While COVID-19 has ignited an ongoing shift towards e-commerce, payment systems have also undergone a major transformation sending digital payments soaring. For e-commerce businesses, digitalizing payment systems is an unstoppable trend as it is linked closely to customer experience and conversion rates 💰.
To help you win the 2021 e-commerce game, we'll clarify the rise of digital payment services in the global e-commerce industry and identify other relevant trends for you to watch out for.
Below are the three key questions this article will answer:
Let's get started 😃
What are digital payments and how will the trend affect the future of e-commerce?
According to Google Trends, the term "digital payment" has gained continuous popularity over the past decade.
In a broad sense, “digital payment services" refer to various forms of cashless, paperless, and contactless payment methods that take place digitally or online with no physical exchange of money. As the largest segment within FinTech, digital payments’ global transaction value reached US$5,204 billion in 2020.
If we take a specific look at the broad picture of e-commerce payment methods, digital payments have led the game for a while (see figure below). In 2019, digital and mobile wallets were already the most popular online payment method worldwide, making up 41.8% of global e-commerce transactions. The share is projected to reach 52.2% in 2023. Comparatively, credit cards are expected to decline to 18.8%.
The data trends demonstrate that digital payment is the future ⭐️.
Why do digital payment trends matter to your e-commerce success in 2021?
The stats above demonstrate the increasing popularity of digital payment methods worldwide, but why exactly do digital payment trends matter to your e-commerce business's success in 2021?
The reason is digital payment methods can greatly improve the checkout experience, and checkout is a vital final step in converting consumers into actual buyers. In fact, according to Accenture's latest study, 87% of online shoppers will abandon their carts if a checkout process is complex 🛒.
This clearly points out consumers' high expectations towards a simple and frictionless checkout experience, and digital payment services can help meet this expectation.
Compared to traditional payment methods, newer digital payment methods such as Apple pay, Paypal, or Shopify's Shop Pay don't require customers to go through the long process of first digging out their card and then entering the number, expiration date, holder name, security code, billing, etc., every time. Instead, apps like Shop Pay saves your important details via your email address and phone number for next time so you can "fill carts, not forms."
Besides simplicity, security is another crucial element for consumers to consider when it comes to online payments.
Digital payment methods are considered to be a more secure and private option than credit cards as it relieves consumers of having to give out their payment information and other personal details. Instead methods like Shop Pay encrypt every customers' information ensuring it stays safe.
In short, offering more digital payment options at checkout allows you to provide your customers with the easy, frictionless, fast, and secure payment experience they long for.
Will the buy now pay later solution be one of the biggest retail trends in 2021?
Previously, we talked about how the buy now, pay later (BNPL) solution contributes to Zalando's success in Denmark. As consumers look for new financing possibilities and businesses strive to drive sales, BNPL solutions are rapidly gaining adoption.
Recent research found that the two primary reasons why US consumers use BNPL services are "To avoid paying credit card interest" and "To make purchases that otherwise wouldn't fit in my budget."
Besides being appealing to consumers, BNPL solutions also bring compelling benefits to retailers increasing basket sizes, conversion rates and revenue, as well as winning the hearts of Millennials and Gen Z for long-term growth 🥳.
Klarna, a fintech service company founded in Sweden, has gained widespread populatiry throughout Europe, Australia, and the US in recent years. The stats from Klarna further uncover the reasons why BNPL has become increasingly popular amongst retailers.
First, checkout conversion rates increase approximately 30% with Klarna. In addition, Klarna also found that retailers using the service enjoy a 58% increase in average order value. Lastly, according to Statista, 54% of Millennials and 50% of Gen Z in the UK reported using BNPL methods for online shopping in 2020.
All in all, integrating digital payment methods can address evolving consumer expectations and offer new revenue streams.
Digital payment services, combined with Clerk’s all-in-one personalization engine, can enable your business to provide customers a long-desired seamless online shopping experience. As we say, the happier your customers are, the more money flows into your bank account 💸.
To learn more about how to grow your online business in 2021, book a meeting with one of our leading e-commerce experts today: