Merchants that have prioritized payments within their business have been best positioned during the pandemic. More than half (55%) of merchants that said payments are a highly strategic areas of focus within their business noted that COVID-19 was having a positive effect on sales, according to a March 2021 survey of more than 250 commerce and payments technology decision-makers conducted by 451 Research, part of S&P Global Market Intelligence. For those that said payments are either somewhat or not at all strategic, just 25% said the same.
Merchants with efficient and effective payments infrastructure have been able to quickly adapt over the past year, allowing them to capitalize on emerging trends and customer needs. Those without an adaptable payments strategy have faced no shortage of challenges. Reflecting on the past year, five key areas caused widespread issues and business distractions, including:
- Fraud. Many enterprises were challenged by fraud management challenges as their digital sales volume accelerated. Some that rapidly scaled their e-commerce businesses in the early days of the pandemic found themselves overwhelmed by chargebacks. Others saw their fraud analysts inundated with manual reviews, resulting in shipping delays and spikes in false-positive declines. On the whole, most saw fraud volumes rise. More than two-thirds (67%) of merchant respondents observed an increase in the volume of fraudulent online transactions experienced by their business.
- Limited payment options. Throughout the pandemic, consumers sought out faster, easier and more flexible ways to pay. Nearly one-third (30%) of consumers tried a contactless payment method for the first time, according to 451 Research’s Voice of the Connected User Landscape: Connected Customer, Disruptive Technologies 2021 survey. As if keeping pace with domestic payment preferences wasn't enough, many merchants began to see meaningful cross-border activity and found out the hard way that offering card payments alone was insufficient. Those that were unable to support payment methods demanded by their customers bore the consequences: more that three in four (78%) consumers say that if their preferred payment method isn't accepted, they are less likely to shop with that business in the future.
- Processor/gateway outages. Merchants' payment partners were pressured by soaring e-commerce volumes during 2020. Those without highly scalable, resilient infrastructure saw downtime and outages, and merchants felt the impact in the form of lost sales and negative customer experiences. Merchants without a backup processor or an orchestration platform to reroute volume were left in the dark. According to a custom survey of global merchants conducted by 451 Research, 52% of merchants with $5bn+ in annual revenue estimated that a payment-processing outage during peak business hours would result in $10,000 or more in lost sales per minute.
- False declines. Merchants inexperienced with e-commerce, in addition to those that faced significant transaction volume growth, struggled to mitigate false-positive declines. This is due to a variety a factors, running the gamut from ineffective fraud management processes to lack of local acquiring capabilities. False declines impacted approximately one in seven millennials – among the most active e-commerce shoppers – during COVID-19, according to 451 Research’s Voice of the Connected User Landscape: Consumer Population Representative Survey, Connected Customer, Q3 2020 survey. The consequences are significant, with nearly one in four (22%) millennials stating that they plan to stop shopping with the merchant where the false decline occurred in the future.
- Omnichannel integration challenges. Experiences such as curbside pickup and buy online, pickup in-store were in vogue during the pandemic. Merchants without an omnichannel payments platform struggled to bring these experiences to life in an operationally efficient manner. Others were challenged to manage the high rates of fraud often associated with expedited, cross-channel fulfillment. A key challenge at hand are siloed processes. More than half of surveyed merchants (54%) said their commerce strategy is handled by different teams focused on individual sales channels. It's no wonder that 73% of merchants report that integrating sales channels to obtain a unified view of customers is a high priority for their organization. Omnichannel payment platforms are a critical ingredient for execution.
The pandemic has cast a light on the shortcomings of many merchants' payments infrastructure – so much so that nearly nine in 10 merchants surveyed identified payment needs that COVID-19 has exposed. Throughout 2021 and 2022, it should be anticipated that payments modernization efforts will be a key strategic area of focus for merchants of nearly all sizes. For a deeper dive on merchants’ top post-pandemic payment priorities, please see our recent report on the topic.
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July 12, 2021 at 11:20PM
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COVID-19 Puts Payments Into Focus For Retailers - Forbes
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