Svetlio Todorov, Managing Director, emerchantpay
The payments landscape has evolved fast, in line with changing consumer shopping preferences that have accelerated as a result of the global pandemic. For example, over the last year, transactions using contactless cards amounted to approximately £12.18 billion.
emerchantpay’s recent report (New World, One Market) of over 2,000 consumers in the UK revealed that 28% of the public intend to use cash less after the pandemic than they did prior, with 13% saying they don’t want to use cash at all. While the pandemic played a role in accelerating cashless payments, consumers today are finding increasing value in the efficiency that card and contactless payments offer over cash.
However, many merchants simply aren’t geared up for this quick step-change in how consumers want to pay. In order to provide a positive shopping experience, merchants must be equipped with the payment options that consumers prefer to use both in-store and online. As such, here are a few ways retailers can ensure that their payment model encourages a repeat custom and brand loyalty.
The growth of eCommerce and shifts in consumer allegiances
Throughout the pandemic, eCommerce became a valuable source for consumers to access essential goods and services. In fact, Mastercard found that there was a 40% jump in contactless payments in April 2020 alone. As the world begins to tentatively emerge into the ‘new normal’, online shopping will continue to gain momentum with this year’s eCommerce revenue expected to reach £124 billion in the UK alone.
With business models continuing to evolve in an increasingly digital world, consumer loyalty becomes an essential part of remaining active in a competitive market. In a separate emerchantpay report exploring brand loyalty, it found that 77% of people changed stores, brands, or how they shop since the onset of the pandemic, and 13% of consumers claimed not to be loyal to any brands at all. What’s more, this consumer group differs with age as 93% of Gen Z consumers are loyal to brands in comparison to 23% of Baby Boomers. For retailers, it is crucial to provide a holistic and diverse payment offering for a seamless checkout experience. This, in turn, will help your business achieve customer loyalty.
With this in mind, it is important to recognise shifting preferences in order to provide the best experience. Our New World, One Market report, for example, found that UK consumers preferred to use PayPal (34%) or debit card (33%) but these findings change based on demographic. It was a particular favourite for Gen X (46%) while PayPal and credit cards shared the top spot for Baby Boomers (36% each). Of all respondents, Gen Z was the generational group that was most likely to pay by digital wallet (11%).
Experts predict that merchants have the potential to lose $18 billion in sales revenue each year due to cart abandonment. That said, they also found that implementing the right checkout optimisation strategies such as one-click checkouts can increase conversion rates by 35.62%. To encourage repeat custome, an integrated approach to payments is needed to facilitate growth.
Leveraging subscription-based services
Depending on the merchant’s business model, services like subscriptions can also be a useful tool for merchants to encourage a loyal customer base. In fact, research reveals that the subscription economy has grown more than 435% globally in the past nine years alone. What’s more, our report also found that 29% of UK consumers took out more subscriptions in 2020 compared to 2019, with the total spend on monthly subscriptions linking directly with age. We found that Gen Z were reported to spend an average of £31.46 per month, with Millennials spending £28.52, Gen X £20.99 and Baby Boomers £16.22.
Data by Royal Mail also found that during the pandemic, 55% of subscription box consumers said they signed up for this service because they wanted to help ease the “lockdown blues”. As lockdown restrictions eased however, it continued to witness growth with the UK subscription economy now worth £395 million. Currently, 81% of UK households pay for at least one subscription service, which is a significant increase from last year’s 65%.
As such, retailers must ensure that their payment service provider has the capabilities to support recurring payments. This as a result, can further encourage brand loyalty and open up valuable upsell opportunities.
The evolving payments landscape
In today’s digitally evolving payments landscape, merchants must strive to accommodate shifting preferences and technologies. In addition to offerings like subscription-based services, retailers would also benefit from being responsive and agile to the payments landscape, with a focus on how consumer behaviour is changing.
As part of our research, we asked our respondents how they envisage making payments in five years time. We found that PayPal and credit card usage are expected to be fairly similar to now at 33% and 18% (vs 19%) respectively overall. But with ongoing uncertainty in the world of payments, merchants must be prepared for changes in payment preferences as the industry continues to accommodate an increasingly digital consumer base.
An example of this can be seen in debit card usage, which saw the biggest drop in usage, particularly among younger generations. Among millennials, this preference dropped from 37% now to 32% in five years, and Gen Z dropped from 34% to 27%. In addition, we found that 38% of consumers feel encouraged to make a purchase when having Buy Now, Pay Later as an option and retailers would benefit from ensuring that they are geared with these services.
This is reflective of the gradual shift to alternative payment methods which we predict will continue to grow in a post-pandemic environment. In fact, emerchantpay expects to witness its biggest increase in digital wallets in the next five years, with our report revealing that 15% of Gen Z and 11% of Millennials are expected to pay by digital wallet, with a small number of respondents (4%) expected to use cryptocurrencies as a preferred online payment method.
The pandemic accelerated the long-term decline of cash acting as a catalyst for innovation within the payments space. In order to take advantage of the eCommerce opportunity that the industry has witnessed in the past 18 months, retailers must partner with an integrated payment provider that provides in-depth market knowledge, as well as the technology needed to facilitate changing preferences. A collaborative and supportive approach will be key in ensuring that travel businesses adopt models that are best suited to them.
A seamless checkout experience can be the difference between success and failure, making agility key in today’s evolving landscape. Retailers who can tap into this momentum and adapt to the payments landscape of the future will continue to grow.
