How has the role of payments in business strategy changed in the past year?
ACI Worldwide has recently published the results from our second annual Global Payments Insight Survey: Merchants and Retailers, conducted by Ovum, and the results clearly indicate a positive change in the role of payments in business strategy. Nearly 81% indicate that payments represent a clear part of their current business strategy, a double digit increase over last year. This substantial increase shows that more merchants and retailers are recognising the strong correlation between a comprehensive payments strategy and their bottom line as they continue to articulate that payments investment improves the overall customer experience and helps drive customer loyalty.
Merchants need to serve customers in any channel at any time and capitalise on every opportunity. Payments are a critical component to delivering a seamless experience for their customers and must be part of any strategic omni-channel strategy.
What level of investment in payments can we expect from merchants and retailers?
Given the increased role of payments in business strategy, it is not surprising that almost all merchants (92%) indicate that they plan to increase or maintain their investment in payments over the next 12 to 18 months. This trend holds true worldwide as the majority of merchants and retailers will increase payments investment spending across all geographies. This is a strong indicator that payments innovation is impacting, and will continue to impact, merchants and retailers into the foreseeable future.
Merchants tend to embrace newer consumer driven technologies more quickly than their banking counterparts. I believe the drive to offer new and alternative payments types is playing a big part in this ongoing investment. In addition with the continued growth of ecommerce, more and more merchants are looking to take advantage of cross-border opportunities to expand their reach beyond their traditional markets.
Does the level of investment in payments vary by segment?
Yes, the level of investment in payments varies by merchant segment, but all segments expect to see an increased investment in payments. Based on what we have seen in the market, it is not surprising that the biggest increase in payments investment is expected by the grocery and supermarket segment (with an expected 59% increasing investment in payments) along with the gas and convenience segment (with an expected 56% increasing investment in payments). Both the grocery and gas/convenience segments have complex scale of their businesses – number of payment devices, number of stores, fuel dispensers, etc. As a result, the costs tend to be higher than other segments facing the same issues.
What are the key drivers of investment in payments?
The biggest driver of payments investment is security – with 40% of respondents indicating they are primarily driven by security demands. Given the many high profile headlines we have seen regarding security lapses in the past several years, and the increase in regulatory requirements worldwide, it is not a surprise that security is the primary driver of payments investment. With physical and digital channels multiplying and converging, securing consumer data and fraud prevention become table stakes for merchants needing to protect their customer and payment data, and their profits.
Survey respondents also indicate that competitive pressure is driving investment in payments. As more and more merchants and retailers implement the latest payments technology, laggards are recognising that they must keep up in order to continue to compete.
Merchants and retailers are also investing in payments because of the substantial ROI that is able to be recognised. With further investment in payments, this group expects to see ROI by increasing customer retention, increasing the range of payment options offered and launching value added services.
All of these areas are critical to the success of a secure, omni-channel payments strategy.
How have alternative payments disrupted the payments industry?
Every year, merchants and retailers evolve to include the latest and greatest advancements in alternate payments.
Merchants look at alternative payments essentially for two reasons: lower cost options and increasing sales. And more and more merchants are trying to incorporate or take advantage of alternate payments to benefit from lower costs and improved conversions. Alternative payment methods include bank transfers, digital wallets, cash on delivery, e-invoices, digital currencies, and a variety of locally-preferred payment options. Research tells us that by including one additional local payment method can increase conversion rates by 30% compared to only offering one or two payment types.
The payments industry must be able to quickly adapt to help merchants and retailers successfully integrate new forms of alternate payments. This year, the vast major of new investment in alternate payments has come from investment in contactless cards and mobile NFC acceptance. The majority of merchants and retailers do or will soon offer both of these forms of alternate payments. These forms of alternate payments increase the range of payment options merchants and retailers can accept and also increase customer satisfaction – which are key contributors to ROI on payments investment for in-store, ecommerce and omni-channel strategies.
To obtain a complimentary copy of the ACI sponsored Ovum research report entitled 2015 Global Payments Insights: Merchants and Retailers, Changing the Merchant Experience, and related infographic, please click here.
About Lynn Holland
Lynn Holland, vice president and product line manager at ACI Worldwide, is responsible for merchant payments solutions with a primary focus on card-present and in-store payments. A retail payments expert with more than two decades of leadership experience, Holland previously held roles at Shared Financial Systems, American Airlines - Sabre and S2 Systems.
About ACI Worldwide
ACI Worldwide powers electronic payments for more than 5.100 organisations globally. More than 1.000 of the largest financial institutions and intermediaries plus thousands of global merchants execute USD 14 trillion each day in payments through ACI. Through a comprehensive suite of software and SaaS-based solutions, ACI delivers real-time, any-to-any payments capabilities.
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