The shift to digital shopping has been underway for some years now as payment and logistics services enhance the convenience of purchasing and receiving goods.
Since 2017 e-commerce revenues have risen from an estimated $1.4 trillion to $2.4 trillion, nearly 2.7% of global output. The shift has been accelerated by the Covid-19 crisis, as restrictions on mobility led to a surge in online demand. To be specific consumers spent $861.12bn in the US alone in 2020, a 44% increase from 2019, that’s an extra $263.1bn!
History is often to repeat itself, and in this case the rapid digitisation of commercial goods and services has a precedent with the SARS virus in 2003. Alibaba and other Chinese companies at the time were able to kickstart their success by servicing those stuck in quarantine throughout Asia.
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Retailers during the current pandemic have faced the same problem, and have had to rapidly upgrade their digital and payment services as a result. It has been a case of adapt or die, a challenge that even household brands like Debenhams and many more were not up to.
The payments industry has had several products take off that were already being pushed before the pandemic, fuelling the rise of payment companies such as Klarna. The struggle to gain user and retailer attention away from traditional payment methods was alleviated by lockdown restrictions and the corresponding rise of shopping via social media.
According to the 2020 Sprout Social Index, nearly 90 percent of consumers will buy products from a brand they follow on social media. The study also revealed that when consumers follow a brand on a social platform, 75 percent will increase their spending with that brand. Online retail can often be volatile, a good brand awareness campaign can backfire on an unprepared company, with websites grinding to a halt beneath the onslaught of eager customers. This has led to a demand for faster and more convenient methods of payment, to tackle the growing market.
One of the most successful options has been the buy now, pay later feature that companies such as Klarna and Afterpay have made so popular. Leading buy now pay later player Affirm projected an increase of 20% in conversion rates and 87% in average order value for retailers that offer its service.
Another breakthrough in payment products strategy is the ability to pay in instalments, a great innovation during the pandemic, when many people were experiencing financial hardship. Even post-pandemic this option incentivises people to make larger purchases in general; according to Klarna brands with instalment financing found an increase of 58% in average order value and 30% in conversion rates.
The effect of such payment innovation is actually measurable according to a Bank for International Settlements (BIS) bulletin. The BIS report proved that the stricter the lockdown containment measures, the faster the growth of e-commerce. Interestingly countries with less developed e-commerce industries experienced the highest growth, highlighting a ‘catch up’ effect that presents an exciting breach for enterprising tech start-ups to step into.
The bulletin also highlighted the increase in the use of CNP transactions, indicating the increasing popularity of convenient new payment options. Post-pandemic transaction value remained higher than pre-covid showing that the greater convenience of emerging payment systems not only attracted but also retained customers, when they were re-exposed to traditional purchase options.
Headcount’s 2021 Payments and Fintech Salary Survey contains data that tracks with the rapid uptake in new payments technology, highlighting demand for greater technological competence and leadership skills to assist growing companies. According to Headcount’s Mike Champion, “even as the Covid-19 threat continues, demand is expected to sustain into 2021 and beyond.”
The significant boost given by the pandemic is an exciting opportunity for innovative professionals to sweep in and revolutionise the industry. Ambitious talent is required to bridge the skills gap that payments suffers from, but a lucrative career rewards those who succeed.
If you are looking to take the next step in your career, connect with Headcount, the number one recruiter in payments and fintech. Send us your CV or apply now for one of our live job offers.