13 Payment Trends Shaping the Future of Retail & Ecommerce
This article is part of a larger series on Payments.
The retail environment is constantly evolving, and that evolution accelerated amid the COVID-19 pandemic and related societal changes. To compete, businesses need to offer flexible and fast buying options that meet the needs of every kind of shopper—whether online or in person. Below, we look at 13 payment trends and how they impact small businesses everywhere.
1. There are more and more digital payment options
Let’s start with a quick payment industry overview: Retail transactions started out cash-based, but payment technology has changed that—giving consumers more choices than ever before. Consumers are eager to adopt new technologies; in fact, 58% are open to newer digital shopping methods.
Plus, just shy of 70% of consumers say the way they pay has changed forever due to the pandemic. Most now prefer the conveniences of things like curbside pickup and contactless pay and have little interest in returning to their previous shopping habits.
According to 2021 data, digital wallets were one of the most popular in-store payment methods, accounting for 11% of transactions. Digital wallets are forecast to account for over half of all ecommerce payments by 2024.
Many retailers are enjoying the time-saving benefits of online payments. Small businesses surveyed by Square stated it took them 542 hours to process $100,000 in non-digital payments. This is compared to only 189 hours to process digital payments.
More than a third of retailers are interested in implementing new payment options. Small businesses can do more than just accept credit and debit cards, contactless pay, and subscriptions. Consumers can now use buy now, pay later (BNPL), split the purchase into payment installments, pay via mobile phone, or scan a QR code, among others.
Takeaway: Use a point-of-sale (POS) system and payment processor that can handle a variety of payment methods. Learn more about NFC and contactless payments.
2. Consumers are shopping and paying via mobile, text, and live chat
Nearly 20% of today’s shoppers want to be able to purchase products directly via text message or a live chat platform. As consumers become more technologically savvy and take advantage of new advancements, it’s up to small business retailers to keep up and compete with big box stores.
In China, Alipay and WeChat Pay are emerging technologies facilitating SMS-based shopping and purchasing.
Takeaway: Implement a chatbot or live chat option on your store’s website to capture online browsers.
3. Cash stays on the decline
As little as 11% of POS transactions are paid for in cash—not surprising given the growing popularity of non-cash payment methods. A 2021 study from the Federal Reserve Bank of San Francisco found that 75% of consumers prefer cashless payment.
And according to a more recent report, cash and check payments for in-person purchases decreased 18.5% in 2022 and are expected to continue falling—a key payment industry trend. Globally, cashless payments grew 42% and are expected to more than double by 2030.
Takeaway: Credit and debit card users spend more than cash buyers. In fact, the average debit card transaction is 50% more than the average cash transaction, and businesses stand to increase revenue by 17% just by offering cashless payment options. Not to mention, cash payments cost 28% more to process. This is a great way to boost your store’s average order value (AOV).
4. Automation powers more payments
Automation and artificial intelligence (AI) are two buzzwords in business lately, and they’re also impacting the payments industry. Automation helps businesses boost efficiency, accuracy, and profitability. As many as 41% of retailers plan to automate operations with the goal of increasing staff efficiency.
While there’s been trepidation in the past, consumers are more open to the technology than ever before. In fact, three-quarters of shoppers say automation technology wouldn’t dissuade them from shopping with a retailer, and nearly a quarter would even be more inclined to shop with a retailer if they do use the technology.
Takeaway: Start small with automation. Audit your current payments workflow and see where you have the most opportunity for efficiency. You can automate one thing at a time.
Check out these automation resources:
- 11 Best Sales Automation Software Tools for 2023
- What Is CRM Automation? Benefits & Examples
- Artificial Intelligence in Customer Service: The Ultimate Guide
5. Shoppers want to process their own payments via self-checkout
Self-checkout, whether through a traditional grocery store checkout aisle, standalone kiosks, or mobile option, are popular due to speed, convenience, and reduced interpersonal contact. Though self-checkouts have been on the rise for years, the pandemic accelerated customer use, and retailers pushed to implement new technology at shorter timelines.
As many as 38% of shoppers like to use kiosks to place an order or check out. Two-thirds of shoppers would like the option to use self-checkout from their mobile device, and 79% of customers are using or increasing usage of self-checkout opportunities in stores.
Takeaway: Set up an integrated payment processing system that allows in-store customers to make payments online via their own mobile devices. Also consider adding self-checkout kiosks if it makes sense for your space.
6. B2B payments are getting more creative
B2B payments are on the rise. Though there was a small decrease in 2020, likely linked to the COVID-19 pandemic, these payments have rebounded. In 2022, total B2B payments surpassed $28 trillion.
B2B payment trends are similar to B2C transactions—B2B payments are just a bit behind in the times. Like B2C payments, B2B transactions are increasingly digital—80% of B2B payments are expected to be online by 2025. Additionally, 42% of executives strongly believe there will be an “acceleration of cross-border, cross-currency instant, and B2B payments” through 2025.
Takeaway: Don’t be afraid to adopt new technologies when it comes to B2B payment solutions.
Check out these other resources to help you run a better B2B business:
- What Is B2B Sales? The Ultimate Guide to Business-to-Business Selling
- 12 B2B Sales Lead Generation Ideas for Small Business
- Best B2B CRM for Sales Teams: Our Top 7 Picks for 2023
7. Peer-to-peer payments grow
Just like B2B payments are on the rise, so are C2C—or consumer-to-consumer—payments. Peer-to-peer (P2P) payment apps and platforms like Venmo, Zelle, and PayPal have made it easy for consumers to send money to one another. This is helpful for splitting bills at a restaurant, for example.
It’s forecast that by 2025, more than 70% of smartphone owners will have a P2P mobile app. Many users are motivated by convenience as well as safety.
Takeaway: Consider using a POS system that allows for bill-splitting. You can always give customers the option to split the bill that way or handle it on their own with a peer-to-peer money app.
8. Digital currencies remain unpredictable but viable
The rise of Bitcoin and other digital or cryptocurrencies took a hit in the recent past, but it still continues to be a viable payment method to keep on your radar. Though nine of 10 American adults have heard about the digital currency, only 16% have invested in it. However, it’s growing rapidly.
As many as 57% of crypto owners have paid for at least one purchase with the digital currency in the past year, and nearly 60% of those who haven’t owned it are interested in learning how to use it to pay for purchases in the future. Nearly a third of US small businesses have some sort of Bitcoin payment processor set up. But two-thirds of cryptocurrency owners and more than half of nonowners feel too few businesses accept crypto payments, and 47% seek out those that do.
Takeaway: Learn how to accept crypto as a small business and consider enlisting a payment processor that can handle crypto and other digital currencies. Crypto payments often have lower transaction fees.
9. Buy Now, Pay Later (BNPL) continues to rise
BNPL was on the rise before the jump to buying online. However, once the pandemic hit, US adoption rates of BNPL technology, both by retailers and shoppers, skyrocketed. According to the Consumer Financial Protection Bureau, the dollar volume of BNPL loans increased by over 1,000% from 2019 to 2021, from $2 billion to $24.2 billion. BNPL lending in the US is forecast to hit $127.73 billion by 2025.
Businesses should be aware that BNPL increases average order value (AOV) and draws consumer loyalty and repeat purchases. But it hasn’t come without its investigations and headaches. In the UK, regulators banned an advertising campaign by international payment solution Klarna for causing irresponsible spending, particularly among young consumers.
Furthermore, the Federal Reserve reports American credit card debt increased by $61 billion in Q4 2022 to $986 billion, surpassing the pre-pandemic record of $927 billion. This could push consumers toward BNPL even more if they don’t have room on cards for purchases or want to avoid continued credit card interest. In fact, a Motley Fool study found that 37% of consumers use BNPL to avoid credit card interest and 45% use it for purchases they can’t afford in their budget. More than one in 10 (13%) say when credit is maxed out they turn to BNPL.
Who Are the Major Players in the BNPL Market?
- Klarna raised $650 million at a $10.65 billion valuation in September 2020. With over 12 million active monthly users and 55,000 daily downloads, Klarna signals to the retail industry that BNPL is here to stay.
- Afterpay reported 1.9 million active US customers in June 2019. That number jumped 219% to 5.6 million active customers in June 2020.
- In 2020, PayPal released a new Buy Now, Pay Later program as an installment solution.
- The number of Shopify merchants offering BNPL has increased by 60% since the start of the pandemic.
- In 2021, Amazon partnered with Affirm to offer customer financing options on purchases of $50 or more.
- Square acquired Afterpay in 2021 for $29 million, with plans to incorporate Afterpay services into Square POS plans.
Takeaway: Don’t forget to designate a special space in your retail store for BNPL customers. The whole idea of BNPL is convenience—the last thing you want to do is make your customers wait in long lines to receive their order. Learn more in our roundup of BNPL statistics.
10. QR codes are here to stay
Contactless payments for in-store purchases also emerged as a convenient and safe way to pay for transactions during the pandemic, giving quick-response (QR) codes a second chance. QR codes are also convenient and more sustainable and allow businesses to make changes on the fly. About a third of consumers like using QR codes, and as many as one in five shoppers would window shop via QR code. Plus, 37% of restaurants have started using QR codes for payment.
The global contactless payments market is expected to record a compound annual growth rate of 11% through 2026, hitting revenue of just over $20 billion that year. Shopify reports the number of merchants accepting contactless payments through its software increased by 122% during the pandemic. Meanwhile, a report by Raydiant found that over 80% of consumers use contactless payments.
Here are some of the major players to consider when implementing QR codes for your small business:
- Venmo now has business profiles with scannable codes for sole proprietors.
- PayPal also launched QR codes for businesses.
- Popular payment processors like Square have deployed QR code payment options.
- Shopify’s Shop code QR code feature has existed since 2017.
Takeaway: Be an early adopter. The US has fallen behind the rest of the world in terms of payment processing technology but is finally starting to play catchup. WeChat QR codes have been a popular payment method in China for years. We expect this to be among the payment industry trends that will stick around.
11. Digital payments spark privacy and security concerns
Digital privacy is always a top concern for online merchants and shoppers alike, and this is very much the case when it comes to payments.
Plus, merchants need to stay on top of ever-changing laws and regulations. Nearly half of respondents to one survey say data privacy/cybersecurity is the top area likely to be affected by regulations in the next few years. Digital identity authentication comes in as the second area of concern.
Takeaway: Ensure you’re using PCI-compliant payment processing technology. Learn more about PCI compliance in this article and check out these tips for ecommerce payment security.
12. Convenience powers one-click checkout growth
Since Amazon’s patent on one-click checkout expired several years ago, ecommerce businesses have been racing to develop, implement, and perfect the technology to streamline the checkout process and boost conversions.
A staggering 97% of buyers have bailed on an online order because it was complicated or inconvenient to finish, causing shopping cart abandonment rates of up to 80%. And 83% of shoppers say convenience is even more important now than five years ago. A 2022 Baymard Institute study found that three of the top five reasons for cart abandonment are linked to convenience: complex checkout process, long delivery timeframes, and being required to create an account.
Who Are the Major Players for One-click Checkouts?
- Expect to see more of the one-click ecommerce payments like Fast.co, Bolt, Shop Pay, Apple Pay, Google Pay, and PayPal One-touch.
- According to Shopify, conversion rates increase by more than 50% when using Shopify Payments; it also results in winning 45% more chargeback disputes.
- PayPal checkout boosts conversions by 28%, increases unplanned purchases by 19%, and increases repeat purchases by 13%.
- With ecommerce giants like Shopify, it will be an uphill battle for newcomers and third parties like Fast to get widespread adoption. However, in one sign of smaller providers making inroads, Bolt checkout partnered with Authentic Brands Group in November 2020 to offer one-click checkouts to their more than 50 consumer product companies.
13. Payments by voice command gain traction
Voice command and voice search technology continues to improve, thus encouraging more people to adopt it. According to Voicebot.ai, some 35% of American adults own a smart speaker.
Voice command has also emerged as a commerce “channel” and gained traction as of late. Essentially, people can make payments using voice commands. As many as 43% of consumers would like “voice-activated solutions” for shopping.
Some forecasts estimate voice payments market value to surpass $40 billion by 2028 (representing a compound annual growth rate of about 10%). In 2018, just 3.6% of US consumers had made a purchase using voice command—that figure jumped to 6.7% in 2020. Smart speakers and technology like Siri and Google Voice have made this possible.
In almost any buying situation, the checkout transaction can make or break the experience and the sale. As we’ve learned from the consumer payment trends listed above, shoppers want convenience and simplified checkout—both online and in store.
If you aren’t taking the steps to offer seamless transactions through one-click online payments, BNPL, QR code payments, and voice command payments, among other services, you’re likely missing out on sales.