Putting the ‘human’ into payments

While it's easy to get lost in the operational and technical side of a transaction, it's important to remember the third component of a payment. That is, the human behind the screen.

Over the last two years, many retailers have seen the benefit of investing in new, flexible payments. Ones that reflect the changing lifestyles of younger spenders, who are increasingly holding onto their cash — despite reports to the contrary. This means it's more important than ever for merchants to take note of the latest payment innovations so they can tap into the savings of the COVID-19 generation.

And yet, despite the low-hanging fruit this opportunity presents, our research shows 60% of ecommerce merchants globally do not feel they receive enough payment insight to allow them to innovate their models.

So how can businesses turn their ships around before it's too late? I believe it all comes down to a convenient and fast-as-possible payment experience. Consumers don't really see the mechanics behind a payment because they think a one-click button to pay is normal.

Of course, lots of work goes on in the background by a payment service provider to make sure that merchants never miss a sale. That's the link in the chain which merchants need to maximize — their acceptance rates. And a big part of what drives acceptance is understanding the human behind the payment. Why did they abandon their cart? How would they prefer to pay? Are you missing popular local payment options?

A mindset change

Five years ago, payments were dominated by Visa and Mastercard. People used to pay with a debit or credit card, or potentially with a PayPal account. But that was about it.

Today, you have more and more payment methods being introduced that remove the need to enter billing information or enter card details, be that phone-friendly digital wallets, account-to-account payment initiation via open banking or QR codes. Mobile payments are perhaps the most obvious one to take hold of the world in recent years.

Half of ecommerce merchants Checkout.com surveyed said they responded to the increased cross-border demand for ecommerce during COVID-19 by expanding their range of alternative and local payment methods.

But it's not just about the method. Retailers are increasingly investing in the overall user experience; a payment is no longer a commodity, so you really have to go further if you want to differentiate yourself from other retailers.

Thinking on a macro as well as micro level is also a must, starting with the payment environment itself. In the future, Checkout.com predicts a world where increasingly more purchases will take place across different channels and social media platforms.

Our research supports this, finding 63% of consumers hope to shop more frequently directly within social media to enhance the feeling of choosing products within a community. In other words, integrations with third-party channels which don't force consumers to abandon their favourite platforms should be on merchants' horizons.

Retailers need to partner with the biggest social marketplaces in the world. A platform like Instagram isn't a single merchant. It's connected to thousands of retailers. And yet, the social media giant ensures the payment is seamless.

Going international by getting local

As a payment service provider (PSP), Checkout.com already owns a wealth of insights on buyers worldwide and an extensive network of payment rails which can better connect merchants to new and existing customers more easily.

This means a merchant going international with its payments is almost always going to be better off with a PSP by its side, which can pay out as well as accept payments in as many countries as possible.

The ecommerce boom in Europe, which shows no signs of letting up, triggered a surge in cross-border shopping. From it, opportunities emerged for foreign merchants to enter new markets, as consumers began to expect seamless payments no matter the corridor they had to travel.

During the pandemic, only 20% of online businesses we surveyed currently had local acquiring in place for all the markets they serve. And 43% of ecommerce merchants saw sudden demand from new markets in which they were not initially equipped to offer the correct payment methods to process transactions.

This leaves large gaps for plenty of consumers to fall through if merchants don't act now.

To us, "local" means many things, including working with the local acquirer in the local currency. Otherwise, you'll see transactions declined by issuers simply because they don't recognize the transaction as much as a domestic one. These are things that merchants do not know until they actually implement a local solution and see the uplift in acceptance.

Start with the easy wins

Revamping an entire payment system can seem daunting, especially for smaller retailers, which is why it's important to prioritise. While consumers expect everything immediately, in a business world this isn't how results are achieved.

You have to take it step by step. You cannot cover the world map all in one go. Usually, I ask for the static split of a merchant so we can understand the geographies they're covering and the geographies that they want to target. Based on this, we create a strategy.

In countries such as the Netherlands and Germany, if a merchant doesn't accept the local payment methods, it's not going to convert any sales. iDeal in the Netherlands, for example, dominates more than half of all payments throughout the country.

So, a merchant's strategy is going to be different depending on the country. Ultimately, consumers are aware of what they want, and what they want is to pay in the payment method of their choice — a merchant must react to this.

This means localising the experience as well as the payment, i.e., translating your website into local languages, as well as accepting the local payment methods and currencies.

As far as I'm concerned, if I go on a website which is only in USD, and my card is in GBP, I know I'm going to have to take 3% or 4% off with my bank's charges after the payment, so I'll probably look for another website. So, local currency, local language and local payment methods are all easy wins which do not require a lot of integration or big changes.

While integrations such as "buy now, pay later" are incredibly important for large-ticket items, getting the local payment method down first is what will ensure acceptance rates remain high.

Look beyond conversion

To keep on top of digital payments trends, merchants will need a PSP which can streamline the checkout, whatever the payment method, to drive up conversion.

But our data highlights a significant uptick in various subscription models. Some 63% of consumers we spoke to plan to increase their use of lucky dip style subscription services for ecommerce retail products such as clothes, beauty, books and accessories.

With recurring payments comes the risk of churn, either because of faulty cards or a lack of funds. This means thinking beyond conversion will be paramount for merchants, particularly alongside the growing phenomenon of social shopping.

Our analysis speaks for itself. Subscriptions are the next big thing. Thinking ahead to how you can capitalise on this behavioral shift from a payments perspective will seriously impact a merchant's bottom line.

To explore all the trends and insights Checkout.com has gathered, both from consumers and merchants, throughout the pandemic, you can download a copy of our report here.