2020 has accelerated the trend towards digital in retail. In the UK, the ONS reports that online made up 30% of total retail sales in the period April to November 2020, compared to 19% in the 12 months previous.
This trend has created entirely new battlegrounds for retailers. The surge in use of digital platforms has brought new opportunities for retailers to gain competitive advantage as they deploy martech, incorporate experiential technologies, and offer increased levels of personalisation in customer service.
However, retailers are only as good as their conversion rates, and underpinning the successful application of all technologies and sales strategies is the payments process. Retailers that can successfully drive conversion rates at the point of sale will gain a major competitive advantage in 2021.
We’ve identified a number of trends that will set the terms of the payments battleground this year.
The end of cash?
Did 2020 kill cash? Probably not but it has certainly hastened its decline. Since the pandemic hit in March we have seen huge changes in the way people pay, and want to pay.
The first is a move away from cash payments. Cash was identified as a vector of the virus in 2020 and caused consumers to shift rapidly away to digital payment options. Research from 21 countries shows that in all of them people are using cash less often since the start of the pandemic.
This trend is only likely to increase in the long term, so retailers must ensure their payments processing infrastructure is able to accommodate this shift.
Changing card payments
Card payments may seem the immediate alternative to cash, but card usage too has gone through its own revolution in 2020. Increasingly consumers are choosing to pay either with a contactless card or using touch-free mobile payments, as they seek to avoid contact with surfaces during the pandemic.
In countries such as the UK the limit for contactless card payments has also risen. Visa, the payments technology company, say that in Europe alone they have seen 500 million additional touch-free payments because of this.
For retailers with a physical presence, this means that acceptance of true contactless payment has moved from a ‘nice to have’ to a ‘must have’.
Biometrics on the rise
Touchless payments however may well be yesterday’s news in 2021 as the shift toward biometrics gathers pace.
Research by Juniper solutions as early as 2018 was forecasting a seventeen-fold increase in the use of biometrics solutions for physical and remote payment options. That means c. $2 trillion worth of transactions will be authenticated via biometrics by 2023 globally.
There are emerging examples of fingerprint, palm, and voice recognition software being used as payment authentication; this all points towards multiple “convenience authentication” options being presented to users over the next 2-3 years, plugging into a common infrastructure that is most likely to be shared and delivered as a service.
Buy Now, Pay Later
A final area that retailers must be conscious of is the move towards Buy Now, Pay Later services such as Klarna, LayBuy, and PayL8r.
These services are surging in popularity and the growth is forecast to continue, as consumers move away from credit cards and towards these Buy Now, Pay Later services. The integration of Google, Amazon, PayPal or Apple Pay into this process, for example, is again designed for convenience, as is the drive towards one click payments. We expect biometrics to impact here too with devices rather than credit cards being ever present at the buyer’s side.
These companies have started 2021 on the receiving end of regulatory threats over their seeming encouragement of consumer debt. However, while they may receive a higher degree of regulatory scrutiny going forward, they are here to stay.
Selection of the right retailer payment partners will be key in enhancing the customer experience and increasing conversion, whilst minimising fraud. Must-have attributes are a strong portfolio of payment options, AI based fraud solutions and the ability to offer Buy Now, Pay Later experiences.
Payments as the new consumer battleground
The ability to offer customers their preferred method of payment (and to do so in the most frictionless way) not only reduces the online retailer’s most hated metric; the ‘abandoned basket’, but it may also prove to be a true differentiator for customers when choosing where to shop.
However, retailers must be prepared for how quickly consumer behaviour may change in line with new solutions. Retailers must stay attuned to their customer base and ensure they have the right partnerships in place to enable them to react quickly to this rapidly changing market place.
