The shifting role of payments in eCommerce

The last few years have offered significant transformations in the payments sector. The introduction of new digital currencies, proliferation of buy-now-pay-later (BNPL) solutions, and cultural shifts in how people think about their money have considerably impacted how people pay for products and services.

Naturally, the eCommerce industry has direct exposure to these shifts — shifts that need to be understood and acted upon in order to continue successfully serving an engaged customer audience. The eCommerce brands that are proving to be most resilient are the ones that understand payment preferences at a local and global level, ensuring they are continually able to provide frictionless experiences to their customers.

In this article, we outline the role that payments play in the evolution of eCommerce and how brands can take steps to make the customer experience increasingly seamless. 

The eCommerce market is always evolving

Similar to the payments space, the eCommerce industry is also always evolving. Most recently, some of the key drivers of change include the COVID-19 pandemic, which prompted many people to take their shopping online. Businesses around the world had to quickly move away from the in-person experience, leveraging eCommerce capabilities to stay in business. In addition, customers have also been influenced by the growing sophistication of apps and technology that consumers interact with on a day-to-day basis.

These changes mean that eCommerce isn’t going anywhere. eCommerce sales totaled USD $5.2 trillion in 2021 — and they’re expected to reach a whopping USD $8.1 trillion by 2026.

As a result, brands and retailers that leverage eCommerce are constantly finding new ways to refine the online customer experience. This includes adopting new tools and features, leveraging behavioural customer data for marketing and merchandising purposes, and staying on top of relevant customer trends. Not only does this help to reduce churn during the customer journey, it also helps brands become more competitive at a time when customers around the world are more discerning about where they spend their money.

The shifting role of payments in eCommerce

Payments have always played a vital role in eCommerce processes — in fact, eCommerce can’t happen without a payment function. So, as the payments space changes and evolves, it has a direct impact on how brands can cater to their customers. 

The need for better customer experiences

On average, it takes eight or nine steps for customers to complete a checkout process online. Any friction added to this process (like a convoluted payment experience) can easily disrupt a customer’s experience, and even prompt them to abandon their purchase.

For instance, if the provider doesn’t accept their payment method of choice, or the steps required to confirm payment are too onerous, it’s unlikely that the customer will make the extra effort to spend their money – unless it’s a product or service they really need and can’t get anywhere else. This means that eCommerce brands need to prioritise the customer experience and ensure that their payment processes are as easy to use as possible, in order to minimise lost sales at the digital point of sale. 

In practice, this can look like:

• Introducing gamification
• Simplifying the payments process
• Engaging with shoppers even before they reach the checkout page

Payment orchestration is another useful approach here. With so many payment options available, customers can easily get overwhelmed. Payment orchestration helps present the top payment options up front, with more modern solutions leveraging AI and ML to present the preferred options to each buyer.

In turn, the modern payment solutions brands choose need to be in step with this rate of change in order to enable a frictionless eCommerce experience. They should be easy to integrate with embedded payment APIs, have a wide breadth of payment method acceptance, and be equipped with robust payment authorization levels to help prevent fraud.

Access to increasing amounts of data

Another benefit of adopting modern and varied payment solutions is that they provide useful and actionable data and intelligence. For instance, payments data can give merchants access to peer-to-peer comparisons that they can leverage, as well as a clearer understanding of which payment mechanisms are used most, and where. In addition, customer payment data can also support merchants in the development of sophisticated offers, rewards, and loyalty programs.

This is still an area of opportunity for a lot of brands and merchants that leverage eCommerce. Once we start applying AI and ML models to payments data, the insights available to merchants will be indispensable as they map out their strategy for the future.

An evolving concept of what money is

Another important element for eCommerce brands to consider is that the definition of money itself is currently evolving. Beyond traditional national and regional currencies (e.g. dollar, euro, yen), we’re seeing the emergence of new stores of value. This includes digital currencies, including cryptocurrencies and central bank digital currencies (CBDCs), non-fungible tokens (NFTs), and more. 

Many eCommerce merchants don’t have the systems in place to accept these new stores of value, so there’s a need for evolution there. That said, it’s important to understand which of these new stores of value are actually being used by customers — so that you’re not creating systems and processes for payments that are never made — and which are the most stable from a value perspective. For instance, cryptocurrencies can be looked at as an investment class versus a payment mechanism, as they fluctuate in value greatly, and could negatively impact the vendor or the consumer depending on which way the value shifts between the payment being made and it being received.

In this context, it’s also important to make your systems future-proof and flexible so they can adapt to newer payment methods quickly. We talk about CBDCs and NFTs for tomorrow — but the day after tomorrow, it will be something else.

Thinking globally, acting locally

For eCommerce brands that have a global presence, it’s important to remember that payment preferences vary significantly from country to country based on cultural beliefs, regulatory landscapes, and technological innovations. For example, account to account payments are the preferred method of payment in the Netherlands, Poland, and Germany as people in these countries don’t like to be in debt. Meanwhile, Swedish consumers tend to opt for BNPL payments, while UK and American customers like their credit and debit cards. In China, payments are largely made using digital wallets. 

To succeed on a global scale, eCommerce merchants need to think globally, but act locally. They need to cater to as many people as possible, including those who are digitally challenged, identifying each popular choice of payment solution and including it in their payment roster. In other words, they need to create an inclusive payment experience. This helps to democratise access to products on a global level and expands the brand’s capability to reach broader markets. 

From a B2B merchant perspective, this global approach can be facilitated with payment mechanisms that take out the middleman and simplify typically pesky cross-border transactions. CBDCs and smart contracts have the potential to circumvent traditional payment corridors and simplify international trade. Another consideration here should also be how fast your chosen payment provider can settle payments.

Thriving in a shifting payments landscape

As scaling and global eCommerce brands look to expand their presence across multiple territories, they are going to need a payments partner that has a global presence. One that is already thinking about the various shifts in the space, multiple preferences, and the varied pace of change across different environments. The brands that are most likely to do this effectively are the ones that take an adaptable and proactive approach, keeping their eyes on different trends and incorporating changes in a measured and data-informed way.

At Cognizant, we work with brands to help them optimise the payments experience. We help teams identify the right payment partners, enhance the customer experience within the checkout process, integrate newer payment options, and in rolling out new builds payment orchestration. If you’d like to learn more about how we work with clients in this space, please visit our Payments Hub or get in touch.