Alexa, what's the latest on voice payments?

Virtual assistants, whether on our smartphones such as Apple's Siri or in our smart home speakers such as Amazon's Alexa, have made a full-scale invasion of consumers’ lives with the hope that they will improve them.

Virtual assistants are also being brought forward into a variety of other internet-of-things devices such as automobiles and appliances, with the goal of finding new moments where consumers are willing to spend money — sometimes guided by machine learning.

Improvement in existing voice recognition technology is key for enabling growth in voice-based shopping and keeping transactions secure while defeating fraud. However, convincing consumers in the trustworthiness of voice payments may be more of a challenge, especially when other biometric methods, such as fingerprint authentication, are much more familiar.

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The volume of voice-based spending is set to grow twenty-fold over the next few years due to the rapid consumer adoption of home-based smart speakers, the expansion of smart homes and the growing integration of voice-based virtual assistants into automobiles.

According to a recent study from the global consulting firm OC&C Strategy Consultants the value of voice-based payments is set to skyrocket, from $2 billion in annual payment volume in 2018 to $40 billion in volume by 2022. The data from the study reveals that the four most commonly shopped categories through voice are grocery (20% penetration of voice payment users), entertainment (19%), electronics (17%) and clothing (8%). The study also found that when consumers use voice-based shopping for purchasing groceries that 45% of orders are made to replace in-store and online purchases. Additionally, the vast majority of grocery shopping was being made through Amazon Fresh — a clear benefit of Amazon’s dominance in the home smart speaker market.

There is a massive opportunity for retailers to build skills or connected applications for smart home speakers that will enable voice-based shopping. According to Voicebot.ai, Amazon had over 80,000 Alexa skills worldwide as of January 2019.
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The advent of the iPhone and its Touch ID verification, which leverages fingerprints to login and conduct transactions using Apple Pay and other services, has introduced biometrics to millions of consumers around the globe. Now most competitive smartphone manufacturers and financial apps have integrated some form of biometrics ranging from facial recognition to fingerprint to voice recognition.

While most consumers under the age of 40 have used some form of biometric verification for conducting an online transaction, the vast majority have primarily used a fingerprint. According to a study from PaySafe Group called Lost In Transaction, consumer experience with voice recognition lags both facial and fingerprint authentication for payments.

One factor that could be an obstacle impeding broader adoption of biometrics, including voice recognition, is that they are more likely to be used in authenticating online and smart home speaker transactions. This tends to favor younger consumer groups who shop digitally at a higher rate than older consumers.
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While Amazon was first to the market with its smart Echo speaker that leverages the virtual voice assistant Alexa, it has not rested on its laurels. As competitors such as Apple and Google made their moves, Amazon continued to build and defend about a 70% market share of the installed base of smart home speakers, according to the Consumer Intelligence Research Group (CIRP). The installed base as of December 31, 2018 stood at 66 million units, up 83% from a year earlier when the installed base stood at 36 million units.

Based on data from CIRP, the number of owners with more than one smart speaker almost doubled over the past year going from 18% of owners in the December 2017 quarter to 35% of owners one year later.
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Not all countries have the same level of trust in voice technology. Based on the results from the multi-country Lost In Transactions study by the PaySafe Group, German and Austrian consumers had the least level of willingness to conduct voice payments with just over one-third of consumers (36%) saying they would do so while 52% of Bulgarians said they would use it. Overall, 42% of consumers reported in the study that they would be willing to use voice payments for the purchase of goods or services.

While the PaySafe study discovered that 53% of consumers felt that using voice-based technology to pay was quicker and more convenient than using traditional online payment methods, only 37% said that they felt comfortable that their financial data remained secure when making a payment.

The study also highlighted that in Germany and Austria there was a major trust issue with voice payments in general, and in online purchases overall.
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Since voice payments are relatively new, there is an understandable apprehension about using the technology for making purchases, especially high value ones, most likely because consumers don’t fully understand it.

In the PaySafe Group study, 35% of consumers reported that they did not know enough about technology to trust it — something that may take years to change.

When it comes to making voice-based purchases consumers tended to have a greater willingness to conduct low value transactions such as ordering lunch (35%), grocery shopping (31%) and buying tickets for transit, movies and sporting events (25%). In contrast, less than one-in-five were willing to use voice payments for large-ticket purchases such as booking flights (18%), buying a vacation (18%) or buying furniture (17%).

Additionally, 33% were not willing to use voice payments at all.