitting a restaurant check or sending money to family and friends, according to a recent LendingTree survey that shows more than 80% have used at least one of such services in the last year.

The second spur was the early parade of online payment vendors, including ones that have faded into dust such as Digicash and First Virtual Holdings. These companies had to create a global payments infrastructure from scratch, inventing new protocols that leveraged the emerging web and email technologies of the era and added layers of security too.

All of that was a lot to deal with, especially next to the ease of use of credit cards and improvements to online banking. Imagine how long credit cards would have lasted if you needed separate point-of-sale machines to scan your Visa, Mastercard and Amex cards at the checkout line. That’s why many of these products didn’t go the distance.

One payment company did survive from that era and has evolved into PayPal Holdings Inc. Back in the 1990s the company got its start with an app that ran on Palm Pilots to send payment information for a purchase. Despite this misstep, it then hitched its tech to eBayInc. to enable online purchases, and then expanded to support all kinds of payment methods.

This eBay connection, which turned into an acquisition, turned out to be a lifeline. It also helped that at the time, banks still charged high fees for wire transfers and hadn’t yet developed online apps, systems and integrations. PayPal made it easier for businesses to set up accounts, and for people to pay through email and web portals.

But PayPal has become too successful, in a sense, and is now the focus of many scammers who use phony invoices and phishing lures to steal funds. This isn’t new — I wrote about an early exploit back in 2006 — but the fraud is expanding and the scammers are getting better at their craft. I finally got frustrated fighting off the latest fraudulent message and closed my PayPal account in February, after being a customer for more than 25 years.

Despite these problems, the company is still very healthy. Its latest earnings report Wednesday showed payment volume of $376.5 billion, an increase of 11% from a year ago, and net revenue is expected to grow 8% in the remainder of the year.

PayPal also had another enduring and now well-known legacy, the “PayPal Mafia,” spawning many successful entrepreneurs, including the various ventures of Elon Musk, a thriving venture capital business for Peter Thiel and David Sacks, a start for Netflix and Reid Hoffman of LinkedIn, and many others.

Trends for the modern payments era

The modern payments era was defined by two other trends: First is the evolution of credit cards, and second is the evolution of mobile banking and payment apps.

Accepting credit cards for online payments wasn’t always easy. Back in 2010, I wrote that online businesses had to go through a series of hurdles to accept credit card payments using the primitive tools available then. In those dark times, an online seller had to establish a merchant account with their bank to take credit card payments.

Now, shoppers use credit cards to pay for our purchases without giving it a second thought. And there are a number of payment processing solutions, known by some as global payment organizations), that make this whole process easier too.

It also helps that today’s credit card product is a lot more sophisticated. As an example, look at the Mastercard from Apple and Goldman Sachs. It has a more secure product that is disposable, designed for online use, by transmitting a unique card number for each transaction, thus thwarting thieves or potential man-in-the-middle attackers. How long that arrangement lasts is now in question, with Goldman Sachs reportedly looking to exit the partnership, but Apple said Wednesday that the Apple Card’s Savings account from Goldman Sachs has reached more than $10 billion in deposits since it started in April.

Another enabling technology is the use of mobile payment providers, most notably from Venmo, now owned by PayPal, as well as Apple Pay and Google Pay. These enable consumers to pay people as well as online merchants with just a few clicks. Dozens of retailers from fast food vendors to department stores now have their own payment apps, along with apps from the leading credit card issuers such as Mastercard and Visa. Many people, I included, carry little or no cash as a result.

Mobile payments weren’t always so easy. In 2014, I blogged that this software was buggy and cumbersome to use. Thankfully, Apple Pay was created to make it both more secure and easier to use credit and debit cards on retail point-of-sale payment terminals. And the pandemic made shoppers more motivated to try out contactless payment options using their phones.

Pathways for payments

All that brings us to today, when there are now numerous pathways for payments. In addition to the latest mobile apps, there are web-based virtual terminals for merchant accounts, hosted payment processors and a number of back-office integrators such as Stripe Inc., Melio Payments Inc., Bill.com LLC and Rapyd Financial Network Ltd. These companies offer “any-to-any” connectivity that match up various global currencies, payment methods, e-commerce platforms and banking systems, all with a rich application interface that can automate onboarding new businesses.

As an example, Rapyd now integrates with its own share of multiple e-commerce platforms, include Wix, WooCommerce, Shopify and Magento. Its tools accept payments from more than 100 countries and offers interfaces for everything from hosted checkouts to a complete payments “stack.” Just this week, Rapyd announced it’s acquiring the PayU division from its major investor Prosus, another company on the cutting edge of payment technologies.

The integration benefits are huge: Sound production company Silver Sound, for instance, deployed Melio’s platform and ended up getting paid faster and saving $17,500 in credit card processing fees and three hours per week in staff time as a result. This is a good example of how the innovation and competition for payment tech has brought down the overhead costs and the money transfer fees that previously were held hostage by the legacy banking system. Now businesses and consumers can move funds across the globe at lower costs and less friction than ever before.

There are also new point-of-sale devices from the traditional vendors along with new ones from Toast Inc., Block Inc.’s Square, Xplor Technologies Ltd. and others. As one example, Square, which was one of the first to develop hardware that turned a phone into a payment terminal, now has a dozen different payment methods (pictured, adjacent).

There is also an entire new class of “buy now, pay later” apps from providers such as Afterpay Ltd. (now owned by Block), Klarna Bank AB, Affirm Holdings Inc. and Sezzle. Not to be left behind, PayPal, Apple Pay and Google Pay all offer this option too. These apps usually pop up at checkout time with their offers. No purchase is too small to be spread across a payment plan.

Back in the pre-internet times when shoppers went to stores, the retailers had layaway plans that had one important difference: No one got the item until it was fully paid for. Now items arrive in days but are attached to a stream of loan payments stretching out several months. The downside is that there are potential late fees and 30% annualized interest charges too. Perhaps this is progress.

Innovation has also happened with the major financial services providers. Thanks to – or perhaps in spite of – crypto, digital banking has blossomed, with new banks that have no brick-and-mortar presence able to innovate quickly with their 100% online operations.

Some of that was brought on by new European Union regulations that made it easier to move an account from bank to bank. But many of these providers happened thanks to the growth of online and mobile and integrated payment processors that provided a rich enough payments development platform.

Most consumers don’t need 57 different ways to pay for things online, but it is nice to have all these choices. Expect more innovations in payment tech to come.

Images: PayPal, Block