Myles Dawson, UK Managing Director, Adyen
2020 has been a lesson for us all in the importance of agility, creativity, and sheer teeth-gritting determination. Much has changed. But in many ways, the changes we’ve seen have simply been an acceleration of what was happening already: The growth in online shopping, the adoption of cross-channel experiences (like click and collect), and an increasing demand for connected experiences.
This year, even the most tech-averse have reached for their computers to order groceries or catch up with friends. Retail turnover stemming from online sales has grown significantly this year – from 19% of all sales in January to 28% in October. This migration online will create a permanent behaviour change. In fact, our research suggests that more than a third of UK consumers are going to shop online more often as a result of the pandemic.
So, it’s not surprising that the appetite for tech-enhanced experiences has increased. Our research also found that 41% of UK consumers are more likely to shop with retailers that use technology to improve the shopping experience. This includes adding new ways to pay.
So, as businesses look to bounce back following the pandemic, here are the key payments trends we expect for 2021.
Contactless payments
As the world sought to meet hygiene requirements to stem the spread of coronavirus, there’s been a huge shift towards contactless payments and digital wallets. Our research shows that over half (59%) of consumers in the UK are concerned about the hygiene of payment terminals and would prefer to use contactless methods. The industry has done its best to support this. Back in April the contactless limits were increased. And Visa used its Tap to Phone to expand contactless payment availability to businesses.
Our research also found that 41% of consumers globally preferred cash, but since the pandemic they have switched to cards or digital wallets. This might not signify the end of the cash dynasty quite yet, but you can expect to see more cash-free bricks and mortar businesses in the UK next year.
Buy Now Pay Later
The pandemic has taken its toll on us all. More than nine million jobs were furloughed in 2020 and redundancies and job losses signify huge financial challenges. So, it’s no wonder there’s been an increase in By Now Pay Later (BNPL) options and we expect adoption to grow even more next year.
In fact, nearly 10 million Brits have avoided retailers that don’t offer BNPL options, with nearly 9 million planning to use the service more in the future. Offering BNPL options will not only boost customer loyalty but increase basket conversions. So, businesses stand to benefit from offering these flexible payment terms to their customers in 2021.
Network tokens make payments even easier
Payment tokens are used to replace sensitive data, such as a primary account number or card number, during the payments process. The sensitive data is replaced by a token in real time and used online in predefined domains and or payment environments, which means sensitive data is never used in the transaction and there is very little possibility that the token can be used for fraudulent activity.
Tokens make it even easier for consumers to securely save or share their payment details with merchants or on devices. This opens up a range of possibilities for one click, or even no click payments experiences – for example if a consumer wants to purchase a film through a streaming app on their smart TV.
There are plenty of benefits for merchants too, which is why they will continue to rise in 2021. First, these seamless payment experiences help to improve payment authorisation rates and conversions. Using network tokens, tokens provided by the card schemes, also helps merchants ensure they have the most up-to-date payment details for their customers, reducing involuntary churn and giving each transaction the highest chance of approval
Big data to fight fraud
With more transactions taking place online there’s sadly more opportunities for fraudsters. Card-not-present fraud is now directly responsible for the loss of around £470 million every year in the UK. And, with time spent online increasing by 15% nearly a third of UK adults feel more vulnerable to online fraud. As fraud rises, so must our defences. Payments data, AI and machine learning will become even more important to help identify the shopper behind each transaction and reduce payment fraud.
PSD2
Building on the theme of payments fraud, the PSD2 EU regulation deadline is around the corner. Businesses will have to upgrade their systems to comply with the new security requirements by September 2021.
This is a good thing. PSD2 is an opportunity for businesses to re-evaluate their processes to create a better customer experience. If you view PSD2 as a purely compliance or security requirement then you’re missing a trick. There are plenty of ways to modernise payments processes to comply with PSD2 regulations to keep customers safe without adding friction at the checkout.
The rise of platforms to open new markets
SMEs are increasingly turning to SaaS platforms as a means of reaching a critical mass of customers quickly. In 2019, $1.97 trillion was spent on the top 100 online marketplaces with gross merchandise sales growing 18%. In an age where high streets are being forced to evolve, start-up businesses are rapidly moving from individual stores to relying on platforms to draw in revenues. So, it’s crucial that platforms and marketplaces can offer streamlined onboarding processes and rapid pay-outs.
We all have high hopes for 2021. But it is likely to bring its own set of challenges and opportunities to businesses that have already fought so hard in 2020. Agility will be crucial. Understanding trends and developments in consumer behaviour will be key to success in 2021.
