Published: August 19, 2020

Introduction

1. The digital payments market of the future is here today.

Our research suggests that usage and adoption of digital payment methods such as contactless, wallets and installments has increased dramatically so far this year. Similarly, in-store purchase volume has been deflected into card-not-present (CNP) channels at an unprecedented rate, and some of that shift will remain permanent. Consider that in one of our payments forecast scenarios, global e-commerce transaction value will increase more than 23% year-over-year in 2020. As an industry, we must prepare to address CNP volumes and payment behaviors that we did not anticipate would occur at this level for several more years. For merchants, this should lead to a proverbial reshuffling of the deck when it comes to their payment priorities and the level of emphasis they place on their payment strategies internally.

2. Payments have become mission-critical business infrastructure.

Merchants that had previously dismissed payments as a commodity service suffered deeply when shelter-in-place orders took effect. High-performing payments infrastructure is needed to accommodate the shifts in payment volume, new customer shopping demands, and changes in the fraud environment that we have observed since March. Not all payments infrastructure is created equal, and this is quickly becoming apparent to digitally empowered customers who crave speed and convenience. Legacy, siloed payment systems stand in the way of the integrated and seamless shopping experiences they desire, ultimately breeding frustration and cart abandonment. It's no surprise that 70% of merchants that are digital transformation leaders say payments are a highly strategic area of focus for their business, according to 451 Research's Voice of the Enterprise: Customer Experience & Commerce, Merchant Study 2020.

3. Agility and adaptability are the name of the game.

If businesses have learned anything this year, it's that being agile and adaptable are critical success factors. Nowhere is this more apparent than with payments. Payments infrastructure that can easily transcend sales channels to deliver omni-channel experiences, scale up quickly to support heighted CNP volume, and effortlessly enable multiple payment options is now required to remain competitive and relevant in the eyes of customers. Merchants that were challenged to make the transitions required to serve customers effectively in recent months must reevaluate the ability of their payments infrastructure to meet their long-term business needs. Notably, this was already becoming a priority prior to the pandemic, with nearly one in three merchants citing 'modernizing payments infrastructure' as a high-importance payments initiative for their organization. We expect that this number will only increase in months ahead.

4. Every dollar matters.

In today's environment, each sales dollar and customer relationship matter even more than in years past. This should direct greater focus to the broader impact of payments within the business. Specifically, further attention must be paid to the revenue-throttling impact of false-positive transaction declines. This is a major risk factor for merchants, with one in four consumers stating that a 'transaction mistakenly declined despite having sufficient funds' would significantly influence their likelihood to stop shopping with a preferred brand or retailer, according to our Q3 2019 VoCUL: Connected Customer, Consumer Representative survey. As merchants look to pursue every avenue possible to secure relationships and drive growth, the occurrence of false declines must be mitigated. Execution requires a focus on payments and fraud optimization to maximize transaction success rates. More than ever, the ability to drive topline growth must be part of any payments provider or fraud-prevention vendor's value proposition.

5. Digital is default.

At the time of our Q2 2020 VoCUL: Connected Customer, Consumer Representative survey, three in five consumers had shifted at least some of their in-store spending online as a result of the COVID-19 outbreak. Even among baby boomers, one in two had transitioned brick-and-mortar spending online. With the recent proliferation of curbside, buy online/pickup in-store and delivery across merchant verticals, it's clear that payments will increasingly be initiated online, even if the end product or service is ultimately procured in the physical world. This should telegraph a simple message to merchants and payment stakeholders alike: Digital can no longer be treated as a secondary channel or a bolt-on to an in-store strategy. Digital experiences must be embedded into the end-to-end customer journey. Execution requires payments infrastructure that can ensure a 'single version of truth' regarding inventory, orders and customer purchase history, regardless of where the shopper chooses to transact.