Change is the only constant in life. This is especially true in the payments space where merchants have witnessed numerous changes from cash transactions in brick and mortar stores, to card transactions, mobile payments, and the rise of ecommerce.
Merchants are set to see even more changes in the payments landscape as technology advances and because of other accelerating factors such as the COVID-19 pandemic. This article will present 2020 payment trends that merchants need to know. These trends will come from Visa’s Annual Future of Payments Report and the changes in the payment space brought about by COVID-19.
2020 Payment Trends From Visa’s Report
The Global Commerce Unbound Report (GCU) surveyed 8,000 consumers across 22 countries to find out how consumers prefer to pay and the future of payments. Here are the key findings of that report and how they will affect merchants.
- The banking industry is changing rapidly and moving towards digital banks, with 77% of the respondents showing interest in digital banking. Additionally, Americans now prefer in-app banking to in-branch banking.
- The payment choices of 51% of consumers are determined by their need for simple, personalized, and convenient solutions that they trust and have control over.
- There is an unmet need for innovation in the payments space. Consumers are ready for new innovations, but the payment systems have not yet matured enough to meet the demand.
- There is a high interest in the Internet of Things (IoT). IoT is a network of devices such as smartwatches that can send information to the internet. 46% of consumers have shown interest in the tap to pay technology in the transport industry. 41% of respondents would like to use their biometric details to pay for retail goods, while 42% of consumers want to pay for things without leaving their vehicles.
- The use of cash is declining while QR code scanning and mobile app payments are on the rise. There is a 60% increase in mobile app and QR code payments by Millennials. For Gen Z, their mobile payments have increased by 50%, and their QR code usage has increased by 75%. The use of cash by both Millenials and Gen Z has reduced by 14%.
What do These 2020 Payment Trends Mean for Merchants?
- Merchants are going to see an increase in mobile and digital wallet payments as more customers use their banking apps or third-party apps like Apple Pay. Merchants should prepare themselves to support different mobile and digital payment methods.
- Merchants will have to accept a wide range of payment methods to support the individual needs of their customers.
- Merchants should prepare for more innovation and new payment methods because of the increase in consumer demand for payment methods that are convenient and secure. What’s more, merchants should be ready to deal with the challenges that come with innovations such as increased exposure to fraud.
- IoT is a double-edged sword for merchants; on the one hand, IoT and biometric verification will increase payment security and reduce fraud since customers will not have to depend on PINs and passwords anymore. On the other hand, every device that connects to the internet provides hackers and scammers with new opportunities to carry out fraud. The challenge for merchants will be to find a way to provide a seamless payment environment while ensuring security.
- Millennials and Gen Z will be the main drivers of change in the payments space. Merchants will have to cater to the different payment needs of their different customer demographics if they are to continue being competitive.
How COVID-19 is Affecting Payment Trends
The COVID -19 pandemic has led to lockdowns and the need for social distancing to reduce the spread of the virus. This has changed how shopping and payments happen, creating a conducive environment for fraud.
Since the COVID-19 virus can be transmitted through touching contaminated surfaces, consumers now prefer contactless payment methods. With contactless payments, consumers can pay for their goods without touching cash or POS (Point of Sale) terminals that might be contaminated. Consumers can tap their credit cards, use mobile payment methods, scan QR codes, or digital wallets to pay for their goods.
The COVID-19 virus has accelerated the adoption of contactless payment methods by forcing skeptical consumers and those who were unaware of using them. The findings from Visa’s report suggest that convenience and simplicity are the main drivers of consumer payment behaviors, and it is likely that they will continue to use contactless payment methods even after the pandemic.
Merchants can start accepting contactless payments by getting a POS device that has NFC (Near Field Technology) that makes it possible for them to accept contactless payments.
The increased use of contactless payments-especially mobile payments and digital wallets, exposes merchants to increased fraud attempts. Fraudsters are now targeting mobile payment apps and digital wallets and then making purchases using stolen credentials.
Types of Fraud That Have Come Out of COVID-19 Payments
Social distancing and lockdowns have made it necessary for consumers to make their purchases online. Additionally, customers are now shopping in bulk and doing ‘panic shopping’ in anticipation of longer lockdowns and shelter-in-place orders. Fraudsters are taking advantage of these increased order volumes to make even larger purchases with stolen digital payment credentials from platforms such as Apple Pay and Android Pay.
As more consumers embrace digital banking and mobile apps, this type of fraud is bound to increase in the future. Merchants should update their fraud prevention methods to include mobile fraud and fraud done using digital wallets.
Chargeback fraud happens when consumers dispute a legitimate purchase that they made to get their money back and still keep the product/service they purchased.
The economic uncertainty plus the job losses brought about by the COVID-19 pandemic have led may consumers to cut back on their purchases and even reconsider some purchase that they had made before the pandemic. Merchants should expect to see more chargebacks and disputes during the duration of the pandemic and put in place measures to reduce them.
Buy Online Pick Up In-Store Fraud (BOPIS) Fraud
As more customers avoid human contact, the option to shop online and pick up in-store has become more attractive. Since the aim of this shopping method is to limit human contact as much as possible, there is limited customer ID verification.
Fraudsters are taking advantage of these lax security measures to make orders using stolen credentials and then pick them up in-store. With the Visa report suggesting that customers value speed and convenience, these types of shopping methods are likely to continue in the future. Merchants should, therefore, put in place measures to verify customer identities when they pick up their online orders.
The merchants that are going to be successful are those who will adapt to the changes in the payment landscape while providing personalized, secure, and convenient payment options to all their customer demographics.