Six Trendlines For Payments In 2021

Image for post
Image for post

The problem with a lot of “big” New Year’s predictions is that they’re really pretty small.

Most are so general that there’s no way they can be wrong. Take the one about the restaurant industry getting better in 2021, or the prediction that it will be the year of takeovers in tech.

Neither one goes out on much of a limb to predict what might be coming down the pike in 2021.

Of course, there’s a lot to be said for playing it safe. But there’s so much more to be gained when predictions go beyond the obvious to make people stop, think, talk and debate.

What I’d like to offer today isn’t a set of predictions, but rather an organizing framework for how innovation in payments, commerce and the broader connected economy will play out in 2021, and will influence changes in the years to come.

There are six elements of this framework, each of which builds on what I wrote about almost a year ago to this day. Then, I said that the widescale availability of connected devices and fast broadband all over the world, a consumer appetite for digital experiences, and access to new digital tech and payments tech would move commerce and payments to an anywhere, anytime, for anything experience.

How we live, work, pay, shop, stay connected, stay healthy, bank, travel, eat and spend our leisure time, I wrote then, would become more digital — and the lines between each of those discrete activities would converge, enabling new digital-first experiences for consumers and businesses. The physical world would have to conform to those digital preferences in order to survive.

In other words, the connected economy — with innovations across each of those areas — would reshape how business gets done, with payments as the fuel that supports new business models and ways to monetize those new ways of engaging.

Little did I or anyone know that a global pandemic a few months later would accelerate that premise and move it closer to reality.

With that in mind, here are the six elements of my 2021 framework and what they mean for the rest of the 2020s, at least.

2021 is the year to stop putting a prefix in front of the word “commerce” and digital in front of any other activity or function.

There’s no longer the need to talk about omnicommerce or multichannel. Digital and different channels are now an integrated part of the commerce experience and the consumer journey. And if they aren’t, they better be soon. No longer different in the mind of the consumer, they’ve become her de facto standard for how she engages with brands and businesses.

In fact, the lines between digital and physical are no longer blurring — they’re disappearing.

We’ve seen this evolve over 16 consumer studies of a national sample of now more than 45,000 U.S. consumers conducted by PYMNTS since March 6, 2020.

The global pandemic has shifted 110 million consumers into digital-first channels to grocery shop, eat at or buy food from restaurants, and shop for retail products over the last nine months — first because there was no other way, and now because it has become the preferred way. Nearly half of the U.S. adult population shifted to digital in nine months; even more remarkably, 83 percent of those consumers say they will stick with some or all of those digital habits moving forward.

But it’s not just shopping for food or other retail products.

In consumer research that PYMNTS will publish very soon, branch-first consumers have adapted to digital-first preferences for banking services. The branch that used to be one of the three things that defined what a primary bank was to a consumer is no longer regarded as essential. It’s digital-first, with physical used only as needed.

We see corporates, large and small, shift to digital processes and payments, as paper invoices and checks create too much friction for a workforce that will likely continue to do their jobs from somewhere other than the office in 2021 and beyond.

We see consumers paying to watch movies on the big screens in their homes — once for the subscription service that gives them access to video content, and then again to watch a first-run movie that’s available at the same time that it’s released in the movie theatres.

We see players like Amazon spending big bucks to bring more live sports online and to offer streaming services that integrate commerce and payments into that digital experience.

In sectors where service was almost always delivered face-to-face, we see digital becoming a more integral and accepted part of the consumer experience.

Like seeing the doctor. Telehealth platforms not only expand access to care, but they also expedite the delivery of care in person only when it is absolutely essential, saving the patient and the healthcare provider time and money. One doctor told me that over the course of the pandemic, 85 percent of the requests to see a doctor were resolved satisfactorily just using the digital channel.

Like eating at a restaurant. Using apps and QR codes to pop open a menu in a restaurant, order from it and then pay for what was ordered after the meal is over was first done out of health and safety concerns — but it is becoming the way ordering and paying will be done in a post-pandemic world.

Like going shopping. Retail’s use of augmented reality and video messaging platforms will become more widely available and accepted as suitable substitutes for the service and the experience of what was once only achieved via a physical shopping experience. Retail’s winners will recognize that job one isn’t to drive feet into the store but to drive the engagement that leads to sales across the digital touchpoints along the digital-first consumer journey.

Now, digital is the first — and in some cases the only — touchpoint that consumers have with merchants and that businesses have with other businesses. 2021 will be the year businesses recognize that digital isn’t another channel to deploy and manage, but the front door to getting and then keeping their customer relationships.

Making things easy and eliminating friction was once how businesses differentiated their services and innovators hyped their solutions. Today, that’s now table stakes.

Consumers and businesses define convenience differently now. It’s a definition shaped by a global pandemic that has given each one a new appreciation for their time — and a willingness to pay to save, shift and pack more things into it.

Over the last nine months, PYMNTS asked consumers whether they’d prefer to have things delivered to them, made available for curbside pickup or in-store pickup. They said delivery — “bring it to me” — by a factor of three to one, even though curbside and in-store pickup are free.

The “bring it to me” economy will redefine business models.

It shouldn’t come as a surprise. Platforms like Instacart, with its 750,000 shoppers in the U.S., make that tradeoff easy. Paying $6 plus tip to get groceries delivered is a small price to pay to save the time traveling to and shopping at the grocery store. It is especially convenient when those shoppers offer access to grocery stores where consumers would like to shop, but which take too much time to reach.

The same is true with restaurant aggregators. Since March of 2020, nearly a quarter of U.S. consumers used an aggregator to get restaurant food delivered to their homes, spending roughly $10 billion in fees to save the time required to prepare dinner and/or pick up a takeout order. More than just ordering out, consumers wanted to shift the time spent cooking to other valuable things, and were willing to pay delivery fees to do that.

Amazon Prime members pay $119 a year to get, among other things, free shipping — and now Walmart+ customers pay $98 a year to get the same. Between Amazon Prime and Walmart+, consumers spent $20 billion in membership fees for the ability to shop online and have things brought to them, avoiding time spent shopping in stores and getting the certainty that they’ll get what they need delivered, when they want it.

When gyms locked down, consumers subscribed to fitness apps and bought Peloton bikes and Mirrors to bring fitness regimens and personal trainers into their homes. No longer constrained by going to a physical gym to work out, or tethered to a class time or workout schedule, consumers were more than willing to pay up to shift time to what works best for them, without giving up the benefits of working out.

Work from home has given consumers totally new opportunities to shift time that they once spent on the weekends grocery shopping or running errands to digital channels during the week. According to the PYMNTS How We Will Pay study, 16 percent fewer consumers now shop for retail products on the weekend, and 30 percent fewer consumers shop for groceries on the weekend, opting to have those products ordered online and delivered to their homes. These habits and patterns will likely stick as work-from-home options expand, freeing up weekends to explore other activities with family and friends.

Payors are increasingly willing to invest in methods that move payments faster to their receivers — and receivers are willing to pay extra to get paid faster, too. Those dynamics are driving instant payments adoption, while at the same time offering senders new ways to monetize payments choice for receivers who want a faster option and don’t mind paying for it.

As consumers think more carefully about their time as a currency to be spent — or saved — and their satisfaction with digital-first experiences continues to increase, businesses will be more motivated to use innovative tools, tech and payments to create new experiences that respect their time.

Knowing that they can monetize these experiences, innovators will move the service delivery paradigm away from “come to me” to “bring it to me” for any number of consumer and business activities that were once only delivered face-to-face. Digital with physical on their terms.

There’s an app for that. Actually, there are a lot of them.

Consumers use bank apps for checking their balances and paying bills, investment apps for managing their money, payments apps and digital wallets to store balances and pay for the things they want to buy, ride-hailing apps for getting around town, reservation apps when they want to eat out, delivery apps when they want to eat in, travel and hotel apps for booking travel, transit apps for accessing public transportation, merchant apps for shopping, email apps for work, calendar apps for organizing schedules, messaging apps for texting with friends and colleagues, social apps for seeing what friends are up to, streaming apps for watching videos, listening to music and playing games, dating apps for finding romance, digital content apps for keeping up with news and reading books, search apps for getting information, map and navigation apps for getting directions, and fitness apps for tracking health.

Over the last decade, consumers have lived their digital lives by hopscotching between a series of icons on their smartphone home screens. Those apps, and now an increasing portfolio of connected devices beyond smartphones, have given consumers a digital front door to services that once required a friction-laden physical-world interaction.

As consumers seek a more simplified, streamlined view of their own very disparate apps ecosystems, new intermediaries will offer a more holistic way to connect the dots across the many banking, payments and commerce touchpoints consumers currently have, or might like to have.

In 2021, the one-stop-shop meets the connected economy.

Payments will become the invisible force powering the connections between these dots. More than the payment enablement of discrete verticals, though, these intermediaries will offer consumers a single place to interact with multiple, relevant services providers.

In this connected economy ecosystem, consumers continue to have choice but have a simplified way to enable, pay for and then track the choices they make. Artificial intelligence (AI) will tailor personalized recommendations, and businesses will be motivated to innovate new services and products so that they can appeal to users who are a part of it.

The “everyday” app concept isn’t a new one — in developing and emerging economies like China, India and Latin America, it is the foundation for how consumers and businesses engage inside of them, and the incentive for innovators to develop services and products that appeal to those users.

But in 2021 and beyond, it will take on a new dimension with the integration of commerce, payments and financial services as the core, especially in developed markets where many efficient banking, retail, investment and shopping platforms already exist. The innovation will be about turning separate apps into a connected ecosystem accessible across any channel and using any modality, including voice.

The belief captured in the old saying “if it ain’t broke, don’t fix it” was the biggest obstacle to getting businesses and consumers to break with the way things have always been done. The perceived risk of trying something new was always considered a far greater downside than the potential gain of a new but unknown experience. Businesses, with conflicting investment priorities, were often forced to deprioritize anything that, well, wasn’t really broken.

Sticking with the status quo worked well enough — until we discovered in March of 2020 that it didn’t.

When the pandemic hit, consumers shifted digital over fears for their health and safety. Businesses were forced to adapt to a work-from-home environment almost overnight and were forced to adopt digital methods to keep their businesses running.

For consumers and businesses, the inertia that kept both from investing in and trying something new just disappeared.

In 2021, sacred cows are no longer sacred.

Pundits like to say that the global pandemic has accelerated [pick your number] years of innovation into nine months. A big part of the “why” isn’t just because banks, payments companies and digital platforms had the necessary digital building blocks in place to help accelerate that transformation.

It’s because there was a complete and universal willingness to put the sacred cows that once held back innovation back out to pasture.

When it became obvious that the pandemic would last more than a few months, businesses made the investments to change the processes that only worked well when people were sitting next to each other in an office. For businesses, getting paid was the catalyst, as was the urgency associated with getting a real-time read of their cash position, and putting expense controls in place for a distributed workforce.

For consumers, the fear of contagion, even to this day, keeps consumers loyal to the digital-first habits they’ve acquired over the last nine months, and largely out of the physical store. More than that, consumers say that merchants have upped their digital-first experiences, which makes it more effective and efficient to engage that way.

Getting over that first big hump — that big shift to digital — now gives both consumers and businesses the confidence to build on those experiences and try even more new things. Innovators, seeing these shifts and the likely permanence of some or most of them, will be motivated to create new ones that leverage these new digital foundations — and consumers’ and businesses’ newfound appetites for change.

A CEO made an interesting observation on one of the last PYMNTSTV segments of 2020. The program was about 2021 innovations and what a group of CEOs might like to see emerge. The massive shift to digital, this particular CEO said, made him feel like he was “back in 2003,” given the flood of email solicitations from everywhere and every business touting their products. There had to be a better way to organize and curate promotions, he thought — innovation was sorely needed to accomplish that.

Truer words.

Not only are our personal and professional emails now overrun with notices of sales and new offers and reminders that we have stuff sitting in shopping carts unbought, but we are also now faced with a barrage of solicitations in our LinkedIn mailboxes and across our messaging apps for the same.

The “unsubscribe” button has never been so appealing — when it actually works.

Brands contribute to this clutter because they now increasingly make entering an email or mobile number (or both) a condition for getting a percentage off their first purchase, well before the potential customer has even gotten to the product page to buy the thing they once thought they wanted. These tactics introduce friction that risks losing a sale — especially when it almost guarantees neverending emails and SMS messages from the brand.

Context is now king, as businesses’ biggest competitors are all the firms seeking consumers’ attention.

But consumers and businesses do want to be made aware of relevant offers. It’s why they don’t mind sharing information with brands to get more targeted ads and promotions. It’s why consumers consistently gravitate to marketplaces and platforms where they have a history — where promotions and recommendations can be proffered based on past behaviors and purchases.

And it’s why context and commerce are now two sides of the same coin.

The biggest competitor to any business is everyone else seeking some of the consumer’s scarce attention. Getting their attention requires being relevant, anticipating their needs and providing options that may satisfy them.

It always meant being where the buyer was. But in a digital world, it means being where businesses and consumer eyeballs are. That increasingly isn’t at the brand’s or business’ front door, but somewhere else along their buying journey.

Innovators will use AI and other methods to personalize recommendations inside the ecosystems where buyers find recommendations in the context of what they want to buy. They need to work harder to find that sliver of time, that context, in which buyers will be most willing to give their attention, instead of the raft of others screaming, like 2-year-olds, to look at them instead.

In a world where Google’s acquisition of Fitbit is challenged by regulators and U.S. lawmakers are entertaining a bill proposing that the only permissible merger is one between two small companies, talking about acquisitions in 2021 may seem a bit nuts. But acquisitions will happen, even if they are likely to be challenged by the regulators. Businesses will somehow persevere.

Surely there will be acquisitions (or attempts at them) that are about consolidating for scale and expanding geographic reach. See Grab and Gojek, Walmart and Flipcart, Just Eat and Grubhub, the rumored Western Union and MoneyGram.

Where acquisitions have the potential to be much more impactful is in situations where suitors are looking to do more than just double down on what they already have. In 2021, I believe we will see attempts to acquire players that give companies a meaningful reach into one or more of the pillars of the connected economy that they lack, giving them access to tech or consumers or a new business model they would like to monetize.

Acquisitions will accelerate the reality of the connected economy.

Take Amazon. The conventional wisdom is that it will buy Target or Kohl’s. Maybe. I think that a much better move would be to buy Instacart. Grocery is retail’s most significant battleground, and it’s where Amazon needs more firepower than it has now. Instacart not only powers the digital shopping channel for most major grocery stores in the U.S., but it also has a shoppers’ network that would give Amazon things it doesn’t have: grocery sales and a network of 750,000 shoppers who can double as last-mile delivery for other segments Amazon would like to monetize: restaurant delivery and local retail.

Then there’s Walmart. The conventional wisdom is that it will (or would like to) buy Shopify. It clearly needs to do something to beef up its online presence and to hedge its bets against grocery sales slippage. The digitization of food stamps, which account for 4 percent of Walmart’s grocery sales, now gives those shoppers other options for shopping, including Amazon. But Walmart needs foot traffic, too, since that’s how it makes money. Buying a healthcare provider to beef up its existing efforts would check that box, especially as healthcare undergoes its own transformation. For an online play, eBay or Etsy seems a better fit.

Take Apple. What Apple lacks is a commerce ecosystem. It has a wallet, payments and its App Store. But it’s not a commerce platform, and for Apple to be anything more than a hardware company with a bunch of me-too services offerings, it needs commerce. Those are the guys who might have their eyes on Shopify as an instant way to access global commerce with the direct-to-consumer brands that consumers increasingly favor.

Then, there’s Google. Google has payments and a mobile operating system, as well as the world’s largest commerce platform via search. It has enabled the integration of Shopify merchants into Google Shopping. What Google needs is logistics — control of the last mile. Here’s where acquisition of UPS might make sense, especially since UPS’ biggest competitor just bought ShopRunner, which is a delivery platform integrated into the eCommerce workflow.

I’ll stop with the free advice now, but hopefully, you get the point.

All of these ideas are less about specific players than a framework for imagining how the connected economy will take shape over the years to come. A wildcard for this framework is what will happen to regulation — it’s clearly going to be one of the big players. It’s hard to know how it will trickle down through the digital economy, what frictions it will cause or what opportunities it will present. That’s because a lot of places are still sorting out what they want to do and how the regulations in many different countries will interact with each other.

What’s Next

We start 2021 with a new sense of hope and optimism, as a vaccine promises to restore normalcy to what has been anything but normal for a very long time. And its rapid development shows how science, tech and business can make the world a better place.

Today, the premise of a digitally-driven connected economy is a pivotal cornerstone for how consumers and businesses will interact. In 2021, I believe that the six things I have laid out will build on that foundation and inspire innovators to take payments and commerce to an entirely new level this year — and in the years to come.

2021 will be a year shaped by innovators who see the potential of life in a digital-first world. It will, no doubt, be thrilling to see how it all takes shape.

Originally published at https://www.pymnts.com on January 4, 2021.

CEO of Market Platform Dynamics & http://PYMNTS.com

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store