… and the circle of competition will repeat itself. At the center of the circle will be payments infrastructure.
The writing is on the wall: 2020 accelerated the move to digital, and it was a bumper year for digital payment services providers.
According to the 2020 Global Payments Report by research group McKinsey, the level of share of global transactions made with cash would by a minimum of four to five percentage points, and much more in some regions.
Going forward, when every digital laggard economy has caught up—and the digital playing field is more level—will consumers be the ultimate winners? Will customer experience levels also be massively improved, and will the ‘value-vs-price’ equation massively improve economic productivity, elasticity and competition?
Staying competitive in the digital age
According to Tristan Chiappini, Vice President and Head of Partnerships (APAC), PPRO, the figures from 2020 reflect a massive boom for global e-commerce. “The ‘quickening’ effect, as coined by McKinsey, describes a 10-year shift in e-commerce experienced in just 90 days. During the month of June 2020, amid the height of the strictest lockdowns for many countries, e-commerce sales grew 34% year-on-year: the highest growth rate reported since March 2008.”
Interestingly, Chiappini said, many consumers were not turning to their trusted brands during this critical period. “Many shoppers branched out to new retailers with the ‘support local’ movement growing in popularity as people rallied to ensure the survival of local merchants who were forced to close physical outlets during the pandemic.”
Disruptions in brand loyalty have created a wealth of opportunities for businesses big and small, pushing them to take their operations online and across borders.
According to the firm’s own research, one of the most-common reasons for cart abandonment at the checkout was that a customers’ preferred payment method was not available. Some data indicated that that the global average rate of cart abandonment was as high as 75.6%—causing brands to lose up to US$18 million a year in potential revenue. “We expect this demand to continue, putting pressure on retailers to expand current payment offerings,” said the local-payments tech expert.
Given these seemingly-permanent shifts in how consumers (from the digirati right down to the newbies and reluctant participants) behave in the digital economy, all the fundamentals of winning customers and market share underlying traditional commerce will be replayed again, just in the Cloud:
- Feature an exhaustive range of products, customization, gamification and interactivity with manufacturers/vendors and even help consumers bypass manufacturers’ region-locked* product plans.
- Provide a guarantee of competitive prices, or a range of prices that offer more value per dollar.
- Offer frictionless product research, legitimate reviews and price comparisons to shoppers.
- Guarantee high integrity in product data, aftersales support and dispute resolution.
- Protect customers by vigilantly curating platform vendors for integrity and accountability. Build and retain customer trust without compromise and in the event of undesirable incidents, ensure speed, transparency and a decisive pro-CX stance in resolving them.
- Explore the trading of refurbished/pre-owned goods and group-purchasing deals in some industries, to make a wider range of merchandise possible to cater to specific needs and budgets.
- Facilitate easy, personalized presales enquiries, feedback and exclusive loyalty programs.
- Enable a wide range of payment and credit options that offer true value and retain customer loyalty. According to Chiappini, there are over 500 significant local payment methods across the globe, and each consumer will have different payment preferences. Merchants should activate as payment methods as possible at the checkout page to keep customers interested.
- Host valuable, vendor-agnostic content to educate, entertain and connect platform users to form a harmonious community that can influence how the platform innovates and manages market trends.
- Constantly innovate in terms of product currency, price adjustments and seasonal promotions in line with global market needs and trends, to differentiate the platform and collaboratively compete other platforms.
- Continuously compete against itself to be transparent, frictionless, interactive and progressive in every aspect of business, sustainability, CSR and integrity.
- Promise customer-first engagement and establish long-term trust in confidentiality/privacy/data security; and over-delivering on these pledges in the event of shortfalls.
These mission statements were relevant in the analog domain (albeit hardly ever achieved), and staying competitive is not really any different in the digital business domain.
What about the payments equation?
After all has been said and done in any e-commerce activity, a price will have been accepted, and it is time for the payment options to be chosen.
Just as consumers want to be reassured that they have clinched a good deal, the final price payable is often impacted by delivery and payment options. If limited delivery and payment options are available, even a differential of a few dollars can cause a potential customer to go to another platform to make the purchase—even if the actual product price is slightly more expensive there!
So how does the payment equation factor in the final checkout? Customers want a guarantee of payment approval, payment security, and if needed, flexibility in spreading out payments interest-free. Privacy is also of concern, where people want to be able to control what a platform does with their transaction history.
- Security-wise, two-factor authentication is widespread now. In 2019, Australia released the Card-Not-Present (CNP) Fraud Mitigation Framework, requiring Strong Customer Authentication (SCA) when a merchant’s fraud rate is above the recommended rate for two consecutive quarters. India requires two-factor authentication for all domestic debit and credit card transactions over Rs 2,000. As a payments method expert, Chiappini naturally hopes that 2021 will see further collaborations among payment providers and merchants to ensure they are prepared to adapt e-commerce outfits to these new requirements, while also ensuring the payments process they offer is seamless for the customer. “2021 will be the year for action – ensuring customers are adequately protected in an increasingly cyber world,” he proclaimed.
- Another part of the payments equation in the ongoing global economic downturn may be credit options. According to Paysafe’s LiT research, an example is ‘Buy Now Pay Later’ (BNPL). Popularized by larger companies like Afterpay and Klarna, these were the fastest growing online payment methods worldwide. Some fintechs fintech’s like hoolah, Rely and Atome are taking advantage of the trend and stealing market share from the traditional credit card services with their interest-free offerings that are more compelling than traditional in-store interest-free schemes that require proof of income and other paperwork.
- Research from Kaleido predicts that BNPL value will reach over 12% of total global e-commerce spend on physical goods by 2025. Europe will be responsible for US$347 bn of e-commerce spend via BNPL mechanisms by 2025, representing 30% of total e-commerce spend by that year.
- *Digital commerce overcomes consumers’ previous dilemmas over geographical boundaries. For example: enthusiasts no longer need to be tied down by a manufacturer’s geographical marketing plans that limit product variation/feature availability by region. By the same token, consumers will be more amenable to using the most globally-accepted payment methods rather than insist on esoteric local payment methods. Ultimately, payment technology should cater for both scenarios while at the same time foster consolidation in the industry to prevent confusion and consumer fatigue.
When the going got tough …
…the tough and resilient got digitalized. Meanwhile, those that were already digitally transformed stayed afloat or even prospered. Those that were unable or unwilling to go online got left behind. As the playing field starts afresh digitally this year and beyond, competition in this next lap will get tougher, following in the circle of (digital) life.
Fortunately, the playing field in the clouds is also global and inclusive. Unlike the closed competition in old-school commerce, the digital-commerce pie can scale dynamically via global connectivity. As long as players keep nimble and stick fastidiously to the fundamentals of excellence, the ramped-up competition may well be a motivating factor for innovation and excellence.
Those that can live up to the new all-digital competition landscape will shape up, while digital customers will waste no time in making sub-par players ship out.