The way forward to making payments a success in the digital economy

The digital economy is driving business changes at an unprecedented rate. eMarketer estimates that by 2021, mCommerce in Europe will top EUR 200 billion for the first time, and that - in 2018 alone - the French mCommerce market will increase by 27% to reach EUR 14.32 billion. So how is mobile technology influencing the way consumers browse and make purchases, and what does that mean for digital commerce retailers and their payments strategies in particular?

Two completely different ways to buy

Broadly speaking, digital transactions fall under one of two categories:

• Experience-based: shopping is always an emotional experience, however logical we think we’re being. And mobile technology, with its ability to deliver video, social media, and immersive, interactive experiences, is perfect for creating that emotional connection between consumers and brands. That’s why merchants are working harder to build that emotional connection. Nike, Adidas, and Vans, for example, encourage their customers to design and create their own shoes, while BMW created the I Visualiser – an augmented-reality solution to bring dealerships to customers digitally;

• Convenience-based: at the other end of the scale, customers want to complete routine purchases as quickly and easily as possible; with one click, voice-activated devices and/or contactless payments. Players like Amazon are rising to this challenge with 1-click ordering and same-day delivery.

Some businesses can focus on perfecting either transaction type. But others need to manage both. Consider the travel industry: the vacationing traveller might research activities, look at reviews, share ideas, and purchase additional services, while the business traveller could be more concerned about providing a fast, secure, seamless booking process.

Trends in digital commerce

Contextual commerce is about giving customers what they want, when they want, without requiring them to take the initiative or expend too much energy. Whether customers demand an experience- or convenience-based transaction, or a combination of both, we can identify two broad commerce trends that can apply to them all:

Contextual commerce is more than a buzzword. It’s giving customers what they want, when they want it. They have no patience for complicated, slow, laborious checkout processes, such as long forms or checkout processes that require them to fetch a wallet from another room.

The benchmark is being set by digital masters. For example, China’s voice-powered mobile app WeChat has taken off to the tune of 1,040 million monthly active users in the first quarter of 2018. It can hail a taxi, order takeout, and even customise a retail purchase according to your needs.

Equally significant is social commerce. Facebook is one of the leading sources of social sales worldwide. On Instagram, integrated applications can now take you from an Instagram picture directly to a product page. Celebrities and/or influencers often promote products to drive even more traffic to a retailer’s website.

Nike saw huge success when they launched PHOTOiD, an HTML5 app that lets fans upload or select an Instagram photo of their favourite shoes, customise them, and then repost the picture across social media. These trends are driven by powerful new technologies, customer expectations, millennial behaviour, and competition from digital masters like Amazon and Google.

What is tokenization and why is it important?

Tokenization replaces sensitive payment data with a unique identifier or token. This can’t be mathematically reversed. Thus, retailers don’t need to handle raw payment data.

Tokenization also helps retailers deliver better customer experiences, such as frictionless checkout, omnichannel initiatives, and loyalty programmes.

To compete in the digital economy, retailers need to focus on three things:

• The customer experience: mobile and cloud technology have established consumer expectations. And the bar is high. Businesses must create new value and deliver personalised outcomes (as opposed to simply selling products), in a way that’s seamless and can be engaged anytime, anywhere;

• Security: the pace of change, the need to quickly support new customer experiences, and the push to innovate at the edge of the unproven digital frontier create more exposure to fraud. With payment fraud and data breaches having such far-reaching impact, businesses can no longer afford to overlook fraud management – and should be embracing technologies such as tokenization;

• Operational agility: adopting digital platforms with atomised services means merchants can rapidly adapt, connect, and scale to deliver tailored experiences.

Payment management is no longer a back-office activity

It has become a strategic operating discipline because it’s woven into the very fabric of customer experience and it is a key factor in localising the experience. The digitisation of payments and risk of payment data theft have elevated payment data security and fraud prevention to top C-level concerns. And, because payment has become so intertwined with customer experience and enterprise security, your payment management platform is now a critical component of your company’s digital platform. Thus, it is a key determinant of your operational agility.

Payment management and fraud detection should no longer be considered back-office activities – they should be at the forefront of your digital strategy. Get that right and you’ll be in a great position to keep your competitors at bay and achieve extraordinary results.

This editorial was first published in our Payments and Commerce Market Guide 2018-2019. The Guide presents the key trends and developments in global and regional payment methods by highlighting the innovation, challenges, and developments in the use of the most important payment methods across geographies and verticals.

About Neil Caldwell

Neil Caldwell is Vice President of European Sales, CyberSource. He is responsible for expanding CyberSource’s European business and overseeing sales and account management. Before CyberSource, he contributed to the growth of some of the world’s largest brands.

About CyberSource

CyberSource is a global, modular payment management platform built on secure Visa infrastructure, with the insights of a USD 427 billion global processing network. It helps businesses enhance their customer experience, grow revenue, and mitigate risk.