4 Payment Trends Merchants Should Be Ready For
by Ethoca
As ecommerce continues to accelerate, so do the ways that consumers want to buy and pay for things. The huge spike in digital transactions and innovation in the past few years has sparked the emergence of several new trends.
These trends not only enhance customers’ experience—offering them more options and convenience—but also create new challenges and opportunities for businesses accepting digital payments.
For merchants, it’s critical to pay attention and potentially embrace these trends while also understanding the implications—including the potential for more customer payment disputes and chargebacks.
Here are four shopping and payment trends merchants need to be ready for:
TREND 1: “Everything” Delivery
Consumers have fallen in love with the ability to buy whatever they need—even small purchases like snacks, chewing gum or candles—from nearby retailers and have it delivered the same day to their doorstep. Using mobile apps or online portals, many retailers now offer delivery in order to cater to consumers who expect or desire home delivery.
A 2021 survey by PwC found that 56% of consumers say they always or very frequently buy from retailers with an efficient delivery or parcel collection service.
What merchants need to know:
While offering delivery can greatly enhance the customer experience, it can also translate to a higher volume of payment disputes. Delivery service, for example, may result in more service issues or errors that can cause customers to dispute charges. In fact, a recent report by Ethoca and PYMNTS.com found that service issues have been by far the top reason for chargebacks over the past couple of years.
Moreover, digital transactions are more likely than in-person transactions to lead to transaction confusion—where the consumer doesn’t recognise the purchases on their card statement—and thus disputes them.
Offering delivery on even small purchases also means there’s a higher likelihood of low-value transactions being disputed—so that a $10 purchase that traditionally happened in-store (chips, gum and a drink) could easily cost a merchant $25 to $50 in chargeback fees alone.
Because delivered purchases typically happen digitally instead of in-store at the checkout counter, merchants that offer delivery will have more transactions classified as card-not-present. Unlike with card-present transactions, merchants are liable for refunding the customer’s money when a chargeback is issued.
TREND 2: Buy Now, Pay Later (BNPL)
More online retailers are partnering with third-party providers to offer “buy now, pay later” payment plans. It’s essentially a modern-day layaway or installment plan, where the customer agrees to pay for whatever they’re buying in regular installments over a period of time rather than in one lump sum immediately.
One survey found that BNPL usage by Gen Z and millennials grew sixfold—from 6% to 36%—between 2019 and 2021.
What merchants need to know:
Merchants that offer BNPL can experience several advantages and potentially generate more revenue by offering payment flexibility. The BNPL provider pays the merchant upfront and assumes the risk if the customer disputes the purchase.
However, this also means the customer experience—especially when making returns or seeking refunds—can be more complex. It’s critical that merchants understand the full arrangement, including customer policies and obligations, when offering BNPL. This includes managing expectations with the return and refund process and making the policies very clear upfront.
TREND 3: 5G & Connected Commerce
As mobile networks get faster thanks to 5G, the growth of the Internet of Things (IOT) means more and more everyday devices—from cars to refrigerators—are connected and enabling various types of purchases. Consider this: By 2025, 70% of licensed drivers in the U.S. will drive a connected car, forecasts eMarketer.
As connected devices go mainstream, the ability to make purchases directly from them will increase, whether by voice or a mobile application.
What it means for merchants:
Businesses need to consider how connected devices will change consumer engagement. An uptick in purchases through connected devices could lead to more friendly fraud disputes—where someone thinks a charge on their payment card’s transaction statement is fraudulent even though it’s a legitimate purchase. This often happens, for example, when a child purchases a video game or other streaming or subscription-based content.
TREND 4: The Rise of Self-Serve Tools
Whether shopping from the comfort of home or using apps that inform and enhance the buying experience in-store, “self-serve” tools have become commonplace and even expected. Examples include online tools that help you select and purchase the right item for your needs, paying at a restaurant using a QR code, or easily reviewing transactions and statements via an issuer’s portal—all without the need to interact with a person.
Gartner Research found in 2019 that 70% of consumers are using self-service tools at some point in their customer-service journey.
What it means for merchants:
Integrating self-serve tools into the buying process can save time (and money) for both customers and merchants, while streamlining and providing a more positive customer experience. That said, it’s important that merchants consider how to best integrate self-serve tools into their various digital channels while still providing live support and interaction at the points they’re needed most. One option: Adding your company logo to help jog customers’ memory of the purchase and show legitimacy.
Managing Risks, Reaping Rewards
With the soaring growth of digital shopping experiences and digital payments, merchants are wise to stay informed on the latest trends and consider adopting those that make sense for their business. Providing customers more options can help businesses stand out and create a better experience, but at the same time, could also potentially lead to more disputes and chargebacks as more purchases are done digitally. No matter how your customers pay or interact with your business, preventing disputes and chargebacks before they happen will be more important than ever.
