“Society is unity in diversity,” wrote philosopher George Herbert Mead. Retailers today are faced with the checkout challenge of unifying consumers’ payment preferences, which have never been more diverse. Payment technology plays an essential role in ensuring customers’ transactional expectations are met and even exceeded, so they return again and again.
“Can I pay with this?” Whether a customer is asking the question to a cashier or scanning the payment options at an online checkout, a retailer needs to be able to answer in the affirmative, or at least provide the customer’s second payment preference.
COVID-19 has upended the retail experience and galvanized a major diversification in consumers’ payment preferences. Four out of 10 Americans have permanently changed the way they pay since 2020, according to our Q2 survey.
Contactless Cards and Mobile Wallet Growth
To a degree, payment preferences depend on the product being purchased. Consumers are more likely to favor cash for smaller items than they would for more expensive products, with 46 percent of shoppers preferring cash to buy bakery pastries vs. 20 percent for clothes.
These nuances aside, one trend is clear across all retailers: consumers favor credit and debit cards. Even at a bakery, 49 percent of customers prefer cards, rising to 69 percent in a clothes store. Supporting in-store card payments requires a robust point-of-sale (POS) terminal. Technology is constantly evolving, but most retailers understand the importance of having the most up-to-date POS, with 73 percent of merchants prioritizing this.
An essential consideration is supporting contactless card payments, which have enjoyed massive growth over the last few years. Our 2018 research revealed that just 3 percent of Americans were paying with tap-and-pay monthly compared to 67 percent today (Q2). Merchants not providing this option at checkout will create friction in the retail experience.
Consumers’ increasing familiarity with contactless card payments is no doubt also stimulating mobile wallet usage in-store. Our research revealed that 37 percent of shoppers are now paying at least monthly via a wallet like Apple Pay using their smartphone or wearable device. With eMarketer reporting that 88 percent of Americans aged 12-plus own smartphones, mobile wallet usage will almost certainly continue to grow.
And the concept of mobile payments extends to POS terminals. Fixed terminal card readers dominate the retail space, with 59 percent of merchants in Q4 offering these. However, wireless card readers that can be brought to the customer are growing in popularity, with 45 percent of retailers using mobile POS systems that are quicker and more convenient, especially in restaurants or for field services like plumbers.
Retail to E-Tail
The pandemic’s lockdowns saw retailers increasingly extending their businesses into the digital space with websites equipped with card-not-present (CNP) checkouts. Today, 71 percent of U.S. retailers have an online checkout, with a fifth of these diversifying into e-tail during COVID-19, according to our Q4 research.
This growth is likely to continue. Of the e-tail holdouts we surveyed, 43 percent expect to have an online checkout live by the end of 2022, though 50 percent have no such plans. This would be a mistake. While shelter-in-place orders are now in the past, consumers have never been more engaged with the convenience and speed of e-commerce.
Integrating a CNP checkout into a website does involve investment, though the return on investment will almost certainly be impressive. An online checkout extends a retailer’s opening hours to 24/7 and its geographical reach from a neighborhood to across the country.
Optimizing online customer conversions is just important as in-store. With the range of available online alternative payment methods (APMs), consumers’ payment preferences are arguably even more diverse. That said, cards are still king. With inflation higher, shoppers are tending to prioritize debit cards, with 60 percent using one at least monthly in Q2 vs. 54 percent paying with credit cards.
Connectivity to a payment gateway for card processing is therefore essential for retailers. However, consumers’ growing adoption of APMs means that these also need to be part of a CNP checkout. After cards, online shoppers’ favorite payment method is digital wallets, with 29 percent using a wallet at least monthly. Any retailer without the option of a digital wallet is going to lose customers or create friction with a customer forced to reach for his/her credit card.
Likewise, if a customer is used to paying with Apple Pay on their phone in a retailer’s physical store, this mobile wallet should also be also an option at its online checkout. In Q2, 24 percent of consumers used a mobile wallet to pay online. This number will grow as more retailers bolster their checkouts with mobile wallet offerings.
Looking ahead, with 11 percent of consumers paying online with either cryptocurrency or eCash today, the payments space for retail is set to become even more diverse. Just as retailers aim to satisfy customers with products that meet their specific needs, they need to adopt the same approach to online and in-store payments. After all, merchants’ main objective for every retail action is ultimately a transaction.
Afshin Yazdian joined Paysafe as CEO of its U.S. Acquiring division in 2020, bringing over two decades’ leadership experience in payments.
Afshin serves as President of Merchant Solutions at Paysafe, bringing over two decades of leadership experience in payments. In his role, Afshin is charged with leading one of Paysafe’s key business units, customized payments solutions for merchants and partners across North America, Europe, and Latin America.
Prior to joining Paysafe, Afshin held the role of President and CEO of New York City-based Cynergy Data until its merger with Atlanta-based Priority Payment Systems (NASDAQ: PRTH), where he served as President of the combined companies until January 2020. Under his leadership, Priority Payment Systems developed into one of the largest independent payment processing companies in America, serving over 200,000 merchants and eventually going public in 2018.
Earlier in his career, he was instrumental in the formation of iPayment, Inc. (NASDAQ: IPMT), where he served as Executive Vice President and General Counsel from the company’s founding in January 2001, through December 2011. During his tenure, Afshin’s contributions have helped to lead the organization through various capital raises, an IPO, a leveraged buyout, and several restructurings in its ownership.
Afshin holds a Bachelor of Business Administration (BBA) degree from Emory University’s Goizueta Business School in Atlanta and a Juris Doctor (JD) law degree from the University of Miami.