• Simon Buchwaldt-Nissen, Head of Strategy and Transformation at Nets Merchant Services


• 08.06.2022 01:15 pm
#payments

The commercial world is experiencing rapid digitisation and the payments industry is no exception. Consumers see payments as a commodity, expecting a variety of payment methods to be available at the checkout, and for those methods to work in a convenient and secure nature every time. 

Convenience has become king and minimising payment friction is a key challenge for merchants and Financial Institutions (FIs) – including payment facilitators – in 2022. Both must ensure their payment offerings are reflective of consumer payment trends in order to remain relevant and competitive. Let’s take a look at three of these payment trends impacting consumer shopping behaviour.

Loyalty programmes 

Smart loyalty programmes can be a differentiator today. They are increasingly being integrated as an alternative form of payment, rewarding the consumer for their loyalty, and creating a more personalised and seamless payment experience. However, a gap has emerged between online and in-store loyalty, whereby consumers must work harder in-store to exploit the programme, for example by having to present specific physical cards. 

FIs must seek to offer loyalty programmes that address this gap, by creating a unified commerce experience in which loyalty is rewarded equally both online and in-store. The payment card itself can be used to identify consumers online and offline, and joining these channels presents a chance to truly tailor loyalty programmes to consumer needs. This approach increases consumer engagement and spending, and so affords FIs an opportunity to differentiate themselves from their competitors by offering the most innovative, personalised and convenient loyalty solution. 

Buy Now, Pay Later (BNPL)

BNPL currently accounts for 7% of e-commerce transactions and is expected to double by 2024. BNPL has been able to thrive thanks to the rise of Open Banking, which has drastically eased credit ratings, and afforded FIs the ability to offer highly integrated financing solutions. Consumers value the flexibility and financial management capabilities BNPL offers, which in turn can raise consumer spending, reduce abandonment rates and improve customer experience. 

This will be a priority for merchants in the coming years, so FIs must ensure it is included in their offer so as not to lose business. However, they must also be conscious of the ethical debate surrounding BNPL, from consumption and societal view, ensuring their solution does not promote unsustainable buying practices. 

Mobile payments are the foundation

The payment form factor has evolved in line with rapid digitisation, from cash to check to a card, and now mobile payments. Mobile payments offer high levels of convenience and security, and because consumers use their phones for a variety of sensitive functions, they are afforded immense levels of consumer trust. In-store mobile payments grew by 54% in 2021, and are expected to continue growing YOY. Because mobile devices also have the ability to house a variety of payment form factors, such as mobile payments, digital wallets, cryptocurrencies and loyalty schemes, FIs should prioritise them as the foundation for the future payment experience. 

In order for Financial Institutions to remain competitive in an increasingly saturated and innovative competitor landscape, their offers must be aligned with consumer and merchant demands. Gone are the days of “preferred payment methods”; if a merchant is not offering a variety of convenient and secure payment methods, consumers will find somewhere else that does. New solutions that provide strong user experiences outside of the mobile form factor, such as biometric cards, must also be monitored closely to ensure competitive offerings. With the payments industry undergoing rapid digitisation, FIs and merchants must embrace innovation, or risk being left behind.