January 14, 2021
Average Read Time: 4 minutes
Would the payments industry have changed in the past year without the global pandemic?
In a word: yes.
Would it have changed as quickly?
Not a chance.
The pandemic accelerated technology innovation by several years, experts say, and the payments industry is no exception. The need for increased safety, efficiency, and cost control speeded up a shift to digital payments, faster funding, and frictionless processes. While the pandemic drove the changes, the payments industry will continue to respond to those needs in 2021 and beyond.
This is the first of a two-part series about what we think is in store for the payments industry in 2021. This week we’ll look at the shift to digital transactions – one of the top potential long-term impacts of the pandemic on global payment processes, according to Accenture.
Welcome to a world where money moves faster and innovation is an imperative, not a choice.
Digital Payments: No Looking Back
Digital has become a de facto standard for engaging with brands and businesses. Thanks to the pandemic and the need for safe, flexible shopping and payment options, more than 100 million consumers shifted into digital-first channels last year, according to PYMNTS.com, accelerating a move from brick-and-mortar shopping that already was underway.
Consumers may have moved to digital shopping out of caution, but because of its convenience, online shopping will remain a preference among recent converts and habitual users alike. Eighty-three percent of consumers surveyed by PYMNTS say they will stay with some or all of their digital habits in the future.
In some cases, the physical point of sale is still necessary, but ultimately the consumer determines where he or she wants to receive goods and services. Grocery shopping is one good example of this trend. Online grocery sales topped $8.1 billion in November, with 60.1 million U.S. households placing an average of 2.8 orders, according to a shopping survey conducted by Mercatus and Bricks Meet Click. 83% of users intend to order for delivery or pickup again, up 40% since the pandemic began in March.
There’s no longer the need to talk about omnicommerce or multichannel. Digital is now an integral part of the commerce experience and the consumer journey. 2021 will be the year businesses recognize that digital isn’t another channel to deploy and manage, but the front door to getting and keeping customer relationships.
Where There’s Disruption, There’s Innovation
While banks, payment companies, and solution providers already had the digital building blocks in place for a technology transformation, that’s not the only reason for the faster pace noted by many experts in the past year. Rather, the inertia that kept consumers and businesses from trying something new just disappeared – almost overnight.
Consumers had to find new ways to buy necessary items and manage their financial affairs, and shifted to digital, a move that, as we’ve already discussed, is here to stay. While people still want human interaction – in fact, may crave it after the last year – technology will support the payment process and do its work behind the scenes, whether in-person or online.
As for businesses, they were forced to quickly adapt to a work-from-home environment and adopt digital methods to keep their businesses running. Getting paid was a catalyst, as were monitoring their cash positions in real time and putting expense controls in place for a distributed workforce.
The increased pace of innovation may be even more pronounced in small and medium-size enterprises. SMEs have been gaining in technological sophistication for several years, McKinsey says, but the pandemic accelerated adoption and turned e-commerce into an imperative. Payment companies have emerged as partners for SMEs and payment providers who haven’t fast-tracked their digital innovation efforts may be left in the cold, McKinsey says. Legacy banks also struggle to serve this growing segment and may end up collaborating with payment providers to bring better digital solutions to market.
The bottom line: The genie is out of the bottle. People and organizations have gone digital, and they won’t go back to taking checks or doing everything face-to-face. Why would customers be eager to stand in line at a bank or cash register, pandemic or no pandemic? Why would businesses wait days, rather than hours, to complete critical financial transactions?
The challenges and changes of 2020 will continue to drive innovation in the payments industry in 2021 and beyond – perhaps not at the pace of the last, extraordinary year, but certainly faster than in the past.
Next week: same-day funding, embedded payments and how they’ll help organizations manage cash and move money in good times and in bad.
MerchantE can help you ensure that your business is set up for scalable growth as more and more consumers—and B2B businesses—shift their behaviors. It’s happening globally.
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