COVID-19 and the payments imperative: Are businesses ready to address the future of commerce today?
The current commerce landscape looks radically different from the one we left in 2019.
COVID-19 has accelerated the pace of change in the industry as well as a multitude of new competitive requirements. Merchants and other payments stakeholders must prepare to address digital transaction volumes and payment behaviours that were not anticipated to be at this level for several more years. In many ways, the commerce market of the future has already arrived.
The pandemic has accelerated the adoption and usage of a wide array of commerce experiences. Momentum has been particularly strong in the following areas:
- Contactless payments. With social distancing and hygiene top-of-mind, usage and adoption of contactless payments has accelerated around the world. Visa noted at its Q2 financial results in April that contactless payments grew 40% year-over-year globally. In the US, adoption has been ignited, with 451 Research’s Q3 2020 Connected Customer survey showing that 1 in 6 respondents made their first-ever contactless payment during the pandemic.
- Digital commerce. As lockdown measures fell into place, many consumers turned to e-commerce out of necessity. According to 451 Research’s Macroeconomic Outlook Consumer Spending survey, 82% of respondents had shifted at least some of their in-store spending online as a result of COVID-19 at the time of our May 2020 fielding. This is driving significant growth in Card-Not-Present (CNP) transactions. In one of the payments forecast scenarios run by 451 global e-commerce transaction value will grow 23.2% year-over-year in 2020, reaching $7.5tn in spend.
- Omni-channel. The fusion of the virtual and physical worlds has become overtly apparent in recent months. To minimise physical contact, many shoppers turned to experiences like click-and-collect and delivery services during the first half of 2020. For instance, US retailer, Target, said that its ‘Drive Up’ curbside pickup, in-store pickup and ‘Shipt’ grocery delivery grew by 278% in the 3-month quarter ended May 2nd. It’s clear that payments will increasingly be initiated online, even if the end product or service is ultimately procured in the physical world.
The burning question on merchants’ minds is to what extent the shopping behaviour changes observed over the past several months will remain permanent? 451 Research’s consumer surveys suggest that an enduring shift in behaviour is underway.
Contactless, digital and omni-channel purchase experiences have become must-haves for businesses to remain competitive moving forward.
As shown in the data below, not only are many of the shopping experiences that have been in vogue during the pandemic proving to be sticky, they’re also key factors required to get consumers back into physical locations.
Minimising physical contact and ensuring speed and convenience are fundamental requirements that merchants must address to ensure customer satisfaction. The Rijksmuseum in Amsterdam provides one such example of how businesses are quickly transforming to meet these heightened consumer expectations. In partnership with Adyen, the museum accelerated its transition to cashless this spring, enabling customers to purchase tickets via QR codes and pay with digital wallets such as Apple Pay. This adaptation – once unusual – is now part of the new normal.
The dramatic shifts in the commerce landscape should lead merchants to reassess their payments priorities and the overall level of emphasis they place on their payments strategies internally. Payments have fast become part of the mission critical business infrastructure, and not all merchants have the ability to address the changes in volume, customer demands and purchase behaviour that have unfolded this year. To adapt and thrive in the “new normal,” we believe that based on our data, the following are now critical success factors.
These are not revolutionary but have quickly transitioned from “nice to haves” to “must haves.”
- An omni-channel payment platform. Merchants need to create digital experiences that work seamlessly across different sales channels. Siloed payment systems stand in the way of this, ultimately breeding friction and cart abandonment. Successful execution requires payments infrastructure that can ensure a ‘single version of truth’ across the value chain: inventory, orders and customer purchase history, regardless of where the shopper chooses to transact. The French multinational retailer Sephora is one example of a merchant that has put omni-channel at the heart of its strategy by connecting its customer app to the in-store shopping experience.
- Efficient checkout experiences. In today’s environment, every single Euro spent and every single customer relationship matter even more than in in the past. Merchants cannot afford to lose revenue to friction-ridden checkout experiences in-store or online. Contactless, digital wallets and mobile point of sale (mPOS) are several examples of what’s needed to streamline the payment flow and create a shopping experience that customers want to return to.
- Agility and adaptability. If businesses have learned anything this year, it’s that being agile and adaptable are core to survival. Nowhere is this more apparent than with payments. To remain competitive and relevant in the eyes of customers, merchants need to have a payments infrastructure that allows omni-channel purchasing to support the growth of CNP payments, as well as giving consumers multiple ways to pay.
For more information about this data and findings, please reach out to the Visa Navigate team.
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