COVID-19 has transformed the world as we know it – and ecommerce is no exception. The fallout from the pandemic has radically accelerated changes in consumer behavior on a global scale. The payments sector has had to adapt at pace to keep up with the emerging demands of digital consumers, resulting in some exciting technological innovations.
Here are four of the big shifts that we’ve been seeing over the past few months:
The coronavirus pandemic sent everyone online and boosted the demand for contextual purchasing significantly. Contextual commerce is the ability to buy within the shopper’s “context.” For instance, they can pick up a new outfit by clicking on a Buy button in a merchant’s Instagram feed, instead of having to abandon their social media scrolling to head over to the merchant’s digital store.
In 2021, the trend is spreading outside social media. Amazon is experimenting with the idea of “tCommerce”, in which viewers can purchase items featured in their favorite show through their Smart TVs. In other words, the gap between entertainment and shopping is closing faster than ever. Today’s digital shoppers expect a seamless, invisible purchase process, no matter which channel they’re browsing on.
Another big shift in the way we buy online is the growing popularity of conversational purchasing. When lockdown forced shoppers to stay home, merchants realized they needed digital tools to build a personal connection with their customers, in the absence of sales reps and real conversation.
Enter “conversational commerce” apps like Emotive, which allow customers to chat with an online sales rep, ask technical questions, receive promotional updates, and make purchases, all within their usual text messaging app.
The End of Ownership
Back in 2016, authors Aaron Perzanowski and Jason Schultz published “The End of Ownership”, a study of the impact that digital content delivery has had on our sense of ownership. The shift away from “stuff” towards the “sharing economy” was already in full swing, but the events of 2020 have pushed this trend even further. Today’s bored and home-bound shoppers are more interested in novelty and experiences than in long-term ownership.
As a result, recent months have seen an explosion of subscription-based business models for everything from clothing to coffee to cars. By the end of 2021, 78% of international adults had signed up for at least one online subscription service (compared with 71% in 2018).
Subscription services form a closer bond between the merchant and the consumer – 64% of shoppers feel more connected to a company if they have signed up for a subscription, rather than making one-off purchases.
The impact of COVID-19 on consumer behavior has amped up the shift to cashless purchasing, contactless commerce and digital-only solutions. Digital wallets and digital vouchers are surging in popularity, while credit card companies are recording a spike in “touch and pay” purchases. Consumers expect every company, even small local businesses, to offer flexibility and choice when it comes to paying.
What will these changing consumer behaviors mean for the payments technology sector?
1. Merchants will need greater flexibility for their consumers.
Consumers expect to be able to pay with the methods they have, not the methods the merchant offers. For payments service providers, this will mean offering a wide range of solutions for each merchant.
For instance, PSPs dealing with emerging markets will be expected to provide local payment methods, including cash-based options, payment in installments, and so on, so that merchants can meet the needs of their digital customers.
2. Customer relationships are now digital-first.
Online shopping is rapidly outpacing in-person retail, meaning that merchants will need the digital tools to build relationships with their customers. It seems safe to predict that the current boom in AI-powered chatbots and text-message purchasing will be continuing for the foreseeable future, as merchants strive to connect with their customers in the virtual world.
3. Payments security is getting more difficult – but more important.
The more ways customers can pay, the more potential exposure to data breaches open up. Merchants need to ensure data security and PCI compliance across all their payment systems – but they don’t want to feel solely responsible for every aspect of data protection. They’re looking for help from PSPs to streamline their data security processes and take over some of the responsibility.
Payments companies can help merchants protect their customers’ data by harnessing the latest anti-fraud technologies, such as tokenization of confidential data, biometric identification, pre-verification of online shopping via mobile apps, or even personalized blockchains.
There’s no doubt these are challenging times for merchants and payments providers alike – but we hope that changing consumer behaviors will also open up exciting opportunities for the payments technology sector.