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Digital Payments and the Future of Commerce in the Next 10 Years

By Ron Hynes
September 28, 2021
in Commerce, Digital Payments, Emerging Payments, Industry Opinions, Merchant
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If the last year and a half has taught us anything, it’s that digital payments are here to stay and will continue to grow as a percentage of total payments. Not only did in-person transactions decline, so too did the use of cash. Could it be possible that we are actually heading towards a world without cash?

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If the last year and a half has taught us anything, it’s that digital payments are here to stay and will continue to grow as a percentage of total payments.  Not only did in-person transactions decline, so too did the use of cash.  Could it be possible that we are actually heading towards a world without cash?

According to a recent report by Insider Intelligence, ecommerce sales in the US will reach $909 billion in 2021.  Alongside this growth, fraud has accelerated even faster, as the bad actors continue to find new ways to exploit holes in the ecommerce ecosystem.  For merchants, this has created a need to pay attention to more dynamics of the shopping and checkout experience.  Delivering a great customer experience means ensuring legitimate orders are processed and fulfilled with little to no friction, and fraudulent transactions are stopped in their tracks.  It seems rather simple, but at Vesta we’ve been helping merchants strike this balance for decades, and I can say from experience that it’s a lot more challenging than it sounds.  As a former boss used to tell me, “Says easy and does hard.”

Stop fearing fraud and start preventing it

The pandemic created a far greater consumer sampling program for contactless payments than any one of us could have ever designed. And the proliferation of online commerce has created a perfect storm of massive changes to consumer shopping and payment behaviors, changes that will never turn back.  What we’ve observed at Vesta is that as more consumers shop online, fraudsters get more sophisticated, which makes it increasingly difficult for merchants to stay ahead of the curve.  However, the fear of the unknown has led many small, medium, and even large online merchants to over-emphasize protection, at the expense of customer satisfaction, and at the expense of ensuring that every real customer that wants to buy from them, can.  In many cases, the lost sales associated with the fear of fraud will be more damaging than the fraud itself.

As we (hopefully) enter a post-pandemic world, digital interactions will continue to accelerate and “buyer-not-present” payments will continue to take an even bigger slice of the overall payments pie.  Retailers in this space must keep pace, not just with payments technology and consumer preference, but equally important, with the technologies available to facilitate safe, secure and seamless checkouts, for their customers and for their business.  It’s important to remember that digital fraud is a big business run by large multinational “corporations.”  The individuals that wake each day and go to work hoping to find new ways to fool the system are not all that different from you or me, it’s a full-time job, and that’s why it’s critical for merchants to use the latest technology available to fight these fraudsters.

Rise in a cashless society

According to Grand View Research, the digital payments market is set to grow globally at 19.4% annually between 2021 and 2028, with the rise in ecommerce sales being a factor in driving this growth. As more and more commerce moves in the direction of buyer-not-present, we continue to move in the direction of a cashless society.  This creates a new set of expectations and requirements. Consumers want transactions to be speedy, discreet, and frictionless, and merchants want that as well, but they also need a way to ensure the person on the other end of the transaction intends to pay for the goods or services being sold.  Over three-quarters of Americans already use some form of digital payment, according to McKinsey’s annual Digital Payments Consumer Survey released earlier this year, and in some parts of the world, it is overtaking all other forms of payment.  The survey also discovered that consumers are using two or more digital payments methods, jumping to 58 percent in 2020 from 45 percent the year prior.

There is nothing to suggest that this evolution will slow down, and over the next decade, it’s likely the available methods of payment will grow as well – from facial recognition to voice-activated payments – creating new windows of opportunity for bad actors to take advantage.

Embrace the future

While the rapidly evolving digital payments ecosystem can be tricky to keep up with, the developments we’re seeing are actually very positive for merchants and consumers alike. A renewed focus on convenience and security will ensure healthy long-term growth for the global ecommerce market and increased revenues for merchants of all sizes. Rather than get overwhelmed by the constant changes, merchants should consider partnering with solution providers to make the prevention of fraud (and a seamless checkout experience) a full time job, much like the full-time fraudsters that wake up every day trying to find new ways to win. 

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Tags: CashlessCommerceConsumer BehaviorDigital PaymentsFraudIndustry Opinions

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