Industry trends update: retail evolution—payment preferences, physical stores, and social commerce

Consumers expect choice about how to pay when they shop online or in person. In an S&P Global Market Intelligence 451 Research report,¹ 33% of consumers surveyed (and 54% of Gen Z consumers) had abandoned a purchase at least once in the previous six months because their preferred payment method wasn't offered.

A Forrester report² shows that newer digital payment options (such as wallets) have pulled ahead of traditional options like cards and cash among U.S. consumers: 69% of U.S. online adults used a digital payment method in the past three months to make a purchase. Forrester compares this with 56% having used a credit card and 55% having used cash during the same period.

Use of buy now, pay later (BNPL) is also growing: the 451 Research report states that 70% of consumers who used BNPL in the past six months said they made at least one purchase they wouldn't have made if BNPL hadn't been offered at checkout. Inevitably, that's good news for merchants too: the same report indicates that 72% of merchants who offer BNPL at checkout strongly agree it has helped increase their conversion rates.

In the store, contactless payments are becoming more popular (whether by card, mobile phone, or wearable device). According to the same Forrester report, 65% of U.S. online adults have made a contactless payment with their cards in the past three months for reasons including convenience, speed, and security (compared with swiping or inserting the card).

It's therefore important for merchants to know which payment methods their customers prefer and add the most relevant options without making the checkout screen too crowded. It can be challenging to get the balance right, but working with a payment partner that makes it simple to accept multiple payment methods can help. Cybersource, part of the Visa Acceptance Solutions family, allows you to accept a wide range of payment methods worldwide, and evolve your payment solutions in line with changing preferences and emerging options.

For some omnichannel retailers, the role of the store is changing. A recent Gartner® report³ says: "The convergence of physical and digital calls for excellent execution in the physical store to support its evolving role as the experiential and operational hub of unified retail commerce."

To differentiate their proposition and drive growth, retailers can improve the in-store experience by creating more immersive store environments. This typically involves blending digital and physical experiences, leveraging technologies like augmented/virtual reality (AR/VR), computer vision, AI and IoT; coupled with smart sensors to assess foot traffic, change digital ads, and provide content via screens. 451 Research, a part of S&P Global Market Intelligence,¹ says: "Smarter stores will mean more seamless experiences for shoppers while allowing retailers to bolster their datasets and customer profiles."

Naturally, consumers expect to be able to move smoothly among touchpoints, with consistent, modern, enjoyable experiences in every channel—both digital and physical. Managing customer data across channels and payment types in support of seamless shopping experiences is a critical success factor in omnichannel retail. This is where Token Management Service comes in, providing insights into customer behavior that can help merchants build deeper relationships with their customers and create more personalized payment experiences across multiple channels.

Social commerce can be an appealing channel for retailers as a way to serve massive audiences. Forrester⁴ indicates that many retailers are enabling some form of direct-to-consumer (DTC) commerce on social platforms to help "reduce traffic drop-off that happens when a consumer has to leave one site and go to another."

A core enabler of social commerce is payments. Technologies like Click to Pay from Visa—which fintechs and merchants can embed into any platform (including social) using low-code capability—provide a quick and easy checkout experience that removes the need for consumers to enter account numbers or passwords. Click to Pay uses token technology to provide a greater level of security, which also enables merchants to gather insights to improve the customer experience.

Personalizing the shopping experience means creating relevant, value-added experiences for consumers, which depends on gathering and analyzing data about their individual preferences and behaviors.

Forrester⁴ comments that the innovative technologies retailers are increasingly adopting, such as GenAI and computer vision, will give them "a better understanding of consumer preferences, stretching the envelope of how, where, and when they can deliver personalized experiences."

Token technology, described above, is a powerful way for merchants to gather insights across channels to help build deeper customer relationships and create more personalized experiences in both physical and digital stores.

We'd love to talk with you about these and other trends and innovations in the payments industry. Feel free to reach out and discover how Visa Acceptance Solutions and our uniquely open payments platform can help you build the future of payments.

And look out for our next update for more news and commentary.