The post-pandemic payment landscape – with Discover® Global Network.
While 2020 was a difficult year, foretelling what will follow might be even tougher.
The covid-19 pandemic affected the entire payments ecosystem — from merchants rushing to get their business online to consumers shopping remotely for food, clothes and even new cars.
In the span of just months, existing payments trends that had been progressing steadily were suddenly jumpstarted and moved to the lead. Ecommerce soared while fraud concerns kept pace, ‘contact-free’ and ‘contactless’ became the words of the year, and non-cash, card-not-present (CNP) and buy-now-pay-later (BNPL) transactions became increasingly popular.
Indeed, with the impact of the pandemic accelerating the trend, global eCommerce jumped 23% in 2020, exceeding $4 trillion (€3.3 trillion) for the year, according to 451 Research1, a part of S&P Global Market Intelligence.
Even when the pandemic is officially declared over, if ever, no one expects everything to go back to the way things were. In many ways, what’s likely to follow is poised to be a unique mix of payments returning to what previously existed and the start of a world facing a new frontier.
According to analysts, most of the major shifts that follow are likely to continue existing trends. But, given the uncertainty that was brought by the pandemic, each of these are expected to either surge or morph in previously unforeseen ways.
Omni-channel adoption accelerates
Whether or not the surge in eCommerce continues unabated, the expanded infrastructure and options adopted by merchants have likely changed the landscape for good. ‘Contact-free’ and ‘online’ will remain keywords going forward, it looks certain that these payment trends will continue to grow even as covid-19 comes under control and lockdowns and restrictions ease.
This rise in merchant flexibility – from desktop and mobile (mPOS) to texting receipts for payments to customers – has established a new marketplace for shoppers to explore. And consumers, already used to the change, are signalling no desire to return to the past. In fact, in a survey by 451 Research2 found over a third (35%) of consumers said they strongly agree that they will continue to shop online for most items, even after social restrictions are lifted. This research showed that of the 30% of consumers who said they tried kerbside pickup, for example, some 96% said they were satisfied with the option.2
The customer experience of fraud prevention
With the shift online, card-not-present (CNP) fraud also increased. Fraud-prevention strategies are key to fighting risk,but preserving a frictionless customer experience is a must. Consumers have repeatedly cited cumbersome steps at the point of checkout as a top reason for abandoning their carts. But they also worry about identity theft and fraud, with 85% of shoppers expressing some level of concern.3
Removing friction for loyal customers requires a combination of strong verification protocols and personalised customer journeys. Retaining individualised data in a secure and manageable state can reduce false declines and streamline both logins and checkouts. Auto-filled templates, where security is appropriate, help speed the process by populating names and addresses. Identifying payment card types by the first four digits and providing a tailored template for a card verification value (CVV) also adds convenience and protects against fraud.
Super apps and QR keep pushing ahead
With digital wallets continuing to grow in popularity in China, India and elsewhere, these applications that go well beyond traditional payments are expected to expand their presence globally. By incorporating payment capabilities, social media, merchant offers, loyalty programmes and more within a single application, these mostly mobile-based platforms have been booming in recent years.
Super apps typically rely on the use of Quick Response (QR) codes for transactions, as scanning QR codes can transfer a large amount of merchant and consumer data. Near Field Communications (NFC) has typically been favoured in the West, but the use of QR codes is globally on the rise.
“To date, wallet apps in the US have been largely payment-centric, but this is beginning to change,” said 451 Research4. “We are observing several US-based players make moves toward becoming so-called ‘super apps’.” Analysts at 451 Research expect additional capabilities, such as cryptocurrency purchasing, investments and messaging also to be added to the offerings.
These digital malls, provided in a single application, are also providing customer access to a world of micro-merchants – those retailers or providers often transacting from phones or digital platforms. As more merchants or gig workers shift to these apps, these sites for lower-value transactions are expected to grow.
Opting for instalment payments
The economic impact on consumers during the pandemic had many shoppers seeking more manageable and predictable payment schedules. As a result, instalment loans, with set monthly repayments, became increasingly popular. Insight from 451 Research5 found 10% of consumers tried an instalment option for the first time during the pandemic with 87% satisfied with the experience.
The option to divide purchases into often interest-free instalments not only allowed for bigger-ticket items, but also made it more likely that shoppers would return. But the one concern that some lenders encountered was with BNPL plans that charged consumers no interest and split the cost to just a few payments – because in many countries these types of loans do not require a credit check of consumers, lenders were unable to measure the risk. This pushback against some BNPL providers is expected to increase.
Content accredited to Discover® Global Network
* & 1 451 Research, 2020. Global Unified Commerce Forecast Scenario Analysis.
** & 2 451 Research, 2020. Voice of the Connected User Landscape: Consumer Population Representative Survey, Connected Customer Q3 2020.
4 451 Research, January 2021. 2021 Payments Industry Outlook.
*** & 5 451 Research, 2020. Voice of the Connected User Landscape: Consumer Population Representative Survey, Connected Customer Q3 2020.