Retailers that continued to operate during national lockdowns strongly discouraged – or even banned – cash payments, favoring contactless or mobile payments. But many stores closed completely, at least for a period of several weeks, forcing the vast majority of non-essential commerce online.
As a result, digital payments volumes reached levels that were predicted – in most markets – to be reached in several years rather than several months. Acquirers were already preparing for strong growth in digital payments before COVID-19 (as discussed in our “Prime Time for Real-Time” global payments report), but the new era of acquiring has arrived earlier than expected. Acquirers have been forced to accelerate their plans, rethinking their business models as a response to a highly dynamic market that has created significant opportunities for those that move fast.
A chance for acquiring banks to take control of key processes
In many parts of the world, lockdowns have been relaxed and shops have opened (though usually with restrictions in place), but eCommerce has maintained many of the gains made in terms of its share of consumer spend. In fact, in many markets it continues to grow as new habits have been formed, which look to stick around.
If a brick-and-mortar retailer didn’t have an eCommerce channel pre-pandemic, they almost certainly do by now. This offers a big opportunity to acquiring banks that can provide payment gateways as part of their offering, capable of supporting both a high volume of payments and a wide range of alternative payment methods.
Acquiring banks have often outsourced these gateways to third parties, but acquirers are increasingly seeing an opportunity to bring this in house. This provides them with direct oversight over a growing part of the business and, more importantly, delivers them higher margins on already increased revenues. The benefits go straight to the bottom line.
More payment types mean more sales made – and more business for acquirers
As already noted, a combination of official guidance and conventional wisdom has led many consumers to make contactless cards or digital wallets their preferred payment method. To better facilitate this, payment limits have been increased, which can only serve to make these new habits “stickier” with consumers and increase their appetite for further payment services.
Necessity is the mother of invention, and as both consumers and businesses search for more COVID-friendly ways to pay, as well as improving customer experience with new value-added services, support for digital overlay services will become increasingly important for acquirers.
Consumer demand will decide what these digital overlay services will look like, such as the current QR-code trend evident in many emerging markets, and acquirers would be wise to follow their lead. Merchants’ sales will suffer if they can’t accept the payment methods that consumers prefer – whether that preference is based on safety, speed or both. If acquirers are to avoid merchant customer attrition, they must support a diverse range of payments. This is more than an opportunity to protect market share through increased merchant loyalty – it’s a chance to develop entirely new revenue streams.
The door is open – acquirers just need to step through it
A largely unexpected global event has accelerated change for acquirers, but the need to level-up capacity and provide innovative services was looming long before COVID-19.
Now is the time for acquirers to change their business models to ensure they can cope with both today’s high volume of transactions and whatever tomorrow might bring. And they must enable their merchants to accept any payment method consumers choose.
Although at first it may seem like a challenge, now is the time to capitalize on disruption. New revenue streams are opening up through overlay services and other measures, which reinforce the critical relationships with customers.
Learn more about how new competitive dynamics and a changing payments market are driving business unpredictability for acquirers in our eBook, No Margin for Error: Why acquirers must change their business models to thrive in the 2020s.