Payments' emergency shifts will eventually help merchants recover
It’s January 2022. Countries around the world are teeming with life again. Roads and trains are packed with employees commuting to work. High street retailers are seeing foot traffic, and restaurants are gearing up for flocks of hungry patrons. After a continued global effort to flatten the curve and months of social distancing, COVID-19 is finally in the rear-view mirror. People around the world are relieved to be back to life as it was, but will things ever truly be the same?
COVID-19 shook the global economy as the largest pandemic since the 1918 global flu pandemic. Social distancing drastically shifted consumer behavior and introduced a new set of challenges to stores and shoppers alike. But, as humanity has always done, we came together, adapted, and innovated.
A look ahead to a more stable 2022 shows how society has adjusted to a new normal. Let’s take a closer look at how payments and global commerce will change over the next 18 months and what that will look like at the dawn of 2022.
COVID-19 was a major accelerator in the shift to digital for most of us; how we take classes, do our jobs, connect with friends, and definitely how we shop. Online shopping had already been the norm with Gen Z and Millennials, but COVID-19 served as the inflection point for older demographics and slow adopters. Gen X and Baby Boomers are often reluctant to change their habits, but 2020 disrupted the status quo for nearly all aspects of life. Throughout 2020, discretionary spending dropped due to a surge in unemployment rates, but e-commerce is now enjoying an all-time high thanks to its inherent convenience.
COVID-19 revealed a structural problem in our reliance on big-box retailers. At first, consumers suffered shortages of goods and frustrating checkout experiences, but big businesses responded with unprecedented agility. They quickly made improvements to overcome the new challenges of the market. Because of social distancing, many brick-and-mortar retailers were forced to go online for the first time. This was enabled by various e-commerce plug-and-play platforms that allowed small retailers or sole traders to sell online in a matter of days.
The market became a cornucopia of choice for the consumer. Millions of people who had previously resisted e-commerce – particularly for fast-moving consumer goods such as groceries – signed up with e-commerce sites. Post-pandemic, few of us have gone back to old shopping habits.
The rapid, sustained increase in online shopping created an interesting challenge for merchants. More consumers meant higher earning potential, but it also meant more competition in the marketplace. To stand out, merchants are applying new rigor and attention to customer and user experience. Brick-and-mortar stores have largely become showrooms or click-and-collect points. Retailers have invested in connecting digital experiences to the physical using robust augmented or virtual reality and immersive experiences.
As a result of the increased quality in the market, consumers (who were already insisting on intuitive user journeys pre-pandemic) now have zero tolerance for sites that are not at least easy to use. When it comes to that all-important payment experience – the make or break moment of conversion – it’s critical to have checkout flows that feel invisible for digital natives yet inspire trust for those late-adopters.
In 2020, COVID-19 drove consumers to look outside their immediate geography for goods and services. Major drivers of this included price point, quality of products, and availability due to global supply chain challenges. The opportunity for merchants to sell across their borders became even greater, and acted as a solution to bridge revenue gaps and increase reach to an entirely new, global audience. Now, in 2022, most large- and medium-sized retailers are selling across borders.
While it’s become easy to navigate logistics around the world, collecting funds in other markets is still an entirely different story. Like all aspects of culture, payment preferences vary from country to country. Surprising to Americans and Brits is that not all e-commerce is paid for with big-brand credit cards. In fact, over 70% of global e-commerce is powered by over 450 local payment methods (which is why the misnomer ‘alternative’ has swapped for ‘local’ in recent years). Indeed, e-wallets like Alipay, WeChat Pay, and GrabPay dominate payments in Asia – now more than ever.
Offering local payment methods has always been a critical part of boosting conversion across borders. During the pandemic, as consumers clung more tightly to their money, the demand for payment methods that were familiar and trusted only increased.