On-demand payments are a significant shift in the way that consumers prefer to shop and buy and the way that merchants push the payment process into the background.

New research identifies how card-on-file solutions have been given a new lease on life and are now the primary consumer method for making payments via mobile devices.

The report – From Card-on-File to On-Demand Payments: New Payment Model and Strategies For Payment Providers – by Mercator Advisory Group describes several examples of third-party solutions that enable consumers to better control and manage their payments.

Examples are also cited in the report indicating how card issuers have responded to on-demand payments in a tactical way but have so far failed to grasp the strategic implications of this model.

“Sometimes changes in technology and consumer adoption occur so slowly that both the nature of the change and the magnitude of the change are misjudged.” said Tim Sloane, VP, Payments Innovation, and author of report.

“On-demand payments may appear to be a simple extension to traditional card-on-file solutions, but nothing could be further from the truth. On-demand payments are a significant shift in the way that consumers prefer to shop and buy and the way that merchants push the payment process into the background. With the issuer’s brand almost invisible at the point of purchase, issuers need to identify new strategies to remain relevant to consumers,” notes Sloane.

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Startups should consider the impact of on-demand payments and look for growth opportunities that exploit this trend in consumer shopping preferences.  Technology changes and consumer adoption play big roles in the shift toward this new way of paying for purchases.  The advisory groups report offers insight into other possible reasons for the shift.

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Report Highlights

  • Evidence that the on-demand payments model is the primary driver of the explosive growth in digital payments volume, further displacing cash and check transactions
  • Issuers should move from the tactical efforts in place today to a strategic response required to remain relevant with cardholders in the long term
  • Industries once thought to be impervious to disruption are now being radically reshaped due to smartphones and on-demand services