By Svetlio Todorov, Managing Director, emerchantpay

Since the introduction of contactless payment cards in 2007 in the UK, the uptake of ‘cashless’ payment methods has been gradually increasing. However, with worries around spreading the virus, the COVID-19 pandemic greatly accelerated the long-term decline of physical cash in favour of online and contact-free payments.

It appears that as people have become accustomed to ditching cash, they intend to continue using cashless methods. In emerchantpay’s 2021 New World, One Market report, which surveyed over 2,000 consumers in the UK, 28% of respondents said they would like to use cash less after the pandemic than they did beforehand, with 13% saying they don’t want to use cash at all. While the pandemic accelerated cashless payments due to social distancing measures, many consumers today rely on this method of payment and find value in the efficiency that card and contactless payments have over cash.

Further, as a result of the pandemic, eCommerce became essential for consumers to access shopping services during lockdown. In April 2020 alone, Mastercard reported a 40% jump in contactless payments — including tap-to-pay and mobile pay. As life gets closer to normal, consumers are increasingly finding convenience in online purchases, with the 2021 eCommerce revenue expected to reach £124billion in the UK alone.

Providing customers with the payment options they prefer to use both in-store and online contributes to them having a positive experience with your brand. This is a major factor in brand loyalty, but the changing payments ecosystem can be incredibly complex to navigate and retailers must firstly understand the varying payments preferences across demographics. With this in mind, how can retailers ensure that their payment model encourages repeat custom and brand loyalty?

Online payment preferences

Customer loyalty in an increasingly online shopping landscape is highly important – especially when your customers are constantly being pushed deals by competitors. It’s not easy to achieve loyalty – a separate emerchantpay report exploring brand loyalty among UK consumers found that 77% of people have changed stores, brands, or how they shop since the onset of the pandemic, and 13% of consumers claimed not to be loyal to any brands at all. What’s even more compelling is that this consumer group appears to grow with age, with 93% of Gen Z consumers being loyal to brands in comparison to 23% of Baby Boomers. For retailers, it is of utmost importance to ensure that your consumer’s payment preferences are met for a seamless checkout experience. This, in turn, will help your business achieve customer loyalty.

Considering this, merchants must be prepared to accommodate a broad range of payment methods in order to effectively leverage eCommerce. Respondents from our New World, One Market report revealed that UK consumers preferred to pay using PayPal (34%) or debit card (33%). PayPal was, however, a particular favourite for Gen X (46%). In fact, PayPal and credit cards shared the top spot for Baby Boomers (36% each). Of all respondents, Gen Z was the most likely generational group to say they prefer to pay by digital wallet (11%).

What’s more, emerchantpay research also found that 10% of UK consumers overall said digital wallets would be their go to method of payment within the next five years. However, as recently as 2019, only 8% of retailers were offering mobile payments. For online retailers who don’t offer this form of payment today, it could result in an increased cart abandonment rate and as a result, lost revenue.

Research revealed that eCommerce brands have the potential to lose $18 billion in sales revenue each year due to cart abandonment. To combat this, experts have found that conversions can be increased by 35.62% by implementing the right checkout optimisation strategies such as one-click checkout and a diverse offering of payment methods.

To increase sales and encourage repeat customers, an integrated, holistic and diverse approach to payments can mean the difference between success and failure.

Subscription-based services
Retailers can also benefit from services like subscriptions to encourage a loyal customer base. In the last nine years alone, the subscription economy has grown nearly six-fold (more than 435%) globally, proving that retailers are finding value in offering these services.

emerchantpay found that almost one in three (29%) consumers took out more subscriptions in 2020 versus 2019. The amount spent on monthly subscriptions correlates directly with age, with younger groups spending more each month. Gen Z said they spend an average of £31.46 per month, with Millennials spending £28.52, Gen X £20.99 and Baby Boomers £16.22.

Further research by Royal Mail found that during the pandemic, 55% of subscription box consumers said they signed up for a subscription service because they wanted to help ease the “lockdown blues” as shoppers could look forward to regular deliveries. But as lockdown restrictions eased, its popularity continued with the UK subscription economy now worth £395m. As it stands, 81% of UK households now pay for at least one subscription service, a huge increase on last year’s 65%.

To accommodate the rise in subscription-based services, retailers must ensure, where relevant to their business model and product offering, that their payment service provider is able to support recurring payment capabilities. This can also help to encourage brand loyalty and open up valuable upsell opportunities.

The future of payments

Retailers can also encourage customer loyalty by being responsive and agile to the payments landscape and the pace of changing consumer behaviour. When asking respondents how they envisage making payments five years from now, we found that PayPal and credit card usage were expected to be fairly similar to now at 33% and 18% (vs 19%) respectively overall. Still, merchants must be prepared for a shift in preferences as payments continue to innovate.

Take debit cards as an example. This method saw the biggest drop in usage, with younger generations showing the biggest change in preference. Millennials that listed it as a preference dropped from 37% now to 32% in five years, and Gen Z dropped from 34% to 27%. This reflects the forecasted shift to alternative payment methods which provide more convenient ways to pay for this generation of digital consumer.

Additionally, more than a third (38%) of consumers feel encouraged to make a purchase when having Buy Now, Pay Later as an option and retailers would do well in ensuring that they are geared with these services. Payment methods that are considered ‘alternative’ currently, will see growth in the future, with our report revealing that 15% of Gen Z and 11% of Millennials are expected to pay by digital wallet in five years. Additionally, a small number of respondents (4%) expect to use cryptocurrencies as a preferred online payment method.

The pandemic has resulted in the long-term decline of cash and the payments landscape will continue to evolve as consumers increasingly realise the efficiency of contactless methods. In order to tap into the momentum of digital payments, retailers must partner with a payment provider that offers in-depth market knowledge, as well as the agile technology needed to facilitate changing preferences.

In today’s digital world, the checkout experience can decide whether consumers follow through with a purchase. As such, agility is key and retailers who can quickly adapt to the payments landscape of today and tomorrow will be the ones who succeed.