2020 was a transformative year for commerce and payments, with 32.4% year over year growth in the United States. The evolution of the eCommerce payments ecosystem will be defined by two significant trends: a global shift towards cashless payments, as predicted by Gartner, and proliferation of “buy now, pay later” (BNPL).
Buy Now Pay Later
This concept allows customers to pay after the purchase is complete using one of the multiple options:
- Full deferred payment after 30 days, or another set period.
- Payment in multiple installments, for example, in 4 installments over 4 months.
- Finance the purchase for a long time: 12 months or more.
Brands benefit from this approach since it leads to increased customer lifetime value and better conversion rates, as customers are likely to purchase more:
- 31% of the shoppers who used BNPL said they wouldn’t have bought at all if they didn’t have the option to pay in installments.
- 48% of consumers said that their purchasing decision was influenced by BNPL availability as a payment option.
This ultimately results in an increase in total revenue through the digital channel. Today there are multiple vendors on the market that provide BNPL services for brands and commerce providers. Below are some of the examples:
Affirm is a payment gateway for businesses of any size. It provides payment plans for customers to divide their payments across 3, 6, or 12 months.
Afterpay gives shoppers the ability to break their payments up into four equal bi-weekly installments.
Klarna offers very flexible financing options, including allowing customers to pay after the delivery of their orders.
PayPal Credit: PayPal provides financing for customers who make purchases that total $99 or more, with no interest if paid in the first six months.
Bread: Bread is another flexible financing solution that lets you offer several payment plans to your customers.
The global pandemic has put regular cash payments under pressure, with more and more consumers switching towards cashless payments. Gartner predicts that by 2023, five countries will have launched digitization initiatives to eliminate cash from circulation. While cash will not disappear overnight, cashless payment methods are on the rise. This is especially true for the eCommerce space.
E-commerce payment methods in the U.S.
Cashless payment options also proliferate in retail sales, with the share of cash transactions forecasted to decline from 30% to 19% and digital wallet share growing from 22% to 30% by the end of 2023. This trend is driven by the fact that by 2026 digital natives will be 59% of the consumers in the U.S. market. Of that, 46% will be Millennials and Gen Z, representing the largest purchasing power. According to eMarketer, it was estimated that in 2013, just 49.6% of all 12 to 17-year-olds had a smartphone. In 2020, that figure is expected to jump to 83.2%. The digital wallet market is dominated by major players: Apple Pay, Android Pay, and Paypal.
Impact on commerce
With the share of cashless transactions growing across channels and the proliferation of BNPL, brands need to provide flexible payment methods for their customers. To achieve this, they need a commerce platform that meets the following requirements:
- Pre-integrated payment methods. The business should have access to various payment methods, including credit card processing, digital wallets, etc. But it’s not just about having out-of-the-box integrations. It is about providing businesses with the ability to switch these integrations with minimum effort, ideally with a click of a button. This flexibility allows brands to quickly adapt their payment methods to target new customer segments or enter new markets.
- Comprehensive integration capabilities. With a continually expanding payment ecosystem, there is a high chance that businesses will require integrations that are not out of the box, both now and in the future. To address this challenge, a commerce platform should provide a flexible integration framework for the quick onboarding of new payment methods. Also, it should provide comprehensive documentation and best practices for developers to accelerate the integration process.
One way for brands to address the requirements above is to explore Composable Commerce. The concept relies on MACH architecture with applications broken down into well-defined packaged business capabilities that can be quickly composed into a best of breed solution. This allows brands to significantly accelerate the onboarding of new payment methods with the minimum development effort.
To learn more about what awaits branded manufacturers – get the Gartner Predicts report here.