Tis the season for retailers to be jolly.....if they have the right payment infrastructure in place

It is the time of year which will see a major boost in retail purchases, as shoppers take advantage of sales events, both online and in store. Black Friday is just around the corner on Friday 26 November with Cyber Monday following three days later; Christmas and Boxing Day are also on the horizon. In 2020, Cyber Monday spending came in at $10.8 billion spent just online in the US, the highest amount in history and a 15% increase compared with 2019. Obviously, this holiday season is of significant importance and a crucial period for retailers, given the revenue generated by this boost in sales. This is particularly true in current circumstances, as the global economy slowly recovers from the Covid-19 pandemic.

To capitalise on such opportunities, merchants should ensure the payment experience runs as smoothly as possible for shoppers and be seen as an efficient conversion tool.

What to expect for Black Friday 2021?

At Worldline, we expect that this year’s retail sales season to be more of a hybrid shopping experience. We foresee the return of some consumers who will choose to shop in physical stores, an experience many have missed. However, there are consumers who may be shielding – or at least remain uncomfortable shopping in high street shops unless it is strictly necessary. Equally important to consider is the acceleration of online shopping which has worked so well for shoppers over the last 18 months that they don’t see a need to go in store. This is particularly true of the younger, internet and tech-savvy generation.

There may be more online sales than before, but that mix may change. Last year would be a difficult year to benchmark against because people were likely to have been in a lockdown – albeit depending on where they were in the UK. By default, they will have focused on online shopping. Another interesting trend to consider for 2021 are disruptions to the global supply chain. As a result, we have noticed that consumers tend to take all necessary steps to secure their items by purchasing earlier, and therefore are not necessarily prepared to wait until the traditional sales periods of Black Friday or Christmas to make their purchase(s). That might be a bigger driver in consumer behaviour than savings. There is clearly a shortage of certain goods in certain places, so customers are likely to shop earlier to avoid disappointment.  And then when you get to Black Friday, buy more at that point.

This year’s sales shopping is going to be a very mixed bag – but not in a bad way. We are going to see a really broad spectrum of consumer activity across a variety of channels.

Different customer experiences

As mentioned earlier, Black Friday and Cyber Monday have hit historic ‘highs’ when it comes to sales in 2020 in the US. In comparison, sales throughout the Black Friday weekend in the UK decreased in 2020 (£8.57 billion) compared with 2019 (£7.95 billion). However, a significant rebound is expected for the 2021 period. Many factors are likely to be behind this, but one major driver is that high-street retailers are open and able to trade, providing shoppers with further choices.

Retail customer experiences clearly differ from one market to another. For example, Black Friday and Cyber Monday have long been established as major shopping trends in the USA, whereas they are much newer concepts in the UK. Another factor to bear in mind is that the UK spent last Black Friday in lockdown, which had a major impact on consumer confidence and behaviour.

The culture in the US favours consumers to focus on certain key dates for shopping and now online shopping. Black Friday and Cyber Monday are huge retail events for American consumers, and merchants will transact high above usual volumes.

A series of American candy shops have made their appearance in Oxford Street, London over the past few years with mixed reception from the public. In a way, American retail stores have successfully implemented themselves in the UK through brands such as Hollister and Abercombie & Fitch. This indicates a huge influence, and we are much more global in our consumer patterns. Naturally, US companies will see further growth into international markets, moving into the UK and Europe.

The role of payments in Black Friday

A payment has got to be frictionless- it needs to: provide consumers with most choice, give consumers the opportunity to pay how they wish, spread the cost should they wish to take this path, and enable them to make transactions with the confidence their card data is secure. From a retail’s perspective, our clients (retailers and merchants) need to understand and know that their funds are going to be delivered to them on time and securely and that their payments platform is robust. A hugely significant part of the retail journey both online and in store is ensuring that the payment infrastructure has the ability to process the latest payment types and offering the most acceptance, regardless of the point of interaction with the customer is critical, to both the retailer and the consumer.

Payment trends and diversity

In terms of payments in the current marketplace, diversity is hugely significant, as well as understanding how consumers behave differently in different territories, understanding how you are going to manage different payment types, various settlement times and different refund processes. All of that goes hand in hand but really being able to give the consumer the choice is ultimately going to deliver the most sales and therefore revenue.

There is very little doubt this trend will continue in the coming years. Consumer behaviour is changing, and we are here to support that, and help retailers provide their customers with the best experience.

Payment trends are consistently changing. Examples of some of these evolving trends include:

• The increase in “buy now pay later” acceptance. Depending on where you are geographically- some countries favour debit over credit cards as, for example, credit card usage is very low in many countries, but very high in the UK. So there is local cultural dependency there.
• The recent rise in the limit of contactless payments to £100 in the UK.
• More payment types are playing an increasing role:  Apple Pay, Google Pay, Wallets, tokenising your card, data so that you do not have to re-enter your card.
• Are people shopping on Amazon so you never have to re-enter your card details again? Is it because you do not have to find your wallet and are able to check- out quickly? It is a question to be asked, the ability to tokenise card data and just keep charging.
• Another shift is related to neo-banks and what they are offering in terms of payment types and acceptance.

It’s incredible really what is coming, it is such an exciting space to be in.

Where does it leave us in regard to regulations?

Alongside changing trends, the payment sector has witnessed further changes emerging from recent regulations, with Payment Services Directive Two (PSD2) the foremost example.  PSD2 is designed to provide a more consistent approach to card security across several jurisdictions. Whilst it may feel at times that the regulation further complicates payments, because it adds another step, whether it is a one-time password, a text message, an email, etc… it is there to protect consumers and support their card usage activity. So, I do not believe it would necessarily drive basket abandonment. If anything, PSD2 would provide confidence that the retailers from which you are purchasing are working with the latest standards.

I suppose the question is do the end consumers know what it is, or do they just see it? We know it is because we do it, we know the thinking behind it, and we are engaged as payment experts.

Neo banks are still heavily regulated even if they are e-money providers. It will be interesting to see how they evolve and what role will they play towards retailers, particularly for online purchases.

From Worldline’s perspective, peaks into sales which occur during events such as Black Friday and Cyber Monday are all handled and remain as secure as normal. Nothing is compromised even if retailers’ volumes surge dramatically. From an infrastructure perspective, in our world, everything is still set up to support it.

It’s all about working and partnering with the companies that can support you on the journey, regardless of what the journey looks like – expected or unexpected. And if anything, the past 18 months have shown that we have seen both. Looking ahead, there is a likelihood of future global supply chain issues.

Are people behaving the way they did a year ago? I doubt it. Are we behaving the way we did two years ago? Categorically not.