COVID-19 has forced change in commerce by compressing several years’ worth of digital shopping and payment behavior adoption into a matter of months.
The rise of omnichannel experiences
The rise of eCommerce and omnichannel shopping experiences during the pandemic have contributed to significant expansion of the market, with global digital commerce transaction volume exceeding $4 trillion in 2020, a 23 percent increase over the year prior.1
451 Research expects this digital shift will have staying power. Consider that approximately a third of consumers say they are more comfortable shopping online now than they were at the onset of the pandemic.2 Nearly a quarter strongly agree that they will continue to shop online for most items once COVID-19 restrictions are lifted.2
More sales moving online
With more sales volume moving online, the stakes for delivering a compelling consumer payment experience are increasing. In e-commerce, a better experience is just a click or a tap away, meaning payments must be viewed as a highly personal and impactful brand touchpoint. Any friction occurring at this stage can compromise sales and customer lifetime value.
Of the 47 percent of consumers who have abandoned an online shopping cart in the last six months due to difficulties in completing the purchase (e.g., false decline, limited payment options), more than two-thirds ended up not purchasing the item at all, or purchased it from a different retailer.2 Similarly, we find 48 percent of cross-border shoppers have abandoned a purchase because their preferred payment method wasn’t available.2
How merchants are responding
Given the business impact of payments, it’s no surprise that the most technologically advanced merchants are placing significant importance on payment technology and strategies to power their digital accelerations. 451 Research’s Voice of the Enterprise Merchant Study indicated that 70 percent of digital transformation leaders view payments as a highly strategic area of focus within their business, compared to just 41 percent of digital transformation laggards.3 Our conversations with commerce and payment strategy leaders at high-performing merchants surfaced three key strategic initiatives they are prioritizing to elevate the customer experience and improve business performance:
- Managing fraud, chargeback and regulations/compliance to mitigate business impact
- Expanding payment options to reach different geographies and demographics
- Modernizing payment technologies to drive operational and customer success
While it’s clear that developing an effective digital payments strategy must become a business-wide priority, execution can quickly become a business-wide distraction. In-house orchestration of payments and fraud-prevention technologies can siphon off precious capital and developer resources, diverting focus away from the core business. It can also stifle speed to market, delaying the launch of strategic initiatives such as a new business line or entering a new market. This isn’t to say that need for internal payments teams is lessened, however. Aligning with the right payment platform will allow employees who are dedicated to payments to shift their focus toward payment innovation and strategy and away from more laborious operational tasks. Similarly, it will allow merchants with small payments teams to deploy capabilities that were previously deemed unattainable due to resource capacity constraints.
What makes a good payment strategy
Effective payment strategies—and partners—harness a combination of front- and back-end approaches that elevate the customer experience, enhance decision-making and drive efficiency. Merchants should measure success by the extent of business outcomes produced, such as:
- Higher authorization rate
- Improved conversion rate
- Reduced churn
- Decreased false declines
- Increased access to new customer segments
- Optimized operations
The question every payment and commerce strategy leader should ask is simple: Does our payment strategy, and more critically our payment infrastructure, help our business drive these business outcomes effectively today? If not, it might be time for reevaluation.
1 451 Research’s Global Unified Commerce Forecast, 2020
2 451 Research’s Voice of the Connected User Landscape: Consumer Population Representative Survey, Connected Customer, Q4 2020
3 451 Research’s Voice of the Enterprise: Customer Experience & Commerce, Merchant Survey, Q2 2020