Three Merchant Payment Trends to Watch in 2020
In 2019, merchants everywhere were challenged by pressure from new entrants, the continued breakdown of traditional industry boundaries and growing customer preference for a digitally-led or digitally-influenced purchasing experience.
As the year draws to a close, there are three trends I see taking shape in 2020 and impacting both merchants and their payment providers:
The Reverse Omni-Channel Journey
We will start to see larger pure-play eCommerce sites opening physical locations (the obvious example being Amazon, which is now moving into brick-and-mortar) – though we are not likely to see a situation where a pure play becomes a huge franchise department store.
There are a few factors driving this particular trend. First is how consumers are choosing to interact with merchants. Today’s shoppers have different needs and interests – some prefer mobile shopping, while others prefer to touch and feel a product before buying. If businesses limit themselves to a single channel – even if it’s the eCommerce channel only – they will be leaving opportunities on the table.
Secondly, the ease of access to the physical store helps bolster customer experience. For example, it will unlock the buy-online-pick-up-in-store (BOPIS) or click-and-collect model for those consumers looking for immediate gratification. Merchants risk missing out on business from consumers who prefer this channel, which is rising in popularity, according to Nielsen.
Physical stores also make returns easy. With pure eCommerce players, the return process is usually a daunting ordeal including re-packaging the goods, printing out shipping labels and a drive down to a shipment store like UPS or FedEx and then waiting for a refund. From the merchant’s perspective, expanding the consumer’s access to a physical store not only improves the ease of doing business, but also solves logistical challenges.
The Growing Importance of Artificial Intelligence
As retailers experience price compression, along with the need for revenue retention and a stellar customer experience, getting every possible advantage over the competition is becoming critical. Artificial intelligence (AI) will play a significant role here.
In the realm of fraud prevention, distinguishing a bad customer from a good one is important. You need to catch the fraudsters while concurrently creating a smooth and frictionless experience for legitimate customers. Using machine learning as part of a multi-layered approach to fraud detection, merchants can build predictive models to automatically identify legitimate transactions, ascertain how they compare to a customer’s purchase history and isolate the potentially fraudulent ones with greater accuracy – all in near-real time.
AI will also play a role in optimizing conversion rates. When a consumer walks into a store or goes online and interacts with a merchant, the percentage of consumers who were engaged and those who then completed the payments process are key metrics. Understanding and influencing what nuances and experiences helped capture the consumers’ attention from the initial touchpoint through to the checkout process and final payment will be increasingly important.
AI will also drive the consumer’s payments experience as well as the merchant’s experience. For example, when the consumer has swiped their card, providing the best connection to avoid card declines will improve the outlook in terms of revenue conversion and a good payments experience. At the same time, merchants must also ensure that they route the payment through the least expensive path.
At a macro level, retailers will depend on AI to help manage their business. What kind of goods to stock up on, what kind of marketing to undertake all the way through to how the business is doing compared to competitors will all be driven by AI, and this will be important for merchants’ success.
Continued Growth of the “Subscription” Business Model
If you listen closely to the younger generation, owning goods or property is going out of style. While the older generations tended to measure success and happiness based on what they owned, younger generations are measuring their success in terms of experiences. The advent of subscription businesses like Netflix and Rent the Runway have led consumers to focus on the experience without the need to own movies/TV shows or clothes, respectively. Today, everyday brands like BMW and Nike are also using the subscription model to create differentiation through experiences – and immediate gratification. It will be something that merchants continue to drive.
From a payments perspective, in order for merchants to continue benefiting from those recurring subscription fees, they need to remove hurdles and friction that could prevent these recurring payments from taking place. For example, in situations where the consumer didn’t get their paycheck on time, it might lead to a decline in payment. In such cases, merchants will want to consider giving the consumer time to retry, or approve the purchase knowing the consumer is good for it, rather than immediately shutting off the service and losing the consumer’s future business. Merchants will also have to think about how to manage collections with customers who do default on payments.
Next year is going to be an exciting time for merchants as they navigate the growing consumer demand for all things digital and experience-driven. Merchants with a strong digital presence and strategy will certainly have the edge in 2020’s competitive environment.
Find out more about how ACI supports seamless and secure omni-commerce with the ACI Omni-Commerce solution.
Related Blog Posts
Could COVID-19 Be India’s Cashless Catalyst?
India’s push towards a digital economy has accelerated over the years, with a supportive regulatory environment, home-grown technologies and innovation around digital infrastructure improving “last mile” connectivity to the remote towns and rural areas of the country. While the “Digital India” drive has been consistent, the COVID-19 pandemic has brought out the true value of digitization for businesses and consumers alike. It is a watershed moment and has fast-tracked the pace of digital adoption, particularly for payments, which now plays a critical role in economic recovery.
Only One-Third of Major Fuel Merchants Have Fully Implemented EMV and 20 Percent are Still in the Planning Stage
Earlier this year, we blogged about the issue of EMV implementation in the U.S. fuel sector and the fraud issues fuel merchants can expect to see if they’re not ready by the extended April 2021 deadline.
Omni-Commerce Is Heating Up the Merchant Token Revolution
Merchants around the world have embraced the wisdom of keeping sensitive customer data (such as card numbers) out of their own environments, with tokens emerging as the tool of choice to bridge the gap. Merchant functions — including reservations, returns, reporting, rewards, research, reconciliation and more — have typically required access to sensitive data, but a series of high-profile breaches has highlighted the need to store card numbers in tightly secured safe harbors.
Are Alternative Payment Methods the Future of Fuel and C-Store Payments?
Card payments are still king in many sectors, including fuel and convenience, where according to Mercator Advisory Group, 57 percent of U.S. drivers currently use a credit or debit card to pay. However, the rising adoption and associated benefits of mobile and other alternative payment methods (APMs) in many other sectors have put the topic of APMs on the radars of fuel merchants.
Will COVID-19 Accelerate Friction-Free Payments in the Fuel Sector?
Today’s consumers expect easier and more frictionless ways to pay. The upshot for merchants is that consumers who do receive convenient, friction-free experiences tend to spend more and show greater loyalty.
COVID-19: Global eCommerce Sales are likely to rise beyond the crisis and businesses need to prepare accordingly
Since the start of the Covid-19 pandemic, ACI has published a monthly Covid-19 eCommerce Tracker, analyzing global eCommerce sales, consumer purchasing behaviors and fraud trends. Katrin Boettger spoke with ACI’s Debbie Guerra, executive vice president at ACI, about the latest eCommerce trends and the long-term changes the pandemic may bring for consumers and merchants.
The Co-op U.K.: In with the New Does Not Mean Out with the Old
I had the pleasure on May 19 to discuss The Co-operative Group’s consumer payments strategy with Paul Fletcher, Co-op’s Head of Payments.
The Co-operative Group is a compelling case study within the U.K.’s convenience grocery sector; steeped in history and tradition, with a culture that demonstrates a real heartfelt pride in its mutual ownership origins. A nod to the past now seems to be a trend among big businesses, as they remind customers of their (usually) long-ago establishments and “origin stories.” But in the case of Co-op, it really does mean something, and it influences everything they do — payments included.
Move Over EMV – Meet the Real Protectors of Fuel Pump Payments
There’s much more than EMV for fuel merchants to consider when it comes to blocking fraudsters. Learn why P2PE and tokenization are the data security duo fuel merchants need to block fraud and satisfy genuine customers.
The EMV Deadline Has Been Extended for U.S. Fuel Merchants – Now What?
U.S. fuel stations were originally supposed to be EMV-compliant by October 2017, but due to complications and costs at the time, the deadline for EMV at the pump was extended for three years – and it has now been pushed out further to April 2021 due to the COVID-19 pandemic.
Are Chargebacks Making a Comeback for U.S. Fuel Merchants?
With the planned EMV implementation date looming for U.S. fuel merchants, we’ll be spending some time ahead of the October 2020 deadline looking at the fraud issues affecting fuel merchants and how these might change through the final quarter of this year.