Is the Christmas rush boosting digital payments?
Mounting pressure to buy the perfect holiday gifts for family and friends each year is leading many consumers to either buy online or seek better in‐store experiences. Digital payments offer the convenience and speed that people want more than ever at this busy time of year.
A huge shift towards the use of digital payment methods is well underway— affecting online, mobile and smart device transactions — but the transactions industry itself must be careful not to lose out. As shoppers seek easier, faster experiences that offer great choice and personalization, there is an urgent need for technological advancement.
Demand for that change is being accelerated greatly by Christmas shopping trends, and the enormous pressure on retailers and e‐tailers to seamlessly handle masses of individual purchases simultaneously. Deloitte researchers predict that more than a quarter of total US retail spending this year will be made during the holiday season, and over half of the associated spending will be carried out online.
This holiday season, a colossal $124 billion is expected to be spent online by US consumers alone, a 17 per cent increase from last year’s total and a near doubling of the numbers from 2014, according to Statista.
Promotional dates at the start of the season are leading to an efficiency step‐change from payment providers, with the most significant peak in Europe and the US on “Black Friday”, and a further boost to US sales arriving on “Cyber Monday. But according to the online advertising firm CJ Affiliate, holiday payments are increasing across the entirety of November and December, with strong sales beginning before the early promotional days and extending until just before the Christmas week itself.
The payment space and what customers expect from the payment moment will continue to change
Jacqueline Joel — director in Accenture’s Retail practice
Payment habits among shoppers in general are changing rapidly, with technology very much at the heart of ongoing developments. Already, one in seven people have used Amazon Alexa’s voice‐based services to help them shop, and over half are interested in doing so. There has also been a near doubling in social media sites driving online purchases, often allowing purchases to be made with just a few clicks.
“The payment space and what customers expect from the payment moment will continue to change,” says Jacqueline Joel, a director in Accenture’s Retail practice, who notes that retailers and their technology partners need to focus on making payments as frictionless and as personalized as possible.
Mobile is taking an ever‐larger piece of the pie, with Deloitte’s holiday retail survey finding that in the US nearly half of shoppers will make purchases via mobile devices this year. “Online is still king by some distance, but mobile is quickly catching on for purchases, and growing well,” says Mr. Jukka Yliuntinen, Vice President Financial Service Solutions at Giesecke+Devrient Mobile Security. Phones and tablets accounted for two thirds of digital orders last year, an eight‐percentage point increase year‐on‐year, CJ Affiliate data shows. People now often use multiple devices on their shopping path. On Black Friday last year, nearly a fifth of product or retailer interactions were initiated on desktops with the orders completed on smartphones.
If retailers want to truly evolve the in‐store consumer experience, they will need to add innovative options
Jacqueline Joel‐ director in Accenture’s Retail practice
Mobile devices are also taking an increasingly prominent role for people shopping in store, with nine in 10 people wanting to make mobile payments. This is exacerbating the demand for other Internet of Things (IoT) connected devices, such as smart watches and other wearables, which also allow payments. Wearables‐based payments doubled in number last year, according to a PwC report, driven in particular by high‐earning millennials. With fitness tracker makers increasingly partnering with processors such as Visa and MasterCard for contactless payment, this type of payment is expected to grow rapidly.
Mobile wallets are playing a big part in the digital payment growth that’s currently in evidence, storing card details and allowing people to easily transact by tapping their phone on a reader in store, or by making a payment online. Their popularity among younger shoppers is “partly due to the fact that, for many, they have known no other way to pay—they will probably have a debit card, perhaps a credit card, but these days, almost certainly not use cash to any great extent”, explains Pierson Broome, retail expert at Hitachi Consulting. This, combined with the fact that people already have their phone with them wherever they go, makes this method particularly convenient and it is “fast becoming the norm” for younger shoppers, Mr Broome says.
Among the leading wallets in use are Apple Pay, Google Pay and Samsung Pay, all of which are vying for in‐store and online partnerships. In China, some payment providers are driving further change, including Alibaba’s Alipay, with its mobile wallet allowing QR code payments at checkouts, and WeChat which combines a social platform with mobile payment methods. There are also smartphone‐based challenger banks around such as Monzo whose solutions integrate with the most popular wallets.
In terms of mobile wallet use, the UK narrowly leads Germany, with most users favoring the convenience on offer, according to a report by Paysafe. Around half of smartwatch users across those markets have used their watch to make a payment, in contrast to Canada and the US where regular credit card usage dominates.
User experience is clearly key to payment technology growth. Consumers appreciate user‐friendly apps that help them monitor and control their spending, while gamification gives shoppers richer and more engaging experiences. A key part of what makes for a good experience is personalization, with some 35 per cent of revenues driven by shoppers clicking on a recommendation, according to predictions from Salesforce.
“I don’t think you can separate convenience and speed from personalization,” says Ms Joel. “You have to put the customer at the heart of the experience design, and ensure the design aligns to the brand purpose. Crucially, personalization can also drive an experience that is led by the customer.”
Some 64 per cent of shoppers look for simple checkout procedures as a core attribute of their retailer or e‐tailers of choice, according to Deloitte’s research. “Digital innovation means that retailers can now deploy mobile point of sale (POS) around busy stores to maximize customer service, reduce payment queues and enhance the instore customer experience of a well‐oiled, ‘slick’ operation,” explains Mr Broome.
“If retailers want to truly evolve the in‐store consumer experience, they will need to add innovative options, such as allowing customers to pay automatically as they leave the store using biometric authentication,” adds Ms Joel.
People are also increasingly keen for their transactions to do good, with Accenture finding that half of younger millennials are more likely to shop at a retailer with proper inclusion and diversity practices. GiveAsYouLive, an affiliate app that sends half of its commission to charity, allows customers to automatically feel philanthropic as they spend.
In this demanding environment, particularly during the holiday period, digital payments providers need to adapt rapidly. Getting payment offerings right is essential, especially given that one in three consumers say they would happily mass buy all their Christmas presents in one place, if they could, even if it meant paying more, according to Accenture. That buying experience has to be easy.
“The best positioned merchants this holiday shopping season will no longer just focus on accepting cash, coins and cards at a cash register. Having a strategy to accept the latest in payments technology—whether it’s mobile order ahead, e‐commerce, mobile payments, checkout solutions, contactless payments—gives consumers as many channels and opportunities to engage with a merchant as possible,” Jason Oxman, chief executive of the Electronic Transactions Association, recently said in an article on AmericanExpress.com.
For success in this increasingly complex arena, payment providers will need to work with the right partners. G+D Mobile Security gives those providers an end‐to‐end solution for processing, full interfaces for building wallets, enabling security with tokenization and a top‐of‐the‐art user experience. “Payment providers are looking for the convenience and confidence to offer transactions that are frictionless and fully secure,” says Mr Yliuntinen. “Ultimately, they need to serve multiple devices and channels, while increasing their understanding of customer habits and needs.”
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