Exploring expansion with digital payments
The pandemic has been the single largest catalyst in the move away from cash. Even merchants that typically see higher levels of cash payments have felt the shift. According to company reports, major card brands have noted a doubling of tap-to-pay transactions in everyday segments such as grocery and pharmacy,and an increase of more than ten percentage points in consumer penetration.
To capitalize on these trends, payment processors, merchant acquirers and banks should connect the increasing consumer demand for new payment choices with the growing number of merchants seeking a digital-first approach.
For example, merchant acquirers that typically rely on scale for their sales approach likely need to ramp up on the increasingly popular integrated payment solutions. These solutions combine traditional point of sale (POS) capabilities with industry-specific demands across payment processing, loyalty, payroll and other business management capabilities for both online and in-store activities.
For merchants such as restaurants, the shift from in-store dining to online and mobile ordering has increased the desire for integrated POS solutions that bundle menus, ordering, loyalty and different payment options supporting “card not present” payment experiences.
The surge in digital payment volume will also reinforce the role of banks in the payment ecosystem. While payment companies, particularly FinTechs with modern platforms, were already well positioned to address the shift to digital payments, banks, as the traditional incumbents, should adapt their technical capabilities to keep pace. Incumbent banks process about half of US payment volumes. They face the challenge of modernizing their payment products and software to meet new merchant and consumer needs, or risk losing share to payment companies or new market entrants.
Simultaneously, the shift to digital ordering and payments has opened consumers’ eyes to new conveniences.. Many consumers experienced the “aha moment”: even though no cash had changed hands, ordering and payment became a single activity; for transfer payments, funds were available in customer bank accounts in real-time.
As consumers move beyond the immediate health and safety concerns that forced a shift to digital, we expect convenience to take over. We believe that when in-store commerce returns, convenience will likely be the appeal for digitalcontactless payments, making contactless the predominant form of payment for both online and in-store purchasing.
