The Future of Payment Solutions

Changes in the way people want to pay are here to stay. Here’s what you need to know to keep pace with your customer’s expectations

 

8 minute read

 

Key takeaways

  • The pandemic accelerated a shift in consumer payment habits that were long in the making.
  • Implementing real-time and digital payments can save businesses time and money, and reduce friction for every type of sale.
  • An omnichannel approach has the potential to enhance the shopping experience and drive revenue.

Over the past decade, technological advancements have transformed how we pay and the solutions used to transact. Yet in some cases, merchants and consumers alike have been slow to adopt them, and even slower to use them. Then came the pandemic. Consumers paid with contactless cards and mobile digital wallets like never before, while sales from social media, apps and online sites soared. To meet the newfound enthusiasm for these payment and shopping preferences, merchants scrambled to find solutions that could handle them all.

 

But are these just passing fancies? Businesses shouldn’t expect consumers to return to pre-pandemic spending habits, says Monica Kennedy, merchant portfolio executive in global banking and markets at Bank of America. With contactless payments, what may have begun as a safety practice is now a convenience too good to give up. “Consumers quickly realized how much easier and safer it is to tap your phone than to fish for your wallet,” she says. According to a survey, 42% of consumers say they have pivoted to online shopping since the pandemic; of those who have, nearly all plan to keep doing so.1  And while customers will certainly return to brick-and-mortar stores, they’ll continue shopping on social media, apps and online sites too — and expect a seamless checkout process on each. “Clients and consumers want convenience, security and ease, and if some merchants are not offering it to them, it could really hamper their business,” says Juan Garrido, head of merchant services product in global banking and markets at Bank of America.

 

Here’s what you need to know about three key payment trends that may shape the future of your business operations and interactions with customers.

“Clients and consumers want convenience, security and ease, and if some merchants are not offering it to them, it could really hamper their business.”

 

Contactless is here to stay

 

According to data compiled by Bank of America, the use of contactless cards and digital wallets grew 238% from July 2020 to February 2021, increasing to 15.8% of total card transactions from just 4.7% the year before. While using a mobile device to pay for products or services was popular in Europe and Asia even before the pandemic2, under a quarter of U.S. consumers had enabled a digital wallet by mid-2019.3   During the last six months of 2020, however, U.S. digital wallet spending doubled, averaging 50% year-over-year growth for every month through the end of the year, according to Bank of America proprietary data. As consumers became less apt to use cash, they even turned to digital payments for smaller transactions — those under $25 — which make up the majority of retail sales. “Everybody has a mobile device and because of the familiarity and ease of use, they are not going to want to go back,” says Kennedy. 

 

Customers want to shop — and pay — anytime from anyplace

 

Digital payments are fostering the popularity of omnichannel shopping, which allows a customer to purchase online, via an app or on social media, and lets them choose whether to pick up the order at a store or warehouse or have it delivered at home. The same order can be returned or exchanged at a retail store or drop-off point or through a delivery service. “Customers have changed the way they go about their shopping experience and that’s been a huge use case for omnichannel solutions,” says Garrido. “Merchants too want to remove the lines between an online transaction and a point-of-sale transaction, make it ubiquitous and easy to use.”

 

Plus, the data gleaned from omnichannel sales allows for greater insight into your customer’s buying patterns, he notes. If you have a loyalty program, for example, you can track data about a single shopper in multiple on- and off-line locations and use that information in future marketing efforts.

 

Frictionless business payments

 

Before the pandemic, 42% of business-to-business payments were still made by paper check, according to the Association of Financial Professionals.4 But checks are mailed to offices and require someone to endorse and deposit them. The pandemic changed all that. “We saw more businesses going digital to pay vendors and invoice customers,” says Rich Clow, senior vice president for emerging payments and strategy with enterprise payments at Bank of America. “Once they tried it, they didn’t want to go back to paper. They found it more efficient, effective and more user friendly.”

 

Pandemic-related supply chain issues, too, were exacerbated by long-standing practices that delayed processing time, says Clow. For example, a single payment for multiple invoices would have to be coded and reconciled separately. To avoid these issues going forward, businesses may want to consider implementing a real-time payment solution that allows for same-day payments instead of waiting two days for a transfer. “With automated payments, the whole process from financial approvals to reconciliation of accounts becomes much more efficient,” Clow notes. By installing the technology to accept digital payments instead of cash or checks, you simplify bookkeeping, reduce friction at the point of sale, and may even attract new customers, adds Garrido.

 

The world of payments has forever changed

 

The pandemic was the catalyst for sudden, sometimes dramatic changes. Understanding the drivers of change when it comes to consumer payment preferences can help you choose the payment system technology that best delivers a secure, seamless and convenient transaction to your customers. Contact Bank of America to explore payment solutions optimized for the way your clients and customers prefer transacting today and in the near future.

 

Payments.com, New Merchant Business Models Playbook, 2021

Mobile Wallet Adoption 2020, PYMNTS.com, April 2020

Why the U.S. Still Lags Behind China In Mobile Wallet Adoption, Forbes, June 2019

https://www.afponline.org/publications-data-tools/reports/survey-research-economic-data/Details/epayments-survey

 


Rich Clow, Senior Vice President for Emerging Payments and Strategy with Merchant Services at Bank of America

Juan Garrido, Head of Merchant Services Product in Global Banking and Markets at Bank of America

Monica Kennedy, Senior Vice President for Global Banking and Markets with Merchant Services at Bank of America