With the cost-of-living crisis putting pressure on household incomes, the need for flexible payment options has never been more urgent, as customers seek alternative ways to pay for those all-important purchases. Similarly, for retailers making payments as seamless and friction-free as possible can up sales.
And the payment industry is responding, with a raft of new payment tools coming to market, along with a range of services being launched to help retailers deploy and manage this growing array of payment tools.
Instant payments on the rise
Instant payments – where a customer pays a retailer by instant bank transfer – is set to be the latest payment tool to have a big impact on in-store and online commerce, with experts predicting that it will become the de facto way to pay in the coming months and years.
An instant payment is any payment outside of a card network that is capable of receiving funds in 10 seconds or under. This is of particular importance now, as many merchants will be seeking to reduce costs and protect margins through the global economic downturn.
According to Juniper Research, the number of consumer instant payments is forecast to exceed 235 billion transactions by 2027; up from 74 billion in 2023. This growth of 218% will be driven by lower merchant acceptance costs when compared to traditional card schemes.
The research found that the transition to instant payments for consumers will rapidly expand, reaching 70% of all global transactions by 2027, up from just over 30% in 2023.
The research identified that the lower costs of instant payments allow merchants to pass on savings to consumers, as well as benefitting from increased speed of transfers. With instant settlement, merchants will receive payments within seconds, reducing payment settlement delays.
Report author Michael Greenwood says: “Payment processors, who provide payments acceptance for merchants, should look to offer instant payments integration via a single API. This will allow merchants to accept instant payments at checkout alongside existing payment methods, such as cards and wallets, without needing to undertake a separate, costly and time-consuming integration process.”
Adyen, a global financial technology platform, has become the first to embed the Click to Pay experience into its online checkout flow in all available markets. This innovative method of data retrieval addresses the widespread hurdle of manual card entry at the payment stage.
By enabling enrolled shoppers to bypass data entry during online checkout and complete the transaction in only a few clicks, it simplifies the payment experience across devices and browsers. Building on Adyen’s advanced digital offering – the company’s original and persisting focus area – Click to Pay marks the latest stride forward in reducing friction for shoppers and increasing conversion for global businesses.
“Many businesses still struggle with low conversion at online checkout, especially as it pertains to first-time or one-time shoppers,” says Edgar Verschuur, Global Head of Payments at Adyen. “We are committed to addressing this challenge using a range of global payment initiatives. By embedding Click to Pay into our online payment flow, we eliminate the need for consumers to manually enter their card details. This makes it quicker, more intuitive, and less error-prone for shoppers to successfully complete their purchase, which ultimately drives revenue for our customers.”
Every step added to a consumer’s payment journey increases the chances that they will abandon their purchase. To combat the risk of drop-off at the checkout stage, Adyen makes online payments as fast and effortless as possible – all while maintaining the highest level of trust and security. Rather than manually entering card details – a common cause of frustration which is prone to human error – Adyen retrieves a shopper’s historically preferred card information on their behalf.
The resulting payment solution is available even when checking out as a guest. It not only saves time and effort, but also provides shoppers with the comfort of not needing to share card details with every online business they transact with.
Don’t forget BNPL
Alternative payment methods like BNPL are becoming increasingly popular with Gen Z and millennials, with 34% of UK shoppers using the service over the 2022 Christmas period. The number of Gen Z and Millennial consumers in the US alone is expected to grow to 70% of the population by 2028; therefore, regardless of a retailer’s current target market demographic, tomorrow’s retail trends will be shaped by these younger generations.
Nevertheless, that’s not to say the preferences of more mature cohorts, who currently account for the majority of retail spending, should be ignored. According to research by Pymnts.com, older generations with higher income levels are expanding their footprint in BNPL usage. This suggests that consumer demand for BNPL options at checkout is increasing across the board. Consequently, stores that do not offer alternative payment methods are failing to provide their customer base with the options they now expect and are likely losing out to competitors.
According to Melanie Vala, Chief Commercial Officer at Deko, the multi-lender Buy Now Pay Later (BNPL) platform, “Flexible payments can reduce cart abandonment rates, as well as empower shoppers to increase the size of their purchase by reducing the financial burden of paying for purchases in one upfront payment. As a result, eCommerce stores are likely to boost their average order value (AOV), which is one of the major solutions to generating more income.”
She continues: “Providing customers with flexible payment options enables online stores to stay in line with customer expectations. Shoppers actively look for companies offering different payment types and the ability to spread the cost, and businesses should grasp this opportunity to increase their customer base further.
“Stores can increase the chance of repeat business by offering popular alternative payment methods such as digital credit products which seamlessly slot into the customer’s purchase journey. Consumers who are looking to purchase similar and related products are likely to return to stores that offer their preferred payment method. Keeping customers happy and engaged will encourage loyalty from their side.”
Vala concludes: “There’s little reason for eCommerce stores not to offer flexible payment options to shoppers. Regardless of what products you sell, it is important to keep up with current trends and ensure customers are eager to shop with you. Allowing them to spread the cost of an item can increase business, boost average order size and encourage repeat purchases. Offering different options can position your business as a forward-thinking company ready to enjoy sustained success.”