COVID has had a massive impact on retailers, but how has it impacted payments and the transition to digital?
COVID forced many retailers to make a major shift towards digitization. Not only did they increase their e-commerce investments, but they also leveraged innovative in-store technologies to transform business models to secure revenue and create value-added opportunities.
We saw hybridized services such as curbside pickup, click-and-collect and online buy, pay in store (BOPIS) come to the fore and see a massive uptick in mobile payment and shopping app usage. Importantly, COVID also removed many barriers to adoption as less-tech-savvy demographics embraced contactless, mobile payments and apps, and switched to using new digital services.
How is digitization affecting customer expectations? What payment challenges does this create for merchants?
Today’s buyers want more than ever to be able to move freely between channels at any point in the buying cycle. They want to be reminded and recognized with personal offers; to be able to browse, rate and source products on their phone while in store. And they want to be able to decide for themselves where, when and how they pay, collect their goods or have them delivered.
Omnichannel empowerment is now central to offering choice and convenience and creating hyper-relevant and targeted customer experiences. To do this, merchants must be able to effectively track customers on their journeys and also be responsive to their preferences. That means removing barriers, unifying data, and being able to truly integrate multi-channel services. Failure to do so can affect not only sales, but loyalty, revenue and ultimately market share and competitiveness.
How is this affecting retailers’ approach to payments?
Retailers no longer view payments as just “plumbing” but as a key differentiator with a direct impact on their bottom line. Why? Because customers proactively choose where to spend based on checkout choices. And since payments now directly impact revenue potential, it’s much more visible in the boardroom. Today’s retail executives are increasingly involved in discussions about the digitization of payments, including infrastructure investments, platform requirements and partner selection.
Convenience, security and compliance usually drive payment discussions, but which digitization trends will make waves in 2022?
- Empowering decisions become the new battlefield.
Contactless, alternative payments, e-wallets and BNPL are increasingly being used to empower customers at checkout. Modernizing the POS to accept new forms of payment – from crypto and contactless payments to e-wallets and apps – is becoming a #1 priority for merchants.
- Hybrid services will continue to gain momentum even after the pandemic is over.
The technology that allowed e-commerce to bridge the gap as stores closed will play a crucial role in brick-and-mortar’s recovery. Shoppers will want digital in-store experiences that use artificial or virtual reality with labels, QR codes, or shelf stickers to immerse themselves in “connected shopping experiences.”
- Retail is becoming more social, intelligent and embedded.
We will see more buying and selling of products directly on social platforms like Facebook or Instagram. And a greater emphasis on product discovery and off-the-page buying methods. To serve increasingly fragmented channels, retailers will turn to intelligent commerce to map customer journeys, predict demand and manage inventory levels, and support just-in-time delivery and same-day fulfillment.
- The act of paying becomes more immersive – and invisible
Voice commerce and AI shopping, including auto-replenishment and VR, will take hold in mainstream commerce. Customers will want to place orders via smart devices without needing an e-wallet or payment card. Already in the US, drivers can use Alexa to pay for fuel at Exxon and Mobile, or instruct Siri to pay at 7-Eleven gas pumps with a Fuel Loyalty app.
Where do retailers look when preparing for future developments?
Merchants should invest in agnostic and flexible platforms that can easily continuously integrate with new payment methods and technologies. Those equipped with tools to support smooth customer journeys, streamline channels, increase responsiveness, and improve decision-making.
On the infrastructure side, omnichannel gateways and agnostic processing platforms are critical to support new multiple payment methods, acquirers and channels. At the same time, APIs and Software Development Kits (SDKs) ensure merchants leverage new ecosystems and marketplaces to keep services flexible and competitive.
Key features include secure but frictionless authentication and verification methods for CNP transactions; tokenization to track and reward customers; and data analysis and AI tools for customer insights and to support personalization. More sophisticated rules engines and machine learning will also help them mitigate risk, fraud and chargebacks.
How will digitization affect payment transactions in the long term?
As we emerge from COVID, there is a crucial window for merchants to rebuild their brick-and-mortar business and re-grow their customer base by leveraging digitally-enhanced sales journeys to achieve better transaction lift, average order value, conversion and acquisition.
Across demographics, markets and sectors, payment, convenience and innovation are now de facto. Today’s rides need to be seamless, smooth and fast – tomorrow’s need to be invisible, intuitive and immersive.
Ultimately, the digitization of payments must allow merchants flexibility, freedom and connected omnichannel capabilities. This allows them to adapt and tailor services and quickly launch innovative new customer journeys – in-store, online and phygital – wherever their customers prefer to shop and pay.
In it, we uncover some of the digitization trends in payments and their impact on merchants’ omnichannel strategies eBook.
About Johannes Gessau
With over 20 years of experience in the payments industry, John leads the team that… Omni Commerce Serving the needs of retailers worldwide as part of ACI’s Retailer Portfolio team. His focus is on driving innovation and growth for merchants around the world, and he is passionate about finding ways to enable merchants to deliver optimized payment experiences to strengthen both their brand and their bottom line.
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