Contactless payments as a bridge to e-commerce

Contactless payments as a bridge to e-commerce
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Contactless payments as a bridge to e-commerce

The mass adoption of contactless payments in 2020 should be seen within a greater context. This move from cash to cards, is the final catalyst for the acceptance of e-commerce as the new normal. Are you ready for it?


When back in April 2019 an article was published on the Mi-Pay website entitled ‘Cash is king, but for how long,’ it wasn’t meant to be a Nostradamus-style prediction piece. But fast-forward a year later, and we find ourselves in a time when cash is literally avoided as if it were the plague. 

The concerns raised in 2019 are still valid, as are the benefits described in the article. At present, in 2021, we do have to ask ourselves if the accelerated shift to cash avoidance is permanent and what the implications thereof are for the future. 

In the follow-up article ‘Cash is Dead, Long Live Digital Cash,’ published in July 2019, we discussed how cash is actually quite unhygienic and how flu viruses can live on paper money for up to 17 days. In retrospect, it looks like we were on to something, doesn’t it? 

The year of the great digital migration

In 2020, millions of people stayed home and did the bulk of their shopping online, while those who ventured out to brick & mortar stores used payment cards to complete their purchases. 

One way in which consumers were able to protect themselves while doing their offline shopping errands was by making contactless payments at checkout. While the adoption of contactless payments across Europe has generally been widespread, it’s evolution wasn’t quite uniform. Interestingly, data shows that at the start of the pandemic, many countries saw an increase in cash withdrawals as consumers rushed to the ATMs in order to withdraw cash for use during the lockdown. However, it wouldn’t be long before retailers would ask consumers to go contactless for their own good. 

The massive adoption of contactless payments had a lot of going for it. For one, contactless payments are more hygienic since there is no need for shoppers to physically handle the POS terminal. Also, at the start of the pandemic, European countries like the Netherlands increased the threshold for contactless payments without PIN code, further reducing the need for PIN codes and increasing the speed of the checkout process. Contactless payments, being a faster experience, also reduce the size of queues, making it easier for shoppers to practice social distancing. 

The bigger picture: payment habits in 2021 and beyond

Will using payments cards for offline transactions also lead to a boost in card-not-present transactions online? 

Research into habit-formation conducted by Lally et al. (2010) revealed that it takes 66 days on average for people to form a new habit (or anywhere from 18 to 254 days). In contrast, the pandemic and its side effects will last a lot longer. 

For 2021 and beyond, we predict that the payment habits formed during the pandemic are here to stay. Card payments, whether online or offline, are the new normal as a large portion of society that saw itself as cash-only, is now socialized and trained in the art of making of digital transactions. 

Moving forward, the share of cash transactions will continue to dwindle while digital payments become the norm. Companies looking to succeed in a mostly digital economy need to take the necessary steps to offer their consumers an easy, seamless experience when it comes to the purchase of goods and services.

Many will also need to consider a (more substantive) move of their product offering from the brick & mortar shelves to the online space. 

Going online, with all your bases covered

Expanding your e-commerce presence and engaging with customers within your very own digital ecosystem also provides many benefits for your bottom line. 

For example, identifying your customers through user account creation allows for proper customer relationship management, improved customer service, the offering of incentives through loyalty programmes as well as the discovery of profitable upselling opportunities. 

In particular, companies selling high-risk digital goods like redeemable vouchers, prepaid credit and gift cards have an opportunity to work on improving their digital experiences as more consumers sit back and try to figure out how their typical offline purchase can be done over the internet, whether that’s via mobile phone or computer. 

Unfortunately, going digital is not without risk. The more consumers purchase online, the higher the risk of fraud. Though fraudsters are always going to be on the prowl, transaction fraud doesn’t have to be a problem.

It is important that businesses choose a partner with experience in all areas of digital commerce, including revenue management, customer loyalty and fraud prevention. When looking for the ideal e-commerce platform to partner with, firms need to ask the right questions: 

  • How will you maximize our revenues?
  • How will you boost our profits?
  • How will you improve customer experience and increase customer loyalty?
  • How will you protect our transactions from payment fraud?

At Mi-Pay, we have over two decades of experience in answering all of these questions and more. We offer highly customizable end-to-end e-commerce solutions that are trusted by industry leaders. If you’re considering your options or are just curious about the possibilities for your business, feel free to reach out to me with any questions you might have. 

 

Alper Altan
Revenue Consultant

E: [email protected]
M: +31 619949464