Knowledge bites: navigating risk, innovation, and the 'new normal' in merchant payments – part I

Tuesday 1 September 2020 09:43 CET | Editor: Stefana Ivan | Interview

In this first part of a two-part interview, some of the speakers from the MPE Summer Week provide answers on relevant questions that are often asked in the aftermath of the COVID-19 crisis

MPE Summer Week is a virtual addition to the MPE annual conference, a place where merchants, acquirers, and payment providers connect to discuss on a variety of themes that are highly relevant for the payments and commerce industry in light of these unforeseen circumstances.

Some of the topics that will be discussed during MPE Summer Week are: commerce and payments during the COVID-19 crisis; reducing friction, building trust in 2020; chargebacks and dispute management; the post-PSD2 SCA era; securing digital payments with technology; changing card acquiring and payments acceptance. Global merchants, industry observers, and payment schemes and providers will elaborate on these topics during MPE's first ever virtual conference.

Changing commerce and customer behaviour

A lot has happened during the first half of 2020, as the pandemic has drastically impacted the nature of transactions – online transactions have increased, while POS transactions have shifted towards contactless. How likely is it for newly developed habits of consumers to last?

Holly Worst (HW), Director Strategy and Marketing, Retail & B2B, Global enterprise eCommerce, Worldpay: Consumer habits will last after COVID-19 – and there are a few of them that we expect to last for quite some time, such as shopping through ‘Buy Now, Pay Later’ (BNPL) providers, like Klarna, and using ecommerce sites to buy new categories of products, such as online groceries. Therefore, BNPL providers have seen a growth spurt in Australia and Europe due to their ability to split payments or postpone the payment of goods. With an economic downturn on the horizon, BNPL will grow in popularity, as people look to control their spending. On the other side, COVID-19 accelerated the use of ecommerce, especially in new categories like grocery delivery solutions.

Claire Maslen (CM), Consult Hyperion: The pandemic has amplified behaviours that people were starting to display before. Previous deployments of contactless cards and acceptance technologies have shown that once people get used to contactless payments, they continue to use it. For instance, the use of wallets for high value transactions has become the norm, and it is unlikely to be reversed in face-to-face transactions. As for online, a shift to ecommerce helps consumers to spend on essentials (groceries) and luxuries (clothing, home, garden accessories), without endangering their health. Moreover, merchants are offering more payment options and we have seen an increase in providers for instant issuance of credit. Personalised and alternative payment methods are also good for consumers and brands alike. The only potential issue that merchants and consumers face now is how they effectively handle SCA, as we run the risk of fragmented experiences, unless people can get on the same page and work to ensure a similar customer journey.

James Booth (JB), VP – Head of Partnerships, EMEA at PPRO: The pandemic has accelerated a trend that was already prevalent in the payments ecosystem. We have seen healthy growth rates for ecommerce, contactless, and other digital forms of payment (e-wallets, bank transfers) for years, but those have grown exponentially since January 2020. Many countries are in the seventh or eighth month of lockdown, and these new habits have taken root. The pandemic has fundamentally changed the way consumers look at purchasing goods online or in-store, and outside of what we know about how long it takes to form a habit, many studies have shown that consumers expect to keep shopping online or using contactless payments even after the pandemic because of its convenience.

Do you feel that the current pandemic will change how consumers will make payments in the future?

HW: The current pandemic will change how consumers make payments in the future, especially with contactless payments and the use of mobile or digital wallets. Our research indicates that by 2023 30% of all POS and 60% of all ecommerce payments will be made via digital or mobile wallets. They are one of the fastest growing payment methods, and we expect to see a lot more use in the near future, as they promote a contactless shopping experience plus a safer payment method, as biometrics are usually needed to make a purchase.

CM: The pandemic has encouraged behaviours that the industry had collectively hoped for previously, as consumers have become cautious about using keypads that are not their own (POS/PED), and they are seeking truly contactless and contact-free payments driven from their own mobile devices. We can expect to see further developments blurring what is in-store, in-app, online payments, whether this be via NFC or QR codes. Moreover, by making payments digital, merchants can consider how their customers interact with them. We can also expect to see an expansion of merchants making use of tablets and mobiles to accept payments from customers anywhere.

JB: The pandemic has permanently altered the way consumers look at payments. In-store payments have gone fully contactless – even in the US, a market that was slow to adopt that technology – and ‘invisible’ checkout flows are becoming more common. Therefore, having a QR code on a tablet to view a menu is now normal, compared to a few months ago, when that experience was very rare. Besides, e-wallets and alternative payment methods are now mainstream, as there is inherent convenience, safety, and security with those payment methods – which has been much-needed during the pandemic. I expect that people will prefer them and even discover new, easier ways to pay, long after the outbreak.

Ivan Glazachev (IG), CEO, Yandex.Money: The boost of the Russian ecommerce market during the pandemic has a few peculiarities that are worth to mention. One of them is regarding conservative users, who tried online shopping (some of them for the first time) and liked it. Consequently, the studies show that around 10 million new customers paid online for the first time during the lockdown in Russia, and around 33% of businesses digitalised sales. The lockdown in Russia started at the end of March 2020, and the first two weeks were hard for the ecommerce sector. However, the number of transactions increased later in segments such as food delivery, beauty, health related goods, online education, and goods for children. Whether the new customer habits are here to stay for good depends on the segments and duration of the precaution measures. For example, food delivery, online shopping, and digital content are still actively paid for online. However, in June 2020, when the lockdown measures were eased, most of the offline segments like apparel shoes quickly regained the brick-and-mortar popularity.

Changing customer payments and preparing for the ‘new normal’

What are the key trends driving European merchant payments and the direct implications for the merchant payments ecosystem?

HW: One big trend driving European merchant payments is Open Banking, as it affects merchants by delivering a new payment experience for their consumers, and it will fundamentally change the way loyalty works. Open Banking will change the customer experience by delivering a new payment method for consumers that helps them to link their bank account, while also putting their data rights into their own hands. This will also change the way loyalty products work for merchants, as consumers are no longer carrying five different loyalty cards around for each of their favourite retailers. Instead, retailers will have access to their card transaction data, and they will be able to understand how often they shop, what they buy, and where they shop, bringing the personalisation of product recommendations to the next level.

What is the industry doing to overcome the challenges associated with the COVID-19 pandemic?

HW: Payment industries are looking to partner with companies or develop contactless experiences to help with the pandemic. At Worldpay, we have begun to look at Augmented Reality (AR) and Virtual Reality (VR) to make sure that those payment experiences are as frictionless as possible for consumers. For these experiences to become mainstream, consumers will need to be able to pay for objects within the AR or VR environment without leaving it. This requires thinking on how to have a secure payment transaction while your hands, eyes, or even phone could be occupied by the experience itself.

What’s next for merchant payments and how do you see the ‘new normal’ regarding them? 

HW: The ‘new normal’ for merchant payments is the emphasis on the contactless experience. ‘How can I shop more online?’, ‘How can I buy something in-store without touching anyone or anything?’, ‘How can I use Virtual or Augmented Reality to experience a product without going to the store?’ – all of these questions are new user experiences that merchants will have to master in order to create the best customer shopping experience. There are many payment companies out there working on solving all these issues with solutions such as mobile POS, Scan & Go apps for customers, Virtual Reality stores, and arming store associates with mobile PEDs.

The second part of the pre-MPE Summer Week interview can be found here.

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Keywords: MPE Summer Week, Holly Worst, WorldPay, Claire Maslen, Consult Hyperion, James Booth, PPRO, Ivan Glazachev, Yandex, merchants, acquirers, payment providers, ecommerce, COVID-19, chargebacks, PSD2, SCA, digital payments, contactless payments, e-wallets, merchant payments
Categories: Payments & Commerce
Countries: World
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