The new normal? Shifting paradigms in payments before and amid COVID-19

Benny Tadele, ACI Worldwide: With shoppers demanding more touchless, frictionless, personalised experiences, the trend towards ‘invisible payments’ is likely to continue

What paradigm shifts have you noticed since the beginning of this year and do you expect them to continue into 2021?

Digital transformation is nothing new, but COVID-19 has played an important role in accelerating the digital shift that was already underway. Consumers and businesses alike have been pushed to adapt to digital channels much faster than anticipated, because of the circumstances of the pandemic. For many merchants, this means longer term innovation strategies have been brought forward to meet immediate needs - and payments is a big part of that.

Because these paradigm shifts are a rapid acceleration of existing trends, rather than a temporary change in behaviours, much of the transformation we have seen is here to stay. Here are two prime examples:

Trend 1: adoption of digital payment methods

Consumers want to pay using their preferred method – this is an expectation which has grown into demand in recent years. But now those payment methods are increasingly digital, hence by nature contactless, and increasingly diverse across different markets. For instance, Chinese consumers prefer to pay with Alipay or WeChat Pay, while Swedish shoppers would prefer to pay with Swish or Klarna. This consumer behaviour is pushing merchants all around the world to offer a broader acceptance, a trend which we think will continue in the coming years.

Real-time payments have also been gaining ground. Spurred by Person-to-Person (P2P) payments, real-time payments often feature immediate clearing and even settlement. Plus, they are more cost-effective for merchants than card payments and offer consumers yet another fast, convenient, trusted digital payment method. On this basis, it is easy to see why its popularity is surging and is likely to continue that trajectory.

The promise to merchants who respond to these demands is real – increased revenue, better customer satisfaction and drive for repeat business.

Trend 2: the demand for a frictionless, personalised experience

Digitally-savvy, mobile-native Millennial and Gen-Z buyers were already leading the way in demanding and adopting new customer payment journeys. They want to try before they buy and minimise their ‘payments admin’, which is driving focus on subscriptions, recurring payments, and instalment payments.

Even for more traditional generations of shoppers, there has been a huge surge in demand for omnichannel buying experiences, with buy-online-pickup-in-store (BOPIS) and curbside pickups experiencing an enormous boost in adoption from shoppers across all demographics this year.  

There’s also a shift being led by some of the industry giants, like Uber, Amazon and Starbucks, who have rolled out embedded payment experiences, where the payment is not the culmination, but rather just a part of the journey. With shoppers demanding more touchless, frictionless, personalised experiences, the trend towards ‘invisible payments’ is likely to continue.

How do merchants need to adapt to best address these shifts?

What COVID-19 has shown us is that merchants, regardless of vertical, as well as their technology providers, need the ability to respond to these paradigm shifts to refocus and refine their offering quickly. While merchants have mostly adapted to cope with more online demand, consumers have shifted their behaviour further still and merchants need to make sure they are poised to deliver the shopping, payment and fulfilment options that customers want, even as those preferences change.

This requires having the agility and tools to innovate and flex cost-effectively, and at speed. Merchants need to have their fingers on the pulse of customer trends - to understand and cater to the changing dynamics of their customer groups across different demographics and markets.

Of course, merchants need to deliver all this whilst remaining secure and protecting customer data.  During the pandemic, we have seen an increase in the value of fraudulent transactions, even though the number of fraudulent transactions has gone down. With changing customer and fraudster behaviours, plus the increased risks that come with greater digitization, merchants need to work smarter and more proactively to optimize conversion rates while accurately blocking fraud.

What needs have you identified among ACI’s customers that tie in with the above trends?

Contactless commerce and digital acceleration have been an ongoing process, and we see merchants, retailers and merchant intermediaries creating innovative, cutting-edge solutions to transform the payments journey. It is fair to say that the current crisis has accelerated the transformation, and these capabilities have reached a tipping point almost overnight.

We at ACI constantly work with our customers – direct or indirect-  on enabling flexibility, choice and control; whether it’s about alternative payment methods to uplift conversion rates, or flexibility around acquirers so they can select based on geography, cost, vertical, and other factors alike.

We recognize the importance of looking at the customer experience holistically, to understand how customer behaviour is changing across the journey, to make sure merchants recognize customers wherever they are and can provide frictionless experiences that drive revenues and loyalty. 

We aim to support our customers in their payments innovation and digital transformation by deploying the right technology to enhance their in-channel and omnichannel experiences.  We also provide them with solutions and support that position them for fast, successful innovation, so they can remain competitive and thrive in the fast-changing merchant landscape.

Register for the upcoming webinar - Preparing for 2021: predictions about changing consumer and payments behaviour – to learn other key aspects should be considered as priorities for 2021.

About Benny Tadele

As head of ACI’s merchant solutions, Benny has the responsibility of setting and executing the strategic direction of ACI’s Omni-Channel and eCommerce Payments solutions. He has been in the merchant retail payment space for more than 13 years, holding a range of leadership roles across software engineering, professional services and product management. Benny brings a background in high-performance computations, machine learning, deployment of enterprise-wide solutions and engineering scalable and elastic systems to his role. He works closely alongside ACI’s merchant customers to develop innovative payment strategies.

About ACI Worldwide