The impact of COVID-19 revealed limitations with traditional payments and highlighted the need for contactless, seamless and secure systems. With organisations and consumers quickly acclimating to a landscape where cash is no longer the norm, the adoption of alternative payment methods like mobile wallets is rising exponentially. Contactless card payments in the US are projected to increase eight-fold over the next four years, and mobile payments are also growing rapidly - the Zelle Network®, for example, processed more than one billion payments in 2020. Businesses and supporting enterprises that handle B2C transactions will need to adapt quickly to keep up with consumer demand for new payment solutions.
Consumer preferences are changing - here’s what you need to know
2020 was the first time many consumers had used contactless payment methods, either pushed or organically. These payments are now used across generations for everyday purchases at grocery stores, for food delivery and to make rent payments. According to a recent Chase study that examined consumer digital banking preferences, 30% of respondents signed up for peer-to-peer payment options in the last year – it also found that mobile wallets attracted roughly 30% of total users in 2020. Among Baby Boomers, 58% were likely to use an online digital payment app.
According to PYMNTS, companies are developing and modernising payment channels to meet this growing demand and improve the customer experience. An example of this is more integrated systems that support mobile wallet and other contactless payment features. Beyond convenience, ensuring payment options support consumer preferences should be a top priority for businesses. By addressing consumer preferences, and continually adapting to new ones, businesses can build brand loyalty.
A convenient and secure payment experience
As expected, businesses have had to adapt to new forms of payments from consumers, both online and in-store. Employing contactless point-of-sale systems for in-person purchases and developing APIs for online and mobile purchases has been critical to businesses that have pivoted to support emerging consumer preferences during the pandemic. Customers are demanding more automated, personalised, and speedier payment technology to support their purchasing habits, but it’s up to businesses to make sure these options remain safe and secure.
According to data from eMarketer, in 2020, ecommerce grew by 30%, reaching a level of growth unpredictable until 2022. In the US alone, ecommerce sales were up more than 32% year-over-year, totalling nearly USD 800 billion last year. With an increasing number of purchases made online, it’s natural that consumers want to seamlessly and efficiently complete transactions without switching between multiple apps or web pages to do so. Through APIs and open banking, businesses can offer customers these embedded payment experiences.
Since the conditions of the pandemic have created more sophisticated opportunities for online payments fraud and scams, there’s an increased apprehension about going digital. Fortunately, digital payments have safeguards to combat the heightened fraud. APIs can provide protection by encrypting sensitive data, like credit card information. Leveraging APIs, businesses can streamline their payment processes to offer a more efficient and convenient online experience, while maintaining the level of data privacy and security that’s needed.
The pandemic has also accelerated consumer behavioural shifts to contactless and ecommerce payments, even though people are still shopping through businesses with brick-and-mortar stores. This change has helped businesses increase ordering beyond the counter experience while driving fulfilment speed and efficiency. In this vein, customers are using digital experiences more to pre-order items, which has opened up opportunities for businesses to build loyalty amongst the digitally engaged through offers, rewards and value-added digital engagement models.
Minimising Risk
Amidst the pandemic, another consumer concern is exposure risk through more traditional means of payments like cash and physical credit and debit cards. Many retailers have even stopped accepting cash or checks and consumers are opting to complete transactions using contactless payments, like tap-to-pay and mobile wallets that help reduce physical interaction. A recent study from FIS found that mobile wallet payments surpassed cash payments globally in 2020. To satisfy customer demand and maintain COVID-safe protocols, businesses will need to consider point-of-sale systems that offer contactless payment options.
Digitisation of the back office
Aside from benefiting the end-user, digital payments also offer efficiencies in the back office. The increase in remote workforce drove the adoption of digital workflows in the back office. This adoption resulted in increased efficiency and accuracy, and improved supplier/buyer experience and customer satisfaction. Through digitised workflows, businesses have the opportunity to further streamline back office operational processes, allowing companies to focus on their core business. It’s hard to ignore the value of sending and storing invoices digitally, distributing and collecting payments electronically, and automating reconciliation processes.
Conclusion
The pandemic has acted as a catalyst for the necessary and inevitable shift toward a more digital world, including payment processes. The transition to digital payments offers benefits to all stakeholders and is likely a long-term aspect of business to consumer transactions.
About Stephen Markwell
Stephen is the Head of Product Innovation for the Commercial Banking business at J.P. Morgan. He is responsible for curating and executing our pipeline of strategic investments, leading efforts to deliver a market-leading digital experience to our clients, as well as evaluating and sourcing fintech partners that address our strategic priorities. Stephen has been with the firm for 18 years, in senior roles spanning strategy, product management, and technology. He’s a frequent speaker and publisher on payments with leading industry publications and associations such as Bloomberg, American Banker, Payments Journal, Treasury & Risk Magazine and The Association of Financial Professionals.
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