7 Key Elements for Merchant Payments in a Digital Future
The push for customer-centrism was born decades ago when shoppers entered a store and merchants planned their products and services around that personal engagement.
Clearly, the shopping experience has evolved since then—and the challenge for merchants has never been greater.
New e-commerce platforms are shaping the habits of customers shopping anywhere and anytime—for retailers online, offline, or an integration of both. The recent emphasis on ecommerce versus in-store sales due to COVID-19 will also likely have a lasting impact on consumers' behavior and their expectations of merchants. And with the steady rise of both new technology and the introduction of generations that know nothing less, how they engage in the payments space is set to determine the future.
"Where the merchant and consumer meet—that is key, and as we move into the digital space, it becomes even more critical and important," explained Amy Parsons, Senior Vice President of Global Operations at Discover® Global Network. "Merchants have to make sure they have the customer front and center, and they must understand what the customer is looking for so they can meet those expectations."
A Generational Shift to Digital
Just as today's capabilities have changed, so have these expectations. And with the rise of the generation born since 1996, or Gen Z, as well as the Millennials who came before them, the desires of shoppers are turning into demands.
Indeed, as global online transaction volume is expected to reach $5.8 trillion by 2022, the impact of digital commerce will only continue to surge.1 And with today's Millennials spending $200 billion annually in the U.S. and Gen Z accounting for 40 percent of all consumers in the country, their desires and preferences are quickly determining how merchants must respond.2
With more than 25 years of experience in Payment Services with expertise in developing strategic business opportunities and partnerships, Parsons previously led expansion efforts with global banks, acquirers and digital payment enablers with a focus on ensuring a seamless commerce experience for consumers. In a recent conversation with PYMNTS.com titled "Why the Future of Merchant Payments Requires a Digital First Approach," she outlined how new advances, coupled with generational shifts, are rapidly changing the payments sector.
The 7 Key Elements for the Digital Future
According to Parsons, there are seven key areas where customer expectations meet merchant capabilities to determine success. In each area, the rapid ascent of new technology and the digitization of payments is now a make-or-break factor.
As the reality of faster downloads and one-click searches has become part of daily life, so has the expectation of frictionless checkout at the point of sale. According to a recent study, about half of both Gen Z and Millennials regard quick and easy checkout at a physical store as the most effective way for merchants to gain customer loyalty.3 And the story is similar for online retailers as well, with 59 percent of these shoppers saying they are less likely to shop at the same retailer again after abandoning an online shopping cart because of checkout friction.4
About half of both Gen Z and Millennials regard quick and easy checkout at a physical store as the most effective way for merchants to gain customer loyalty.3
Younger generations also value merchant capabilities that make the shopping experience more convenient and rewarding. For example, one study found that among the top-performing attributes online that translated to higher sales conversion rates included the merchant offering product ratings, live site help, inventory status, a transaction progress bar, and the ability to easily add a product to the online shopping cart.5
Offering customers the choice to use their preferred payment method and giving them the tools to control their role in the transaction are also key. "Consumers want to have control around the experience," Parsons explained. "They want to be able to interact and engage on their own terms." Beyond ensuring that payment types are accepted, more than two-thirds of Gen Z and Millennials said they actually prefer shopping at stores with nontraditional checkouts that automatically read items in the cart.6
Consumers are no longer tied to any one merchant— even when standing inside a store. In fact, more than one-third of Gen Z and Millennial shoppers said they purchased something from one store's website while standing in a different store.7 Providing these seamless connections between online and offline transactions is key. "The interconnectedness of the shopping experience and being able to bring these channels together, it is all one to the customer," Parsons observed. "They don't see us as operating different channels anymore."
As most merchants know, price is only one component of overall value that they provide their customers. Offering services, being responsive, and building programs that address the expectations of consumers are also vital in delivering value. Merchants, too, expect to find value in these programs—building loyalty and capturing important customer data, which today is considered the "new oil" in this digital age. Merchants, observed Parsons, "have to act and live like a tech company."
The level of buy-online-return-in-store (BORIS) fraud, loyalty point fraud, and coupon abuse has risen substantially as of recent days.8 Each of these requires new digital tracking systems and online safeguards—especially now, with consumers' demand for frictionless checkouts requiring new capabilities.
"When you think about the payments business, we always had identity separate from payments," Parsons explained. "But the two have to converge, because of the real-time nature of our business and the bidirectional transaction activity" of today's payment data.
Each of the above elements in the payment transaction is crucial. But perhaps more important, each of them combined builds a loyalty that brings customers repeatedly back to a merchant. This type of trust goes beyond customers knowing their data is secure. It is a trust built on mutual understanding that makes the entire interaction fully customer-centric.
Building on Expectations
Recognizing these expectations begins by recognizing how these new digital capabilities have changed the lives of today's consumers. And by incorporating these capabilities, merchants can provide the type of payment experience that the increasingly dominant younger generations have come to expect.
"We're able to do things today that we couldn't, or didn't, even think about 10 years ago," Parsons observed. "Now, it is very, very important for all of us in the business world to be thinking about how to make sure that we're meeting the new generations around what their expectations are."
To learn more about the impact Gen Z is having on the payments industry, read Top 5 Ways Gen Z Is Changing the Future of Payments, or download our convenient infographic, Gen Z—Changing the Payments Landscape.
Read the full report, Gen Z Goes Shopping—How Primacy of Payment is Shaping the Future.
1 451 Research, 2018. Global Unified Commerce Forecast. Viewed 5th May 2020.
2 AccuData, Engaging Millennial and Gen Z Audiences. Viewed 6th May 2020.
3 The Center of Generational Kinetics Study in partnership with Discover® Global Network, 2019. Gen Z Goes Shopping – How Primacy of Payment is Shaping the Future. Viewed 18th April 2020.
4 451 Research, 2018. Global Unified Commerce Forecast. Viewed 5th May 2020.
5 PYMNTS.com, 2019. Checkout Conversion Index of 641 U.S. Merchants. Viewed 18th April 2020.
6 The Center of Generational Kinetics Study in partnership with Discover® Global Network, 2019. Gen Z Goes Shopping – How Primacy of Payment is Shaping the Future. Viewed 18th April 2020.
7 The Center of Generational Kinetics Study in partnership with Discover® Global Network, 2019. Gen Z Goes Shopping – How Primacy of Payment is Shaping the Future. Viewed 18th April 2020.
8 Forter, 2019. Fraud Attack Index. Viewed 6th May 2020.
The information provided herein is sponsored by Discover® Global Network. It is intended for informational purposes, and is not intended as a substitute for professional advice.