The initial hard lockdown caused a lot of smaller retailers to re-consider eCommerce and different forms of payments. In fact, 62% of independent retailers reported an increase in online revenue over the last year, according to our research.
Two main factors caused a dramatic change in spending behavior: customers going online for the first time and an increase in cashless transactions for those shopping in-store. The latter led to a spike in contactless transactions especially with the upper spending increasing. And a 50% decrease in ATM usage last year.
Covid forced a lot of people into a pattern of online shopping. For example, people who might never have done an online shop for groceries have found it’s actually really convenient and easy.
A lot of the online clothing retailers have done a great job developing their brand and capitalising on the fact people couldn’t walk in and try on items. Part of that involved refining their returns processes. As in-store retail and footfall returned, the most successful brands have created a seamless experience for customers, such as being able to buy online and return in store and vice versa.
Food delivery is another sector that has done really well, such as Deliveroo and others. They’ve managed to build out their brands off the back of convenience and appealed to demographics that wouldn’t have even looked at that previously, including ordering online shopping via those platforms.
Customers are increasingly looking at new ways of transacting with retailers, for example in the last year we saw a 17% increase in PayPal accounts. Bricks and mortar retailers are also adapting to this desire for more methods of payments. In the past, retailers had an attitude that they’d only accept a certain type of payment. Now they’ve had to think about a broader range of payment methods that consumers prefer to, including things like AliPay and Klarna. It’s moved on a lot from what would have been cash or card a number of years ago.
Mobile payments is another significant area. Rather than just taking out your card, people are increasingly transacting via Google and Apple Pay on their phones. Particularly as there is no upper spending limit, as opposed to using your card for contactless payments. People are more likely to leave the house without their card than their phone. We’ve seen the acceleration of this trend through Covid, where people have realised its very convenient to just pay with their mobiles instead.
There will always be a desire for the physical experience of shopping. So while we’ve definitely seen a shift to more eCommerce, in-store shopping will remain for some time. However, 49% of consumers have said contactless payments would encourage them in-store.
But moving to a fully cashless society is still a long way off. With the initial lockdown in the early part of 2020, we saw a 9% increase in cashless payments. But as lockdown eased, cash usage did come back a little bit. So while we in the industry believe cash is going to diminish over time and electronic payments are going to increase, we won’t see a true cashless society for a period of time yet.
However, habits have changed – particularly where people have worked out there’s easier ways of shopping. And the move to more remote working is changing our shopping habits, too. People are picking up smaller purchases locally and purchases they might have previously made in city centres are being bought online instead.
Contactless will continue to grow, and we will see the highest rise amongst younger generations. It’s also noteworthy that 96% of hospitality leaders have said technology is fundamental to their reopening plans, including the use of quick and contact-free payments – according to CGA.
That includes increasing mobile payments. We spend so much time on our phones, so the ability to make purchases with one click using our mobile is only going to increase.
Also, crypto currencies are an important area. Obviously, there’s a lot of hype around crypto and it’s actual usership is still pretty limited. But the ledger that sits behind it and the basics of cryptocurrency is still really attractive. .
With so many emerging payment options, the most successful retailers will be the ones who ensure they’re able to cater for this diverse offering of payment methods.
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