COO of Adyen.
After a year of uncertainty, attempting to predict the future may seem risky. But even as brands faced upheaval in 2020, the Covid-19 pandemic has accelerated trends toward digitization across all areas of business and society. The reality of needing to avoid contact with others has driven transformations for brands in months that might have taken years. In the process, behaviors and expectations have changed for good.
As 2021 begins, much uncertainty remains. But I feel confident that the digital transformation of payments will only get faster. I suspect the rapid increase in e-commerce seen under Covid-19 will persist, especially among previously digital-hesitant consumers. Merchants can’t assume that their digital customers are limited to younger, tech-savvy shoppers. On that note, these are the key trends in payments that should be top of mind for brands in 2021:
1. Contactless will extend its reach into every corner of retail.
The pandemic forced merchants to find ways to minimize the physical contact needed to complete a transaction. Customers and workers avoided touching keypads and cash. This has led to an increase in the use of digital wallets and contactless cards.
This past year also showed the value of QR codes in anchoring a seamless experience not just at point-of-sale but at multiple points along the customer journey, such as viewing menus and placing orders. The U.S. has lagged Europe and Asia in QR code adoption, but I expect it to start catching up in 2021. In 2020, our company saw a 46% growth in contactless usage globally, and in the post-pandemic world, the transition to contactless will only become more widespread.
2. The distinction between offline and online will fade into irrelevance.
Last year, I predicted that “order ahead” and “in-store pickup” services would become “must haves.” That forecast came true, but not for the reason I anticipated. First-movers in retail had already started teaching consumers to expect a seamless integration of offline and online retail, and others were racing to catch up. Then the pandemic hit, and shoppers couldn’t enter some stores at all. Fusing offline and online became an issue of survival for retailers, who quickly pivoted to make curbside and parking lot pickups a reality.
Even after the pandemic ends, that digital infrastructure will remain in place. Many shoppers will continue to prefer the convenience, and retailers will find they can forge better customer relationships with rich data generated by digital transactions.
3. Platforms will help small businesses offer the same services as big brands.
The pandemic has forced small businesses to face digital transformation. At the core has been the switch to digital payments, which itself acts as a gateway to a range of digitized services made possible by new, often vertical-focused cloud platforms. Integrating payments and services on a single cloud-based platform means that different parts of a small business’s operations no longer remain isolated from one another. The same platform in a doctor’s office can match insurance information to patient treatment plans to appointment reminders, all through an app, all anchored to payments.
With payments now built into software platforms for nearly every sector, expect to see even the smallest businesses in 2021 offering the same capabilities as the biggest brands. Scale is no longer an issue, no matter how big a business or how small.
4. The membership model will reign in retail and food and beverage.
Consumer brands are increasingly turning to the membership model. And why not? Customers pay an annual fee that, in effect, encourages them to buy more. Quick-serve restaurants (QSRs) are seeking to seize some of that flywheel effect for themselves. For instance, Panera Bread’s $8.99-per-month unlimited coffee subscription has led to dramatic increases in store visits and food purchases. In addition to improved spend, membership programs enable QSRs to get to know their customers in ways that were never possible.
Beyond restaurants, meal delivery services are offering membership bundles that take the place of the weekly shopping trip, while subscription passes encourage loyalty and more use. Expect to see more retailers offering memberships in 2021 as brands seek to own the customer relationship and the data that goes along with it.
5. Installments will become an everyday way to pay.
The twin forces of increased convenience and tightening household budgets have brought installment options mainstream. Driven by millennial and Generation Z consumers, this modernized version of layaway offers an appealing simplicity compared to credit cards. That kind of transparency makes it easier for shoppers to commit, which appeals to merchants hoping to avoid the dreaded abandoned shopping cart.
In 2021, providers of “buy now, pay later” options will start to diverge, as some focus on higher-end, multiyear agreements, while others seek to offer installment plans for shopping baskets as small as $50. For households increasingly accustomed to paying by the month for everything from video streaming services to food delivery, installment plans start to look like subscriptions that just happen to have a fixed end date.
6. The checkoutless experience will draw shoppers back to brick-and-mortar.
In 2019, Amazon wowed the world with its Amazon Go stores. In 2020, the appeal of an in-store experience offering limited human contact took on a new dimension, accelerating interest in doing away with the checkout counter altogether. Eliminating checkout counters frees workers to interact with shoppers in a more personal way.
In 2021, more stores will find various ways to make checkout a less prominent part of how people shop in-store. Multiple providers are creating their own versions of the Amazon Go system for brands that want to go the highest-tech route. Others will begin offering pay-by-phone options. Instead of going to the counter, customers will scan their items with their phones’ cameras, pay via app and head out the door—a combination of increased trust and decreased friction that helps cultivate customer loyalty.
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