Breaking down the walls of cross-border payments - interview with ACI Worldwide

It has been a year of extraordinary change. What has been the impact on the ecommerce sector?

The growth in ecommerce due to the pandemic has set a high bar for what is now considered baseline growth. In Q2 2020, US retail ecommerce reached USD 211.5 billion, up 31.8% from Q1 and 44.5% year-over-year. Among our global merchant base, we have seen a similar boost for ecommerce merchants, particularly in sectors such as gaming, digital goods, and homeware retailers.

As you would expect, ecommerce has also accounted for a larger proportion of overall retail sales in 2020, across the board. In Europe, 64% of consumers say that during the COVID-19 crisis they shopped more online than before, and 89% of them expect to continue to shop online post-lockdown, even more often.

For multi-channel merchants, there’s also been a huge increase in ‘buy-online-pickup-instore’ because it has allowed them to provide their customers with the ultimate in convenience, speed, and safety during the pandemic.

Of course, these trends are not new – they were already growing channels – but they have seen enormous acceleration in 2020.

Payment methods have always been a key issue, especially for cross-border merchants. What are the key trends that merchants need to be aware of?

Most shoppers have certain preferred payment methods. Besides these, the rest are not of interest to them. Indeed, research shows that 59% of shoppers will abandon a transaction if their preferred payment method is not in place.

Working with our merchant customers, we have demonstrated that offering three payment methods can lift conversion by up to 30%, so it is vital for merchants to make sure they are offering the customer a choice of payment methods. Increasingly, merchants are understanding that customers in different demographic groups and different geographies are looking for different payment options. Preferred payment methods also vary by device and customer tenure (as both consumer and merchant build a more trusting relationship). Any merchant looking to grow, domestically and especially across borders, needs to focus investment in this area – particularly on tailoring payments choice.

Broadly speaking, there are a few global trends that merchants also need to consider supporting. The use of mobile payments and digital wallets is continuing to grow, as is the adoption of ‘buy now pay later’, instant credit, and ‘pay by instalment’ options. Buy now pay later is a particularly interesting trend, and it is also presenting some great benefits for merchants, with an average 15% higher order value and 30% higher customer lifetime value for shoppers using this payment option.

Consumers are indicating that ‘ownership’ is no longer as important to them as it was before, and they are increasingly opting for usership and consumption-based buying. As a result, subscriptions, recurring billing, and flexible payment options are emerging as a strong growth trend, and this can potentially offer new business models and sales opportunities for many merchants.

We are also likely to see the continued rise of ‘invisible payments’ – where the payment process happens seamlessly behind the scenes. 

To identify one of the key drivers for growth, we need to look at the preferences and habits of Gen Z, as they start to come of age and become a bigger consumer buying group. Gen Z makes up the second-largest age demographic of early adopters, they have a heavy influence on their families’ spending, and have a spending power of their own worth USD 44 billion. These younger consumers are driving the adoption of omnichannel shopping, digital wallets, and social commerce, and they will undoubtedly influence the success of voice and IoT commerce – something that is set to become a significant differentiator for trailblazing merchants.

These are the key areas of growth that merchants need to be prepared for in 2021, and they need to ensure that they can fulfil the experience-related expectations and preferences of their customers and of the digital native generations that will become the core consumers of their products and services.

What challenges do merchants face in preparing for these opportunities, and how can they make sure they can meet customer demand?

Merchants need to deliver the right customer experience, which means supporting innovative customer journeys and catering to shopper preferences.

To achieve this, it will be critical for merchants to break down the walls between the digital experience and the end payment process, to make sure the entire journey is seamless. This will mean using simple, but effective tools that can unlock the potential of growing sales channels. It will also be vital to remove the boundaries between channels to enable true omnichannel journeys and bring digital payment experiences to the store environment, including pay-in-aisle, mobile payment apps, and QR code acceptance.

Ultimately, to take advantage of the opportunities ahead, merchants need a flexible, future-proof payments platform that enables them to innovate and adapt quickly and cost-effectively to stay ahead of their competitors – and customer demand.

This editorial was first published in our Cross-Border Payments and Ecommerce Report 2020–2021, which assesses the change of pace that occurred in 2020 and provides a comprehensive overview of the major trends driving growth in this space, being the ultimate source of information for players interested in selling across borders.

About Peter Moedlhammer 

Peter, in his role as Director, Product Management at ACI, is responsible for defining, positioning, and launching the company’s Secure eCommerce solution. Bringing many years of product management experience in eCommerce and payments to ACI, Peter's primary focus is on how Merchants and Merchant Intermediaries interact with ACI's eCommerce tools, platform, and value-added products (via the API) to create value and drive business growth globally.

About ACI Worldwide

ACI Worldwide is a leading global provider of real-time, any-to-any electronic payment and banking solutions. Through our comprehensive suite of software solutions, delivered on customers’ premises or through ACI’s private cloud, we provide real-time, immediate payments capabilities, and we enable the industry’s most complete omnichannel payments experience.