Raise your hand if you bought something online since the start of the global pandemic. Raise your other hand if you bought something that you’d never bought online before, like alcohol, a fitness app subscription, or groceries. Maybe you ditched Uber rides for DoorDash dinners, or grocery runs for Hello Fresh meal deliveries.
You’d be in the overwhelming majority if you did. Though it might seem like the distant past, 2020 was something of a watershed year for digital commerce experiences and, consequently, payment technologies. For all of its hardships, the pandemic accelerated some dramatic changes.
Research from McKinsey estimates that online spending increased 20 percent. Of the consumers who tried online spending in 2019, 92 percent developed regular online spending habits thereafter. How we paid for good and services changed, too. A total of 2.7 trillion transactions worth $48 trillion shifted from cash to other forms of payments. These include contactless payments with credit card and phone, online or mobile bill pay, and pay-by-text.
Reality Check: Big Changes Were Coming, Pandemic or Not
To call this pace of change precipitous would be an understatement. But these changes were long in the making. The technology underpinning all of our day-to-day commerce experiences were proliferating and evolving long before 2020.
Take payment processing: data from Datanyze suggests that there are some 290 payment processing technologies and more than 500,000 companies comprising the market. Remarkably, more than 64 percent of market share is held by just two vendors.
What’s next for this crowded space and commerce experiences in general? We predict that the businesses who can account for the following three trends, while meeting increased demand for A+ digital-first experiences, will win big.
1. Money Matters: The Digital Overhaul of Modern Banking
Banks as we know them could go by the wayside. PNC, Wells Fargo, and Truist all closed more branch locations than initially planned in 2020. In fact, 5 percent of all branch banks closed from 2017-2020. Only 11 percent of people plan to visit the branch again.
Why?
By some accounts, traditional banks have fallen behind in terms of digital transformation. Siloed legacy systems remain a significant roadblock to digital transformation for more than 77 percent of banks. This problem is widespread and mission-critical, leading many banks to consider fundamental changes to their business models.
Of course, the shift to neobanking (or digital-only banking) creates even more urgency. An estimated 76.9 million Americans (30 percent of the US population) say they have, or are planning to, open a digital-only bank account. Deloitte reported online banking activity increased 35 percent since the pandemic started.
Put simply, the ways that people are managing and using their money is undergoing rapid digitalization. This promises to have far-reaching effects on commerce and digital payments, some that will be difficult to predict.
2. Integrated and Connected Payments: Toward an Inside-Out Approach
How people purchase products, make and receive payments, and monitor transactions is more integrated than ever before. Category leaders are finding ways to centralize and connect their customer experiences, blurring the lines between various channels of digital business.
And centralization does have its benefits:
Smart and intuitive experiences across all touchpoints
This is the inside-out approach to customer experience that people expect—a “wherever, whenever, on whichever device” philosophy. It puts consumers squarely in the driver’s seat when it comes to how they transact. By taking a more agile and modular approach to solutions architecture, for example, businesses can thread together various commerce experiences more seamlessly.
Friendly to all forms of payment, transaction types, and currency
We saw 30 percent of Americans make their first mobile wallet and contactless purchases during the first few months of the pandemic. We know that many people and businesses need the ability to take and make payments in foreign currencies. And more big-name businesses are accepting cryptocurrency as payment.
Then there’s the wide world of “invisible” transactions. Your last Lyft ride is a good example: the payment part of the transaction was so frictionless, it didn’t even feel like a transaction. These kinds of embedded payment experiences are everywhere—they’re projected to grow by $16 billion over the next five years.
Commerce players that wish to maintain a competitive advantage and remain relevant in the future need a scalable solution that supports the payment options, transaction types, and even currency of choice for people and businesses.
3. Missed Opportunities: Using AI/ML to Make the Most of Data
You can’t talk about the transformation of commerce, or the proliferation of payment processing technologies/solutions, without talking about data. In a competitive digital marketplace, it’s the businesses that make the most of the data at hand that will deliver personalized commerce experiences at scale.
Unfortunately, not everyone is making the most of the data. Maybe you’ve seen the now famous quote from McKinsey: “about 90 percent of the digital data ever created in the world has been generated in just the past two years. Only 1 percent of that data has been analyzed.” As Forrester points out, of the estimated 74 percent of enterprises that want to be data-driven, only 29 percent are good at “connecting analytics to action.”
The analysts are aligned on this one.
One common deficiency is a lack of agile processes that move data through the data pipelines quickly. Without these processes, businesses will find it difficult to extract the business value of their commerce data and analytics. Indeed, high-performing companies prioritize agile data monetization, including the development of new business models that often contribute “more than 20 percent to company revenues.”
Many businesses are using AI/ML to blend large quantities of data, from disparate sources, into something actionable—something with value for customers and business. This might include the enablement of deeper personalization based on transaction data, for example.
The Last Word: It’s Still About Creating Value in People’s Lives
When talking about transactions, payments, big data, and so on, it’s easy to forget the main drivers of commerce experiences: people. The trends that will shape commerce experiences in the future are galvanized by the demands of real human beings with real needs.
Believe it or not, people don’t pick up their smartphones solely based on the desire to buy something. They want more than products and transactions. More often than not, they want valuable experiences that fulfill deeper existential needs. They want convenient, timely, and relevant digital experiences that enrich their lives.
Going forward, the firms that compete on this level of experience will win big. And they’ll find that people are the best starting point when it comes to addressing the three trends we’ve detailed above.