30 years of web and online payments

The web, as we know it today, is a digital space that makes it possible to share and enjoy multimedia content, with an increasingly less tangible distinction between those who publish and those who use it, all thanks to the internet, i.e. the global interconnected computer network on which the information travels.

This has not always been the case, in fact, the web has changed over the years and today we are living in its second phase, namely web 2.0. To understand how the world wide web has evolved since the release of the first sites in the 90s, it may be helpful to quickly retrace its history to get to the so-called web 3.0 whose underlying technologies are now seeing the light of day.

From web 1.0 to web 3.0: all the transformations

In thirty years of history, the web has undergone countless changes from many points of view. It has evolved from its initial phase of a reserved space for a few IT experts, real first movers who have also witnessed all web’s weaknesses in terms of accessibility and content use, to a real virtual world, visited by billions of users every day.

Web 1.0 or the read-only web

The first version of the Internet (web 1.0), was characterised by a space in which the roles of those who visited it were clearly distinct. On the one hand, there were those who published content and on the other, those who viewed it.

The web was populated exclusively by pages, information on which could only be viewed by the visitors and not modified or generated, with a one-to-many or unilateral level of communication.

Web 2.0 or dynamic web

The term “Web 2.0” dates back, indicatively, to the first half of the 2000s, a period when platforms also started offering users the ability to publish and share content on the web.

Starting with the first CMSs (Content Management Systems) where personal websites and blogs could be published without possessing specific computer skills, up to the rise of social networks, or at least their older versions most similar to those we know and use today, the web begins to be populated by the user-generated content, i.e. content published directly by users, representing many-to-many communication.

The start of the Internet and its evolution to version 2.0 was well summarised from the point of view of relations between companies and customers in the Cluetrain Manifesto¹, posted to the web in 1999. A set of 95 theses presented a call to action for all companies operating within a new interconnected web context, in which markets are identified as conversations.

Web 3.0: the evolution of the internet

Giving a detailed definition of web 3.0 is more complex because some characterising elements are still in an initial phase of development or are only now starting to have recognizable and standardised or standardisable connotations, such as the concepts of semantic web and metaverse.

As discussed in the insight dedicated to web 3.0 and decentralised finance, there are different interpretations that are associated with the next evolution of the web, depending on the contexts in which the topic is discussed. However, it is already possible to identify a number of necessary elements on which web 3.0 will be based and the main ones are: semantic web, blockchain-based decentralization, virtual environments and, in the context of payments, the concept of DeFi or Decentralised Finance.

The evolution of online payments

The digital component has always played a central role in the world of payments, especially since the birth of electronic commerce. Furthermore, in this sector the web has served as an impetus to find solutions that are able to meet the new needs of digital consumers and online merchants.

Traditional payments for new shopping experiences

At the beginning of the 1990s company websites were mainly showcase sites, i.e. portals that mainly displayed company information, product and service catalogs. Around the second half of the decade the first real Ecommerce websites were born that allowed people to place orders via a shopping cart. Unlike today, however, the payment was finalised at a later time.

Initially, in fact, the payments were concluded thanks to traditional payment systems, such as bank transfer or cash on delivery, also called collect on delivery, and in very rare cases with the first MOTO systems.

Payment by bank transfer
Together with cash on delivery, the bank transfer was the most frequently offered payment solution, considering that in those years the first real-time internet banking services were created that permitted online transfers. Although the wire transfer was a known tool, it was not the favourite one among consumers, mainly because there was distrust in anticipating a payment before receiving the product, a distrust that has accompanied online purchases for years, and for a long time it has slowed down the Ecommerce penetration, particularly among older generations.

Cash on delivery or collect on delivery
This used to be the most popular formula. First of all, because it has been used and known since the days of mail orders and later telephone orders. The main advantage of this form of payment, which in those years was concluded exclusively in cash or by check, is precisely linked trust: the payment, in fact, takes place at the time of delivery, just like in the shop.

MOTO
MOTO payments (Mail Order Telephone Order) represent the first form of remote payment for purchases, therefore, were also ideal for Ecommerce. The merchant asked the customer for the card details via a telephone, email or fax, and inserted them into a physical POS or on digital platforms to complete the payment, instead of the customer. This formula was rarely used, yet again due to the lack of trust of the end customer in communicating credit card data to the merchant.

During the second half of the 90s, the web transformed from a space visited by a few pioneers into a mass medium of the new millennium. The growing interest of companies in the internet as a means of selling their products and services has contributed to the rise of the first online payment gateways.

From the first online payment gateways to payment orchestration

In 1995 the web boasted about 44 million users worldwide that grew almost ten times just 5 years later. ² The Internet, as we know it today, began to take shape: from a simple archive of information it soon transformed into a new sales channel.

At the turn of the millennia, the first online payment gateways were born: GlobalCollect, Authorize.net and Bibit are just some of the online collection platforms that saw the light in those years. In 1997, Banca Sella, the root of Axerve’s history, joined the first Ecommerce program when Microsoft and the Yahoo portal launched the E-Christmas initiative to promote Ecommerce in Europe, managing the first Ecommerce transactions at a European level. ³

The birth of these platforms began to respond to the needs of merchants and digital consumers by offering a shopping experience that concludes online, including the payment phase.

In that period, the first marketplaces were also founded, Amazon and Ebay established themselves as leaders in the sector, and PayPal, one of the most known and still a widely used alternative payment method today, stimulated the increase of online buyers and the appearance of new dedicated collection solutions.

In the early 2000s, credit and debit cards were joined by a new payment tool – digital wallets. In recent years, the sector has seen an increase in the offer of payment instruments and vertical platforms. For example, iDEAL, Sofort (today Klarna Pay Now) and MyBank make the most of the potential of online bank transfers (e.g. high ceilings, ease of use etc.), Klarna, Scalapay and PayPal Credit allow for deferred payment, also called Buy Now Pay Later.

In thirty years, online collection solutions have evolved to meet the increasingly complex and personalised needs of users and, at the same time, to facilitate the collection processes for merchants. Today the entire ecosystem can count on the presence of hundreds of acquirers, issuers, alternative payments methods and related services, among which it is not easy to choose. Not only that, choosing a single payment management partner may not be effective in optimising costs and increasing conversion.

And precisely in this context the first payment orchestration platforms arrived, i.e. services able to manage transactions via multiple PSPs (Payment Service Providers), in accordance with the merchant’s needs, while reducing costs and optimising sales.

Decentralised finance: the future of payments on the web 3.0?

Among the most recent innovations that are revolutionising the processing of financial transactions is the so-called Decentralised Finance or DeFi. By this we mean a financial system that is no longer based on the centrality of its traditional intermediaries, such as banks, but organised and built on new technologies capable of disintermediate information and financial exchanges between multiple subjects.

At the base of DeFi is the blockchain, which is a large distributed database in which it is possible to directly register transactions of all kinds in real time between the parties, without the need for intermediaries, safely and with total traceability.

Decentralised Finance represents one of the pillars that distinguish the concept of web 3.0. Around this concept gravitate other technologies whose potential is being studied in various interrelated sectors: cryptocurrencies, smart contracts and NFT above all.

The issues of DeFi and its role in the evolution of the internet are very complex, which is why we have dedicated an article to Web 3.0 and decentralised finance, in which we discussed more in depth its main aspects and relationships with the world of payments.

We are already talking about web 4.0...

Although it is not yet clear exactly what is meant by Web 3.0, there are already speculations about its 4.0 version. The keywords of the fourth phase of the web will probably be Big Data and Augmented Reality, elements that are actually already part of our present day. It is plausible to hypothesise that both will have an increasingly central role in the future and will further reduce the distance between real and virtual, converging into fluid experiences, that is, permeating each other.

What will be the future of payments in this scenario? It is too early to formulate a hypothesis. History, however, shows us that the financial sector will adapt, integrating into new forms of interactions that will no longer be just person-to-person and person-to-machine but also machine-to-machine. Seamless payment solutions will merge into purchasing paths, no longer just omnichannel but “multiverse”, in which physical and online stores will have new variations based on the context and the type of experience.

This content is published by Axerve without any claim of completeness or topicality of the information provided. This article has the sole purpose of providing useful information on the subject and is not to be considered an exhaustive guide but rather a vademecum. If you want to report a correction, please contact us via our social network pages.