With the pandemic of Covid-19 forcing us to make radical changes in our purchasing behaviors, online shopping has become the norm, and now with high fuel prices, we might as well take deliveries. In the digital economy where online banking, digital wallets, and online shopping have combined to be the future of consumer goods, your digital shopping cart is the way forward on your preferred eCommerce platform. Your eCommerce website has to consider this trend, and what it will mean to your payment processor when it comes to the goods you sell.
Commerce barriers in 2022
With continued Supply Chain disruptions due to labor, product, and base material resources have been significantly disrupted which has put many businesses in a state of start and stop in their outputs. This has put some businesses in a position to shift their automation forward to reduce the cost of labor and put them in a better online sales position to deliver their goods - bypassing some of the disruptions in the industry.
With inflation at its highest in 40 years with May closing at 8.6% (including a 49% increase in fuel costs) which is not transitory as it was set as expectations, as well as the US of Consumer Sentiment reached its lowest ever mark at 50.20 this May 2022 (lowest in 85years). The combined metrics are leaving the consumer in a weaker position when it comes to buying power. This will lead to reduced travel to obtain goods and will push everyone further to online transactions vs. physical retail visits.
Trends for 2022 outlook
With collected data, there are 5 trends that should be noticed and will shape your near-term commerce and payments over the next 12 months. Here they are described below:
Changing customer expectations
Growth of Buy-now-pay-later
Acceleration of connected commerce
Digitization of B2B payments
Attention to data privacy - End-to-end.
Changing Customer Expectations
From March 2020 digital payments surpassed "card present" with "card-not-present" at checkouts. The shift was driven by the Covid-19 restrictions, which governments imposed on the general public globally, and has not reverted back to the "card-present" methods of the past. Additionally, they have raised the wireless payments from the likes of the United Kingdom from £35 to £100 at checkout without inserting the card with the pin verification. This places additional trust in the payment using digital security with the account rather than with the physical card.
To provide additional flexibility in payment options, merchants have expanded their digital payment methods (such as Apple Pay, Google Pay, Amazon Pay, and other digital wallets) so that their online stores can take on every method possible. This is to promote a frictionless eCommerce digital purchase experience, not just at the point of sale but at the center of the lifestyle of the consumer. This core shift could be called "the new normal" when it comes to the purchasing behavior of the consumer.
Growth of Buy-now-pay-later
Businesses that have large ticket items such as furniture and electronics have historically offered payment plans (installment payments, layaway payments, and in-store financing) while now the payment offerings today offer micro zero percent payments such as PayPal's Pay-in-3 and zero percent APR in Pay-in-4-months. This is the fastest-growing payment trend this year, allowing consumers to afford their items for a "paid plan" and spreading out the costs.
65% of merchants have aimed to offer this capability, which is by default given to the merchants that have PayPal at their checkouts. When it comes to selling products, lowering the cost threshold will drive conversion of a sale where mobile wallets will give it the ease of buying items and have them delivered to their residence. PayPal introduced PayPal Credit with these plans, which gives relief of the credit and debit cards impacts of purchases with this found flexibility which helps merchants and consumers to transact. Payments for the Pay-in-3 and other plans can then be settled with a debit card, or a credit card - spreading the costs over months.
Acceleration of Connected Commerce
Online businesses are turning to Social Media to keep their users and customers engaged with their brands and products - this is done through eCommerce features as well as their digital marketing strategies. In doing so, customers have loyalty programs, share their experiences with reviews (good for User-generated Content - UGC), and help with the business' SEO tools. During the Covid-19 pandemic with these programs, the users showed to be more resilient and loyal to the brand as return shoppers. Stores with a more frictionless experience could make their loyalty program more effective as shoppers focused on their rewards and shopped without issues.
Digitization of B2B payments
Payments in the B2B payments have historically been paper checks, and occasionally wire transfers to settle accounts. However, the processing of paper checks is extremely costly from issuance to assigning it into an account and touches many hands in the process (accountant, mail, banker). With the recent move to working from home, things had to change when it came to handling this process but 50% are still paper checks today. The move will take up to 2025 to reach an almost fully transition industry, with another 25% coming on board this year in 2022.
Attention to data privacy - End-to-End.
Due to the migration to online payments, in order to digitally control data privacy which used to be managed by a shopkeeper in a brick-and-mortar store, is now a lot more challenging since it is cross-border and multi-layered at the business level. Customer data has to be managed and protected via border, state, and city laws and legal adherence brings a multitude of challenges when it comes to executing this without breach. Payment gateways are part of the process where First Data and Payment providers have disconnected the risk and came up with a solution for the various legal requirements such as GDPR, CCPA, and LGPD to be adhered to via tokenization.
This is a global transition to digital payments, and could only be happening with the advent of a smartphone. The challenge has always been that the first "end" in the End-to-End could not be digitally captured, while businesses were maybe halfway there, and banks were already there. The smartphone brings in its own security and digital wallet associated with it, shopping is now over 80% done over smartphones, and this leaves everything in between to catch up and be fully digitized. Given that plans like Pay-in-3 and the likes are available, making payments a lot easier, it gives full disclosure at all levels of the credit worthiness of the user, the business, and how risks are being calculated for each industry. Transparency with the consideration of privacy has brought the digital payment age into a new wave and revolution when it comes to eCommerce in the 21st century. Feel free to give us a shout at firstname.lastname@example.org