Payments 2020 and Beyond: The Evolving Landscape of how people Interact, Shop and Pay

Introduction

During 2020, Digital Transformation has become ‘real’ across sectors, organisations, families and individuals at an unprecedented scale and rate of acceleration. Connectivity has been at the core of being together and ‘getting things done’ across work, education and everyday life including commerce, which brings us even closer together through our payment journeys. With payment methods as diverse as the communities who shape them and a growing number of alternatives to choose from, how is the landscape evolving? And what is the impact of recent global events on the way people interact, shop and pay?

This piece helps navigate the pathways of people and payments, drawing on key insights from the 2020 Global Payments Report by WorldPay from FIS. And looking ahead, there is an accompanying and free to attend an EMEA focussed webinar on July 14th. This will allow a deep dive into key themes around digital and social payments and regional trends, supporting you to better prepare, look ahead and optimise not just for business resiliency, but for business growth too.

A Changing Landscape: COVID, Commerce and Consumers

The COVID pandemic has impacted globally more than any other event in recent history, with over half of the world together - but in lockdown - at its height. This has catalysed a rapid change in the home-work-education balance with the shift to remote working, living and learning, and a change in patterns of consumption and buying behaviours too. This is a transformation underpinned by the accelerated uptake and integration of newer forms of technology such as hybrid cloud and AI to enable the everyday to continue, coupled with growing awareness of what is possible.

Social distancing and concerns about hygiene have accelerated the demise of traditional money forms alongside the rise in contactless transactions, whether this is at the point of sale in a shop or through online payment methods. Even people and organisations historically resistant to change have had to adapt to these new practices. And recent research (Accenture) indicates this will have an enduring effect.

This is set against a backdrop of changes that were already happening as elucidated in the 2020 Global Payments Report extensive findings. These include the growth of Voice technology, increasing integration of e-commerce and social media creating ‘communities of commerce’ and the uptake in alternative payment methods notably digital and mobile wallets. Another drive away from traditional credit and debit cards is the access and convenience of Buy Now Pay Later options such as that offered by Klarna. The numbers here are revealing:

Digital and mobile wallets are absorbing eCommerce spend at a rapid rate, jumping from 21% in 2018 to 25% in 2019 and projected to reach 29% by 2023.

BNPL schemes are growing at 39% annually in the UK for online transactions, and set to double their market share by 2023

And finally, open banking and PSD2 legislation changes are rapidly enabling another alternative payment method, that of Account to Account.  Bank transfer is expected to make up a fifth of all online transactions by 2023, a 16% YoY growth between 2019 and 2023.

Key Drivers and Opportunities of Change: Gen Z, Interaction and Inclusion

Two areas come to the fore as especially relevant to the changing nature of commerce and payments, raising the question of how merchants should best adapt and respond. One is the rise of Gen Z with implications for interaction, value proposition and methods of payments. The other is financial inclusion for the un/underbanked and underpinned by a growing move towards conscious consumerism – where ‘values, good business and technology’ combine.

Gen Z, now in their teens to early 20s, have grown up with digital technologies – they are the first fully-native digital generation. Representing over nearly a third (32%*) of the global population, they are actively shaping people’s expectations, wants and needs. Their search for truth is underpinned by their search for who they are, how they express themselves as individuals and the desire for authenticity (Eaves 2020). Perception of shared value alignment strongly underpins their association with brands. Never separated from smartphones they are more likely to use digital services and mobile wallets and want a mobile first experience, with simple intuitive interfaces. They expect strong customer service and high levels of personalisation to create an individual commerce experience – an ethos of ‘my shelf’ not ‘off the shelf’.

For merchants, the compelling implication is both human and technical – it is all about engaging with customers in the way that matters most to them whilst also seeking to enhance the pathway from discovery to conversion by offering customised checkout options and the most aligned payment methods. The opportunity to uplift e-commerce opportunities can also be tailored to local preferences and there is support to actualise this by requesting a consultation with one of the Worldpay commercial experts here. Merchants can offer extended payment methods which appeal to Gen Z such as the “Buy buttons” and digital/mobile wallets and Buy Now Pay Later (BNPL) methods described. These afford financial flexibility coupled with practicality and convenience. Further, Gen Z are also the most likely to take up innovations in financial products and services. 

Additionally, the un/under-banked represent a significant group of the population who do not have access to a bank account, estimated to be at around 1.7 billion adults. However, many of the unbanked do own a mobile phone. So, whilst the unbanked might be socially excluded, payments using mobile phones provides the opportunity to promote financial inclusion, shifting a cash based economy to a digital one. This also provides opportunities for entrepreneurial activity, particularly in emerging economies where participation in formalised banking provisions is hindered. Building trust is key to change behaviour here and a move away from the cash predominance, including keeping money at home. Given the influence of purpose on the decision-making behaviour of Gen Z in particular, merchant support for financial inclusion endeavours appears a timely example of an opportunity to ‘do well by doing good’.  

The Future of Community Engagement

The fusion of social media and e-commerce has created new ‘communities of commerce’ that not only influences but converts socially mediated conversations into sales.  With over 3.3 billion** smartphone users globally and growing, there is enormous potential for consumers to shape brands drawing upon personal ethics. This offers brands and merchants the opportunity to come together and access a massive customer base. It requires that merchants improve the flow from discovery to conversion by offering a smooth and secure experience such as customised checkout options and the right payment methods at the right time, as well as flexible financing. It also necessitates a focus on interactive engagement and relationship building, alongside cultural readiness and investment in technology to enable truly connected experiences, typically powered by AI - where customers seamlessly benefit from the application of real-time contextual data and historic behaviour data too.

Conclusion

Ambidexterity – the capacity to continually and proactive adapt to change - is critical to e-commerce success. Merchants must continually scan for trends across both technology and consumer behaviour, being prepared and capable to adapt and evolve. Although we have all been experiencing change at an unprecedented rate and scale, one aspect remains ever constant – the imperative to know your customers – ask and listen, understand their pathways, and build a payments strategy fit for the future around this. Drawing on highly current research data and expert insights can help navigate this journey and so a closing reminder to learn more from the 2020 Global Payments Report and the webinar on July 14th which will be highly interactive - and so a fantastic opportunity to ask questions!

*Bloomberg  

** Statista, July 26, 2019

About the Author

Prof. Sally Eaves is a highly experienced Chief Technology Officer, Professor in Advanced Technologies and a Global Strategic Advisor on Digital Transformation specialising in the application of emergent technologies, notably AI, FinTech, Blockchain & 5G disciplines, for business transformation and social impact at scale. An international Keynote Speaker and Author, Sally was an inaugural recipient of the Frontier Technology and Social Impact award, presented at the United Nations and has been described as the ‘torchbearer for ethical tech’ - founding Aspirational Futures to enhance inclusion, diversity and belonging in the technology space and beyond.