Creating an easy, seamless and great payment experience is a critical part of any customer journey. Many industries were impacted by changes in the payments industry last year, including c-stores. The global pandemic of 2020 only highlighted the need for convenience retailers to invest in robust payment strategies to ensure customer safety, satisfaction and loyalty.
So, what does the future hold for payments in 2021? We expect that how consumers pay for things they want and need will continue to change, and speed, convenience and security will drive that evolution.
Here are several trends we can expect in 2021 across the payments industry.
Mobile payment adoption will increase
While mobile payment options have been increasing in popularity in recent years, the COVID-19 pandemic accelerated the necessity for and adoption of this technology. According to the Global Consumer Insights Survey 2020, 45% of consumers said they were using their mobile phone a shopping channel since the COVID-19 outbreak. The trend also extends to loyalty program members.
PDI’s 2020 Global C-Store Shopper Report found that 39% of consumers use a loyalty program’s mobile app to pay for purchases—the third most popular use behind redeeming and tracking rewards. The report also revealed that three out of ten U.S. and non-U.S. convenience retailers have seen increases in purchase and payment methods such as contactless and digital/online and curbside pickup or home delivery.
Investing in mobile payment technology has lasting implications for the future, especially along generational lines. The Pew Research Center says Millennials and Gen Zers will eventually account for more than 60% of the U.S. population. That means retailers must prepare to provide a digital-first experience, including mobile payments, across the customer journey.
This is particularly crucial for convenience retailers since research shows that Gen Zers already prefer convenience stores to more traditional retailers. These two generations are also increasingly more inclined to engage with mobile technology, from in-app payments to mobile wallets.
More than ever, consumers expect mobile payment options to be readily available and will favor establishments that offer them in the future.
Contactless payments will lead the way
Any form of contactless payment will continue to be key in 2021 as consumers seek to stay safe from COVID-19. Wearable devices, such as a watch with a payment component, will certainly make it easier for consumers to pay without touching anything. We will also see more facial recognition next year as an authentication and security tool for online and debit payments. Instead of using a credit card, which can be stolen, customers could make purchases using only their face. In fact, some quick service restaurants and c-stores have already started employing the technology – enhancing a customer’s experience and making purchases quick and simple.
Quick Response (QR) codes saw a comeback this year due to the pandemic. We all thought QR codes might be a dead technology, but the touchless form of this payment made a strong showing in 2020 . According to Juniper Research, by 2022, the expectation is that 5.3 billion QR code coupons will be redeemed by smartphones and 1 billion smartphones will access QR codes.
America runs on debit
America, and much of the world, runs on debit. We believe reliance on debit cards, particularly private label debit cards, will continue.
In a 2020 survey, consumers said they preferred debit payment for c store purchases between $10-50. And another study by Deloitte stated that 52% of Gen Z and 41% of Millennials prefer to use to debit cards.
So, even as mobile payments continue to find footing in the U.S., why is private label debit a preferred payment method? The obvious answer for consumers is that it helps them keep track of the money they spend, which consequently keeps them out of debt. But the benefits extend beyond that. Last year, convenience retailers spent nearly $12 billion on credit card swipe fees. By moving to private label debit cards, retailers can repurpose this savings into direct consumer. In turn, this produces profitable customer behavior by engendering more loyalty in the form of increased visits and spend.
Lastly, convenience retailers benefit from private label debit programs because they drastically change consumer behavior. For example, according to the Purchase Model Lift Study, having a private label debit program results in considerable sales lift of around 36% for program participants.
The power of combining loyalty and payments
There’s a common misconception that payments and loyalty should never intersect with one another. For far too long, this “never the twain shall meet” mentality has caused convenience retailers to manage these areas separately, rather than treating them like two complementary pieces. But today’s consumers are sophisticated, and they’re looking for a simple, easy, connected customer experience. To meet that expectation, we believe convenience retailers will begin combining their payments and loyalty programs as a standard practice.
Combining loyalty and payments gets at the heart of convenience retailers’ main goal. In this year’s Road to Rewards Report, 40 percent of all loyalty programs had the primary goal of changing customer shopping behavior. Separately, loyalty members and consumers who use a retailer’s private label payment options are already likely to engage more frequently with that brand. Bringing these two pieces together—loyalty and payments—can create an even “stickier” relationship between a retailer and its customers.
As we enter a new year, there are still a lot of challenges facing the retail industry. The pandemic that disrupted businesses and our everyday lives continues to rage on. And while there is hope on the horizon, the many changes in consumer expectations and rapid adoption of new technologies around the world will likely remain. In order to survive and thrive in this new reality, retailers must lean into digital transformation to create seamless, safe and differentiated customer experiences. And those experiences must include a plan for payments.