Events over the last couple of years have fundamentally changed consumer attitudes, behaviours and purchasing habits, helping to accelerate the diversification of the online payments landscape. As a consequence, retailers operating globally have had to remain astute to the growth of different payment trends developing across regions, particularly the move away from in person card-based transactions to eCommerce.
Despite card payments being the dominant payment method for consumers to date, there are a number of reasons why debit and credit cards will never be the preferred payment choice for all:
- The pandemic forced many shoppers, who don’t trust or feel comfortable sharing their financial details online, to pay digitally for the first time
- Many consumers remain unbanked
- We’re witnessing the adoption of more alternative payment methods such as crypto
- The introduction of new regulations such as Open Banking requirements and Strong Customer Authentication (SCA) are making the user experience (UX) for some payments methods, such as mCommerce, slicker than card payments
Faced with an increasingly competitive market, businesses have been tracking these trends more closely than ever before. To learn more about how businesses are committing to a more diverse checkout, and their motivations, we commissioned a survey of over 900 small and medium-sized businesses (SMBs) in eight countries for our research report Lost in Transaction: Finding competitive advantage at the checkout.
COVID-19 as the catalyst
Although the diversification of online checkouts is not a new trend, the pandemic has driven consumers to demand more choice at the checkout and more businesses to adopt alternative payment methods. Specifically, two thirds of businesses (65%) surveyed believe COVID-19 has changed consumer payment preferences and over half (57%) say they have seen a growth in the use of digital wallets. Other payment methods on the rise include mobile wallets with 39% of businesses seeing an increase in payments, 28% have seen an increase in eCash payments; and 15% have seen an increase in direct bank transfers.
Unsurprisingly, consumer attitudes changed by the pandemic has forced 63% of businesses to alter the way they think about accepting payments, and 61% to accelerate their plans to upgrade their checkout.
Adopting alternative payments
Two years ago, we asked online businesses which payments methods they currently offered or planned to offer in the next 24 months. To measure the appetite for alternative payment methods, last year we asked businesses which payments methods they already offer or plan to offer within the next 12 months.
The percentage of businesses now offering each alternative payment method in their online checkout has grown in the past year. For eCash and crypto, the growth has been dramatic, clearly signalling that for SMBs, new payment methods are central to overhauling the checkout.
In particular, the research highlighted the rise in adoption of cryptocurrencies as a payment method, and this is only set to increase in 2022. Nearly half (48%) of businesses say it is a priority to offer crypto in their online checkout as soon as possible and 59% say adding crypto into their checkout will enable them to target new markets.
Diversifying the checkout isn’t only about targeting new customers
Alongside attracting new customers, expanding the checkout is helping SMBs to combat issues such as payments fraud and cart abandonment levels.
Today, half (49%) of businesses are more concerned about fraud than they were 12 months ago, and 41% have actively seen an increase in fraudulent transactions since the start of the pandemic. For the majority of online businesses (59%), having more payment methods available at the checkout is seen as an effective strategy to reduce fraudulent transactions.
Solving cart abandonment rates is another problem facing SMBs today. Over two thirds (69%) of businesses describe their level of cart abandonment as an issue and 49% of businesses said this problem increased in 2021.
At the crux of these challenges are card declines and consumers not being able to pay with their preferred payment method. By introducing more alternatives to card payments, it will help to reduce the impact of these two factors.
Evolving in 2022
This year businesses will need to continue prioritising the online checkout and make their promises of bringing greater payments choice to their customer base a reality. Those that do not keep up with changing consumer demands and fail to evolve their payment offerings will find themselves facing an uphill battle, in a landscape where diverse checkouts are king.