How Digital Payments Transform Facets of the Retail Sector

How Digital Payments Transform Facets of the Retail Sector

Retail Tech Insights | Tuesday, May 16, 2023

Embedded finance, online bank transfers, and card installments are some of the top retail industry's digital payment trends in 2023.

FREMONT, CA: In the past decade, the world of payments has undergone a complete transformation. Digital payments are no longer a business's top priority. A business selling online in today's e-commerce environment, especially in the highly competitive retail industry, should demonstrate a certain level of maturity when it comes to its payment strategy.

This maturity is largely due to the increasingly complex and fragmented payments world, which can pose a challenge for businesses operating across multiple jurisdictions. In order to succeed, a company's payment needs often require a customized solution built to accelerate business revenue.

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Not all businesses in the retail vertical have adjusted their approach to maximize the potential of payments as a revenue accelerator. This is where the biggest opportunity lies in the sector right now.

In the coming year, what are the main trends to watch in the digital payments sector?

Payment providers have evolved from service providers to strategic partners in online retail, helping retailers customize, improve conversion, and optimize performance, particularly for complex models like marketplaces.

Lowering processing costs and boosting revenue are quickly becoming key themes for businesses in 2023 as they look to turn their payment strategy into a revenue accelerator. Here are some significant payment trends to watch in the coming year:

Embedded finance: Although embedded financial services are not new, they will become more widely available. For example, a travel operator might offer insurance, or a retailer might offer branded credit cards. Companies that implement embedded finance report increased engagement, and 85 percent report that it helps them acquire new customers.

With iBanking and branded or pre-paid cards, individuals expect to see more of this trend in the retail space.

Installments on a credit card: In terms of preferred payment methods, currencies, and regulations, the global payment landscape is becoming increasingly local. The more methods it is offered, the less likely they are to lose the sale if a customer's card transaction is declined.

Visa estimates that payment installments were worth USD 1.6 trillion in 2020, up 5 percent from the previous year. Globally, credit card expenditures declined by 4 percent.

Research indicates that 6 percent of consumers abandon carts due to a lack of payment options, while 18 percent abandon carts due to price. A company's revenue can be increased by installment payments by improving conversion rates and repeat sales.

Traditional card schemes like Visa will soon allow consumers to choose installation payments at major retailers. BNPL options such as Klarna already exist around the world, but traditional card schemes such as Visa will allow consumers to choose installation payments in the near future.

Mobile payments with one click: The mobile commerce market accounts for 73 percent of the total e-commerce market. 4.4 billion global consumers using digital wallets in 2023, which is a significant share. However, mobile purchases have the highest abandonment rate, at 86 percent. As a result, businesses are leaving money on the table by not optimizing their payment flow for on-the-go shopping. The use of digital wallets as a payment method is expected to increase, as well as investments in mobile-optimized customer journeys.

Online bank transfers: a focus- Approximately 70 billion transactions were conducted via instant payment systems in 2020, and the number is expected to reach 199 billion by 2024.

There are two main reasons for this growth: greater connectivity to the RTP network and a growing preference for direct bank transfers by consumers and businesses. As a result, it is expected to see more retail businesses integrate Online Bank Transfers into their payment plans.

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