By Warren Hayashi, President, Asia-Pacific, Adyen.
The pandemic forced brands to transform their businesses in ways that are here to stay
After a year of such great uncertainty, attempting to predict the future may seem risky. But even as brands and retailers faced unprecedented upheaval in 2020, one constant has held true. The pandemic has accelerated trends toward digitisation—and that’s as true in payments as in so many other areas of business and society. The stark reality of needing to avoid close contact with others has driven transformations for retailers and brands in a matter of months that in the past might have taken years. In the process, behaviours and expectations have changed for good.
As 2021 begins, much uncertainty remains but we feel confident that the digital transformation of payments will only get faster. Even after the pandemic has receded and consumers have the option to go back to their old behaviours, many won’t. The rapid increase in e-commerce seen under COVID-19 will persist, especially among previously digital-hesitant consumers. Merchants can no longer assume that their digital customers are limited to younger, tech-savvy shoppers. As brands have shown flexibility during the pandemic, consumers have also come to expect the flexible arrangements to continue. On that note, these are the key trends in payments that should be top-of-mind for brands and retailers in Singapore and Asia Pacific in 2021:
- Contactless will extend its reach into every corner of retail
From the start, the pandemic forced merchants to find ways to minimize the amount of physical contact necessary to complete a transaction. Customers and workers alike sought to avoid handing over credit and debit cards, touching keypads, and handling cash. According to our 2020 Agility Report 58% of APAC respondents preferred to use contactless payment methods because of hygiene concerns.
Our data also showed that the use of services such as Apple Pay and Google Pay has significantly increased over the last year too. Research from Kantar reiterates this, revealing that the frequency of e-Wallets transactions in Southeast Asia rose from an average of 18% pre-COVID-19 to 25% post-COVID-19, indicating a shift from one payment method to another.
In the post-pandemic world, the transition to contactless will only become more widespread now that the bar has been raised among consumers for what checking out can be, from one-click payments to same-day delivery options. Not to mention, the value of QR codes has also been made apparent in anchoring a seamless experience, not just at point-of-sale but at multiple points along the customer journey too, such as viewing menus and placing orders. The pandemic may have driven the change in behavior, but the superior user experience will cement contactless as the new normal.
- The distinction between offline and online will fade into irrelevance
As countries went into different forms of lockdown, many shoppers were unable to enter brick-and-mortar stores throughout 2020. Unifying offline and online became an issue of survival for retailers, who quickly pivoted to make app-powered deliveries and self-pick up options a reality.
Even while most physical stores in Singapore have opened their doors to consumers again, the digital infrastructure will remain in place. Many shoppers continue to prefer the convenience of deliveries and expect the options to continue, and retailers will find they’re able to forge better customer relationships thanks to the rich data generated by digital transactions.
One of the biggest learnings for the industry is the need to rethink the traditional split between offline and online stores. With lines increasingly blurred, retailers will benefit from adopting a unified commerce approach where brand interactions on and across all channels are important.
- The membership model will reign in retail and also in food and beverage
The membership model is another emerging trend for 2021. Amazon Prime is a great example of this, where customers pay an annual fee that in effect encourages them to buy more from Amazon in an effort to ensure they’re getting their money’s worth from their Prime memberships. Quick-serve restaurants especially are seeking to seize some of that flywheel effect. In addition to improved incremental spend, membership programs enable QSRs to get to know their customers in ways that were never possible when they were just anonymous faces standing in line.
Meanwhile, subscription passes encourage loyalty and more frequent use. Our 2020 Agility Report found that 38% of Singapore respondents (compared to 27% in APAC and 22% in Europe) signaled their interest in using these for products, including food passes, to reduce the amount of times they need to shop. Expect to see more retailers offering memberships in 2021 as brands seek to own the customer relationship and the data that goes along with it.
- Installments will become an everyday way to pay
The twin forces of increased convenience and tightened household budgets have brought pay-by-installment options mainstream, a trend that will only grow in 2021. Machine learning algorithms have become more adept than ever at assessing risk instantaneously, making it easy to offer “buy now, pay later” options right at checkout. For small and mid-ticket items, shoppers know that, say, instead of paying $100 now, they’ll pay $25 per month for four months. That kind of transparency makes it easier for shoppers on the fence to commit, which appeals to merchants hoping to avoid the dreaded abandoned shopping cart.
In 2021, providers of “buy now, pay later” options themselves will start to diverge, as some focus on higher-end, multi-year agreements, while others seek to offer installment plans for shopping baskets as small as $50. For households increasingly accustomed to paying by the month for everything from streaming services to food delivery premium memberships, installment plans start to look like subscriptions that just happen to have a fixed end date.
- The checkout-less experience will draw shoppers back to brick-and-mortar
In 2020, the appeal of an in-store experience offering limited human contact took on a new dimension, accelerating interest in doing away with the checkout counter altogether. For instance, in Singapore, BHG is looking to expand its endless aisle offering. By using interactive screens in-store, customers are able to check on inventories across all of BHG’s stores and e-commerce platform and can opt to have items to be delivered directly to their homes. Post-pandemic, shoppers will still find appeal in the human touch. The physical store continues to be relevant, especially in Asia Pacific and eliminating checkout counters frees staff to interact with shoppers in a more personal way, while also making lines a thing of the past.
In 2021, more stores will find various ways to make checkout a less prominent part of how people shop in-store. Multiple providers are creating their own versions of checkout-less experiences, where instead of going to the counter, customers will scan their items with their phones’ cameras, pay via app, and head out the door—a combination of increased trust and decreased friction that helps cultivate customer loyalty. In the case of Love, Bonito in Singapore, if customers are unable to find a particular item in store, they can go to an iPad within the premises, buy it online and have it shipped to their homes.
Across the five trends, this paradigm shift in the retail sector is underpinned by the under-tapped potential of technology to elevate the customer experience. Looking ahead in the new year, we expect retailers to increasingly harness digital solutions. Not only does this streamline operations, it also gives retailers the flexibility to pivot in line with changing preferences, and provide a seamless consumer journey across multiple channels.
Britain launches new pandemic loan support scheme
LONDON (Reuters) – Britain’s finance minister Rishi Sunak on Wednesday launched a new state-backed loan scheme for businesses hit by the COVID-19 pandemic, replacing existing programmes that have seen struggling businesses borrow some 73 billion pounds so far.
The new scheme will offer loans from 25,000 to 10 million pounds, with an 80% state guarantee, replacing the previous ‘bounce back’ scheme aimed at small businesses and programmes for larger firms.
Sunak did not give details on the interest rates or eligibility criteria for the new scheme, with media reports ahead of his Budget plan suggesting they are likely to be more stringent.
Sunak is trying to reduce companies’ reliance on the previous state-backed lending schemes as Britain prepares to ease lockdown restrictions which should lead to an economic recovery.
More than 45 billion pounds had been borrowed by over 1.4 million companies under the so-called Bounce Back Loan Scheme for smaller businesses, which allows banks to lend up to 50,000 pounds with 100% state backing.
The country’s leading spending watchdog last October warned more than half of that money may never be repaid due to fraud and defaults, given the limited checks banks were required to do.
A further 27 billion pounds has been loaned via two schemes for medium and large-sized companies, with 80% of the lender’s exposure backed by the state.
The lending support has helped defer or even prevent bankruptcy for many companies in hard-hit sectors such as retail and travel, meaning Britain’s banks have yet to see much impact on their loan books from the pandemic.
But the support has sparked concerns that the loans are propping up ‘zombie’ companies that will collapse as soon as the life support plug is pulled.
(Reporting By Lawrence White, Editing by Iain Withers)
EU should keep borrowing limits suspended in 2022 – Commission
By Jan Strupczewski
BRUSSELS (Reuters) – The European Union should keep borrowing limits for governments suspended in 2022, as it has this year and last, to help the 27-nation bloc’s economies return to pre-pandemic levels, the European Commission said on Wednesday.
“The general message is that we are keeping a supportive fiscal policy,” European Commissioner for Economic and Financial Affairs Paolo Gentiloni told a news conference, adding the EU would, in this way, be in line with the major world economies.
“Today, the Commission states clearly that pulling back support too quickly would be a policy mistake. The best way to secure public debt sustainability is to support the recovery,” he said.
The commission, which is in charge of enforcing EU rules that cap government budget deficits and debt to safeguard the euro, said current forecasts showed the EU would only reach its 2019 level of economic output in mid-2022.
EU finance ministers suspended the bloc’s budget limits rules, called the Stability and Growth Pact, last year when the COVID-19 pandemic started, using the “general escape clause” put in the rules for such emergencies.
“Current preliminary indications would suggest to continue applying the general escape clause in 2022 and to de-activate it as of 2023,” the commission said in a statement.
The recommendation is meant to help EU governments draft their fiscal strategies for the next two years by April.
In May, the commission will issue its new economic forecasts for the bloc’s growth, inflation and public finances and finance ministers will then take a final decision on whether to keep borrowing limits suspended in 2022.
If any EU country recovers more slowly than the rest and is still in trouble in 2023, the commission will take that into account in its view of its continued borrowing, it said.
“In case a member state has not recovered to the pre-crisis level of economic activity, all the flexibilities within the Stability and Growth Pact will be fully used, in particular when proposing fiscal policy guidance,” it said.
Commission Vice President Valdis Dombrovskis also said that while fiscal polices would have to remain supportive next year, EU governments should gradually differentiate them.
He said countries with strong economies and relatively low debt could afford a more supportive policy, taking into account the impact of the EU’s recovery fund that has both grants and loans for every EU member. Those with high debt, should be more careful, he said, and use the EU grants to fund investment.
(Reporting by Jan Strupczewski; editing by Philip Blenkinsop and Bernadette Baum)
Consumer Financial Protection Bureau Issues Disclosure-Focused Final Rule on Fair Debt Collection Practices Act
On December 18, 2020, the Consumer Financial Protection Bureau (CFPB) issued the second of two parts of a final rule revising Regulation F, 12 CFR part 1006, which implements the federal Fair Debt Collection Practices Act, 15 U.S.C. 1692, et seq. (FDCPA). The CFPB issued the first part of the final rule revising Regulation F on October 30, 2020. Our previous Alert provides a summary of key changes from the prior issuance.
There are several key changes that debt collectors, creditors and financial institutions should note. As further detailed below, the rule:
- Clarifies the information that a debt collector must provide to a consumer at the outset of debt collection communications, i.e., in a validation notice;
- Mandates that debt collectors take certain actions before furnishing information about a consumer’s debt to a consumer reporting agency; and
- Prohibits debt collectors from bringing or threatening to bring legal action against a consumer to collect a time-barred debt.
Although the rule expressly applies only to “debt collectors,“ states may extend the rules to apply to creditors. Furthermore, creditors themselves may elect to adhere to the new standards in an abundance of caution, or stay informed of the rules that apply to their debt collection vendors.
Compliance Time Frame
The rule becomes effective on November 30, 2021.
Information Debt Collectors Must Provide to Consumers at Outset of Debt Collection Communications – Validation Notices
Section 809(a) of the FDCPA requires a debt collector to send a written notice to the consumer with certain information about the debt and the actions the consumer may take in response (known as the “validation notice”) within five days of the initial communication, unless such validation information was provided in the initial communication or the consumer has already paid the debt.
The final rule clarifies the information that must be provided to the consumer at the outset of debt collection communications regarding the debt and the consumer’s rights―including, if applicable, on a validation notice.
Clarified Validation Notice Requirements
The new rule clarifies that the validation notice must clearly and conspicuously include:
- “Mini-Miranda” warning: The statement that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose;
- Debt information: Specific information about the debt (e.g., debt collector’s name and mailing address at which the debt collector accepts disputes and request for original creditor information, name of the creditor to whom the debt is currently owed, itemization date and amount of the debt on the itemization date and the current amount of the debt);
- Information about consumer protections: Specific information about the consumer’s rights and protections (e.g., the date that the debt collector will consider the end date of the validation period and a statement of the consumer’s rights to dispute the debt or request the name and address of the original creditor during that time); and
- Prompts for consumer response information: Specific prompts for the consumer to dispute the debt, request information about the original creditor or take certain other actions. Further, the prompts must be segregated from the validation information and option information, and must be located at the bottom of the notice under the headings “How do you want to respond?” and “Check all that apply.”
Model Notice and Safe Harbor
The final rule includes a first-of-its-kind model validation notice and provides a safe harbor for debt collectors who use the model validation notice or certain variations of the notice.
Disputes and Requests for Original Creditor Information
As before, the final rule states procedures for responding to a dispute or request for original creditor information within the 30-day period following a consumer’s receipt of the required validation notice. During that 30-day period, a debt collector may not engage in any collection activities or communications that “overshadow or are inconsistent with the disclosure of the consumer’s rights to dispute the debt and to request the name and address of the original creditor.”
Also as before, on receipt of a request for original creditor information, a debt collector must cease collection efforts until it sends the name and address of the original creditor to the consumer, in writing or electronically. Similarly, on receipt of a dispute of the debt, a debt collector must cease collection efforts until the debt collector sends the consumer a copy of the verification of the debt or copy of a judgment, or, if the debt collector reasonably determines that the dispute is duplicative, notifies the consumer in writing that the dispute is duplicative.
Definition of Consumer Extended to Include Deceased Consumers
The final rule expands the definition of “consumer” under the FDCPA to include deceased natural persons. The rule further provides that if a debt collector knows, or should know, that the consumer is deceased, and the validation information has not previously been provided to the deceased, then the debt collector must provide such information to the person authorized to act on behalf of the deceased’s estate.
Mandatory Communications Prior to Furnishing Information About Debt to Consumer Reporting Agency
The final rule prohibits a debt collector from furnishing information about a debt to a consumer reporting agency before engaging in specific outreach to the consumer about the debt. The specific outreach required includes either speaking to the consumer about the debt in person or by telephone, or mailing a letter or sending an electronic message to the consumer about the debt.
Prohibition on Collection of Time-Barred Debt
The final rule prohibits a debt collector from suing or otherwise threatening to sue a consumer in order to collect a time-barred debt (i.e., one for which the applicable statute of limitations has expired). This rule does not apply to proofs of claim filed in a bankruptcy proceeding.
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