Recent years have shown that the shopping habits of consumers are changing as the e-commerce market continues to boom. This has proven to be an issue for some retailers. However, many are adapting to the shifting payments landscape and new trends like digital wallets, virtual cards, and mobile payments.
In many ways, the pandemic has allowed the retail industry to undergo an extensive digital transformation. Even before the pandemic, e-commerce had been a driving force for a change in the way businesses operate and, consequently, the way customers shop. However, it was the Covid-19 crisis that acted as the impetus for many businesses to offer more online options.
How e-commerce has changed since the pandemic
Of course, lockdowns forced businesses to streamline their digital solutions. Without the ability to shop in-person, consumers shopped online at record levels. Lockdowns also made it so that contactless payments became more ubiquitous when shopping in stores. It is estimated that contactless payments rose by 20% from 2017 to 2020. Essentially, the pandemic catalysed seven years’ worth of growth in about seven weeks.
It’s possible that if the pandemic hadn’t happened, new e-commerce developments wouldn’t have progressed as much as they did. Many individuals were uninterested in moving away from cash and toward digital. A sizeable portion of the population perhaps would have never gotten used to online shopping, never mind ordering their groceries online. The pandemic made this necessary and has permanently changed the behaviour and habits of many.
When it comes to the airborne nature of the virus, it is obvious why the popularity of contactless payments soared during the height of the pandemic. The ability to simply tap your card rather than touch the pin pad after numerous other people became not only preferred but expected. It gave customers a sense of peace knowing that businesses were taking the necessary steps to facilitate more hygienic interactions.
Contactless payments also speed up the purchasing process. On average, they are 7 seconds quicker than paying with a chip and pin and 15 seconds quicker than cash. This checkout speed is vital to the success of a business, as it impacts the shopper’s desire to return. Queues can build up, and no one wants to wait longer than necessary. Evidently, consumers value efficiency. To appease customers, retailers were allowed to offer a higher contactless payment limit of £100. This replaced the previous limit of £45. This worked to ease the experience and reduce friction.
More payment choices = more customers
Another payment choice that customers and companies alike are gravitating toward is open banking. To put it simply, open banking is like a customer transferring money directly to the business from their account. This benefits both parties. Merchants save money by avoiding card processing fees, which in turn increases their profit margins. It provides customers with more protection and less hassle, as they are not required to manually exchange sort codes and account details.
Consumers are also paying via wearable tech, such as smart watches, and with digital wallets, like Apple Pay and Google Pay. Established digital wallets are no more expensive for businesses than accepting card payments. They allow for a positive customer experience and are becoming more widely offered.
As of now, digital wallets are one of the most preferred methods of payment within the e-commerce space. In two years, digital wallets are projected to make up more than 50% of all e-commerce payments. By this time, the global e-commerce market itself is expected to surpass £5 trillion. This is due in part to the growing number of consumers looking to spend after being restricted during the pandemic. This will massively drive e-commerce and encourage the economy’s bounce-back. Overall, companies can increase profits by offering more payment choices.
Is cash still king?
Cash is clearly losing its status as king. It is becoming more apparent as to how new payments innovations are shaping the retail landscape. Apart from shifting to contactless transactions and wearable tech as the preferred methods of payment, the general outlook on financial technology is improving. These kinds of payments have made transactions easier and more convenient for customers. Additionally, as more sensitive information is stored digitally, transactions become more secure. This all contributes to the general trust the consumer has with the company they are choosing to buy from. Forming a sense of trust with their customers allows businesses to thrive because it establishes them as a competitor.
In fact, in many cases, retailers will not be able to compete if they do not offer flawless digital experiences. Frictionless payments are required now, whether the customer is shopping in person or online. According to research from Barclaycard, online shopping baskets worth billions of pounds are often abandoned if the payment process involves hiccups. Namely, if the shipping includes delivery fees, the customer’s chosen payment method is unavailable, or there are cybersecurity concerns. If brands want an advantage in the customer payments experience, they must innovate and implement frictionless payments. Experts say this is critical for the success of the company.
The structural change digital payment innovations have had on e-commerce and consumerism in general has irrevocably altered the way people shop. It has also made them both more digitally savvy and more aware of all the options available to them. This will have lasting effects on markets around the world and will provide exciting new opportunities for investors.
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