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2020 was a year of profound disruption as the global community struggled with the weight of challenges posed by COVID-19. 2021 is shaping up as a year of transition. The pandemic poses ongoing challenges in many communities while others are further along in recovery. Enterprise businesses are looking to rebuild smarter in 2021, adapting to accelerating changes in technology and consumer behavior.
The 2021 Global Payments Report covers how payments have changed over the last year and how the pandemic has catapulted payments technology further than previous projections.
No. 1 – The accelerating decline of cash
Cash retreated in 2020 as COVID-19 restrictions fell most heavily on physical point-of-sale merchants. In 2020, cash accounted for 20.5% of global POS volume, a dramatic 32% reduction from 2019. The pandemic accelerated cash’s decline by over three years, exceeding in 2020 our previous projection for 2023.
We project this decline will continue well after the pandemic, falling an additional 38% between 2020 and 2024, when it’s forecast to represent just 12.7% of POS transactions. However, cash isn’t dead and should be accepted wherever consumers demand it and where mandated by legislation. Merchants should assess their cash acceptance infrastructure knowing that the decline of cash is a trend continuing into our foreseeable future.
No. 2 – The emerging dominance of mobile and digital wallets
Mobile wallets gained much more acceptance in pockets around the world as consumers looked to reduce physical interactions and increased their online shopping. Mobile wallets absorbed a large part of cash’s share loss at the point of sale, rising 19.5% from 2019 to represent 25.7% of 2020 POS transactions. The pandemic accelerated interest in contactless payment methods, propelling what was already a growing surge in mobile wallet use globally. We project mobile wallets will account for more than a third (33.4%) of global POS transactions by 2024, rising to become the dominant payment method worldwide.
Bringing mobile and digital wallets into the core of enterprise payment acceptance strategies is now an established best practice. Led by its majority market share in APAC, digital wallets were used for 44.5% of global e-commerce transactions in 2020. Digital wallets will eclipse all other payment methods combined in global e-commerce by 2024, rising to account for 51.7% of transaction volume.
Determining which mobile and digital wallets to accept should largely be based on region and geography. Payment preferences remain localized so planning which integrations to put on the roadmap should be discussed based on where your primary customers reside.
No. 3 – Loyalty is the new modern currency
Customer loyalty has long been the goal of brands. Yet the key to instilling loyalty has remained elusive. The pandemic is hastening the evolution of the loyalty ecosystem, as merchants embrace reward programs more in sync with a new generation of consumers.
Central to effective loyalty rewards platforms is product design informed by the customer UX at all stages of their customer journey – awareness ignition, evaluation of alternatives, motivation to sign up, user experience and repeat-purchase behavior. Brands that understand their customers and embrace a digital-first mindset have the capability to tap into the right experience to benefit their business.
No. 4 – The existential importance of omnichannel
Prior to the pandemic, digital engagement strategies, channel-agnostic payments and flexible delivery methods all sounded great. But for many businesses, development efforts could wait. The pandemic changed that equation overnight.
COVID-19 is accelerating this momentum toward omnichannel experiences with the pandemic being the ultimate stress test of business resiliency. Omnichannel approaches were around and well underway prior to 2020 but the pandemic propelled them into the forefront of development. Nice-to-haves instantly became must-haves. Adaptability is now core competency and embracing digital transformation is increasingly a matter of survival for enterprise merchants.
No. 5 – Partnerships are essential to rebuild after COVID-19
Creating infinitely flexible, fault-tolerant digital and physical infrastructure is hard work, even for the best-resourced enterprise merchants. The complexity of digital transformation makes going it alone impractical – if not impossible. Partnerships with technology and logistics providers help make digital transformation a reality.
The pandemic forced even the largest global merchants to engage with e-commerce and delivery platforms to engage customers where they were. Logistics managers are leveraging partnerships to manage a new era of unprecedented risks. Payment partners are helping merchants manage a paradigm shift where safety, speed and convenience are essential to customer experience.
We’ve entered a new era where the velocity of commerce is accelerating faster than ever. Rebuilding our economies and businesses starts with a clear-eyed understanding of what’s changed and where commerce is heading.