Two reports, two gold mines full of data, insights, and conclusions. The Paypers’ report and the McKinsey’s report offer a thorough analysis of ways people have used their mobile devices in 2020. For complete analytics, we send you over to these sources. For everything else—major changes, global trends, behavioural shifts—we ask you to stay with us. Here are both reports in a nutshell, with key data about preferred online payment methods in eCommerce and our in-house commentary.
COVID-19 has changed everything
As much as we would like to forget about this year, we can’t. The global pandemic affected every aspect of human activity and social interaction. That is also true for payments and PayTech. National lockdowns has changed the way people use online shopping and popular online payment methods. Present tense: their habits will most likely outlive COVID-19, and impact shopping and payment platforms even more. Trends are rapidly changing but at the same time, as says the McKinsey’s report, global revenues for the payment sector declined by 22% in the first half of the year. What’s the deal?
Buy now, pay later: eCommerce payments have evolved
One of the most interesting trends is afterpay. Shops and payment processing companies give customers the time to breathe. More and more eCommerce platforms offer even 30 days of delay between placing an order and paying for goods. This is especially important for low-income households, but even financially stable families can benefit. And they do—reports show the fashion industry is among the big winners. People want to feel normal, even if they’re in quarantine. Buying clothes or hobby-related articles (the second fastest-growing category) can help with that. From that perspective, it’s important to establish one fact.
There are currently three main types of customers:
- Still employed and working mainly from home. They have a stable situation, but are saving for the future and cutting non-essential expenses.
- Temporarily relieved from work duties. For them, taking a mortgage payment holiday is often a necessity. They also keep their budget tighter than the previous group.
- Made unemployed because of the pandemic, forced into closing business or driven into consumer bankruptcy. These customers are the most financially challenged and can benefit the most from deferred payments.
Companies like Afterpay or Klarna are now appealing more than ever. Especially for the Gen Z customers who don’t even want credit cards. According to Afterpay’s report, 94% of their Gen Z customers don’t link the account to the debit card. Young adults want low-commitment solutions that allow for easy budget management. They expect customer-centricity and that’s exactly what they get. Platforms like those mentioned above don’t check the credit history before the consumer applies for an account. That’s why they win over high-street banks and other types of online payment methods in eCommerce.
Show me yours, I’ll show you mine:
mCommerce and contactless skyrocket
Distrust towards more conventional online payment methods in eCommerce drives the growth of online sales and its sub sectors. Even when locked in their homes, customers shop on laptops, tablets, and smartphones. So much, in fact, that mCommerce retails sales will probably win over eCommerce before the year is over. McKinsey’s report goes even further, bringing the example of Australian banks. Top four high-street banks removed more than 2,000 ATM terminals and closed 175 branches since June. Why’s that?
We are observing a massive shift towards PayTech. Customers are not so eager to extensively share their personal information (especially Gen Z) but they will gladly share their income. If not through the phone, then with a plastic card—but in a new way. Countries like Poland and the Netherlands have increased payment thresholds for debit cards. In France, contactless card transactions increased in June 2020 by 45% year-to-year. Mastercard reported that 78% of all transactions in April 2020 were contactless. And that’s data for Europe alone.
Optimisation is the new conversion
In July, YouGov surveyed over 2,000 UK adults about their shopping habits. As a result, we know that 63% of participants preferred electronic types of eCommerce payment methods. 63% used more card payments, 80% used more contactless payments, 24% of responders used mobile wallets. What’s the bottom line?
These types of behaviour would not be possible if applications were poorly designed and not optimized. After just a few months of involuntary lockdown, people might already have their preferred types of payment methods in eCommerce. Top apps bet on ease-of-use, intuitive user experience and transparent user interface. The previously mentioned customer-centricity is what customers value the most. The Paypers’ report confirms that. It mentions ACI’s research that shows a 59% abandonment rate among customers who can’t find their preferred payment method during checkout. Customers tend to think binary—if it’s not there, it’s not for me.
Ingredients of a high-converting checkout
There’s only one thing that works like a charm: options. Including multiple popular online payment methods increases conversion rates. In fact, most checkouts have a dedicated page for entering payment information. The Paypers’ report points out that for a lot of retailers the dominant methods involve a handful of big players: Visa, Mastercard, and PayPal. It may be so but the landscape is changing. The same report shows that Amex (American Express) and Klarna are getting traction.
Optimisation of the payment process is the key. IMRG’s study shows that over one-third of customers who reach the checkout level with the intent to purchase, don’t complete it. Naturally, there can be many reasons for this and they vary for each retailer. The Paypers’ report indicates key factors: payment options, delivery options, and appearance. Let’s stop here for a second.
Fine feathers make fine income
OK, the original proverb goes a little different, but that’s beside the point. What really matters is functionality. FinTech software development specialists should go way deeper than what’s mentioned in the Paypers’ report. Things like font type and size are important but trivial. Let’s dive into the advanced realm.
With financial technology, people want to feel secure. Especially now, in these turbulent times. That’s why copy and microcopy next to the most important or most frequently used options gives them a sense of stability. Because of this simple yet powerful tool, customers feel they know what they’re doing with their money. They have control over the budget, spending habits are transparent (application has spending history with categories). Phrases like “Learn how much more can you save” next to the calculator based on account history, make people feel taken care of. Again, customer-centricity.
If the FinTech app has built-in statistics or visual representations of the user’s spending history, don’t overcomplicate them. Design them in the most unambitious way possible. The power and the growing popularity of FinTech apps as a tool for eCommerce payments comes from simplicity.
Which brings us to another point. Colours. It’s not only about design being easy on the eyes. The role and distribution of whitespace, strategic content display and quick navigation tool: colour can help with all. Careful, though—the app has to be appealing but can’t generate mistakes on the user’s part. After all, we’re talking about money and even one misclick can cost dearly. Apps like MoneyLion or Mint have a slick design and are colourful for a reason. Clarity.
Card networks and FinTechs for better online shopping payment methods
Recent years have brought a few major trends in the development and growth of FinTech companies. I won’t mention them in this article, for that please read the FinTech trends in 2021 post. Let’s talk about the last major section of the Payers’ report instead. Disruptive technologies bring global card networks and FinTechs together. This cross-industry effort emphasizes three major areas: the growing role of touchless payments, real-time payments, and security issues.
That’s where biometrics comes in. People want their online purchase processes to be quick and safe. Payment gateways do what they can to further simplify them and make them even more distinctive from traditional bank transfers. Juniper Research study has found that mobile biometrics will have checked and authenticated (remotely and with in-store payments) $2 trillion by 2023.
That puts additional pressure on app owners and companies that offer FinTech mobile software development services. Security is also crucial for open banking. Trends like the adoption of fingerprint recognition replacing PINs are already hot. Biometric authentication can only increase the market share as an online payment method in eCommerce.
New rules of engagement for higher engagement
McKinsey knows that long-term forecasting is tricky. However, they have prepared five major recommendations to take advantage of this years’ trends:
- Carefully compose your customer portfolio. Bet on users that value tailored solutions and want to pay for them.
- Create services and solutions, not financial products. A product seems like a one-time deal. You build something, you put it on a market and that’s it. Meanwhile, services are updated and tailored to customers’ needs almost in real-time now. It’s not necessarily about the software-as-a-service (SaaS) model, it’s about ongoing product development and support.
- Recognize that the sales process involves a variety of tools and emotions play the central role. The McKinsey report underlines that transaction banking is a decade behind tech and telecom sectors in terms of customer management. FinTech companies use advanced data gathering and processing plus algorithms, but tapping into people’s needs is key. Hence the section about UX and UI in this article.
- Corporate clients demand a long-overdue refined experience. Give it to them. Bottlenecks in supply chains and trade challenges (not only those related to COVID-19) deserve proper attention. I have personally called one of the retailers to ask about my overdue online order. Response? “Please wait three to four days, we have problems with delivery. A known courier company is holding products in another country for no reason. We can’t get a straight answer from them”. Now imagine that happens in B2B relations… Buying something should mean not only swift payment processing but also monitoring the product route.
- Change the focus from “time value of money” to “money value of time.” Focus on the customer journey and refine internal processes to mirror and fix customer pain points.
What are the most popular payment methods online?
The obvious answer is: those that your customer chooses to use daily. But turning your app into a household name is everything but obvious. Even the most advanced digital product will have financial performance issues if it’s not built with empathy. Launch a FinTech app without taking notes from UX/UI specialists and you’re bound to face customer attrition. FinTech UX design plays a vital role in product development. So do emotions.
If anything, the year 2020 showed us that major business shifts can happen suddenly and without warning. The good news is that with the right business partner and agile mentality, everything can be managed. Welcome to 2021: a very interesting year to start a new decade.