Treasury and Payments
Six trends shaping the future of payment acceptance
Global events have once again highlighted the need for business to be flexible and agile, to adapt to the environment. But with so much change happening, how can merchants know what to prioritize? Using trends as a guide, says J.P. Morgan’s Max Neukirchen, will help position you for the future.
Failed payments are the biggest threat to any online business. As a result, payment acceptance – the proportion of successful payment attempts – is critical for merchants to thrive. These transactions are no longer simply the remit of the CFO, but a core focus at CEO, product and technology level.
To understand this shift in focus to payment acceptance, we can look at how the market has evolved through six key trends that are driving the future of payments acceptance.
1. The rise of digital payments
The rise of digital payments has been shaping global business for the past several years and the pandemic accelerated this shift. Across the world, in almost any country, digital payments are seen as more efficient, safer and smoother.
This surge in payment methods is reflected in the fact that three quarters of Americans now use Apple Pay, and buying online and with apps is now commonplace. Business also followed suit; pre-pandemic, many restaurants were restricted to cash only, but had to pivot to a delivery based model during lockdowns – necessitating an acceptance of digital payments.
2. Optimizing with data
Data and analytics is a core driver of payment acceptance, and increasingly clients value the data we can share, as much as providing the payment. The unparalleled insight that merchants can uncover from payments data can help shape a business based on understanding their customer needs. J.P. Morgan’s data science team has identified nine “levers” that use transaction data to help merchants approve the greatest number of card payments at the lowest possible cost. They key is understanding how all nine of these levers work and using them in a coordinated manner continuously to monitor, benchmark, and optimize payment performance.
Through capabilities like tokenization and stored credentials, we can understand the necessary elements by brand, but also those that directly impact approval rates, cost of payments, and fraud.
3. Proliferation of methods of payment
Keeping on top of the proliferation of payment methods, and providing customer access at the checkout, is essential. Traditionally, we have seen a lot of credit and debit cards in the U.S., UK and Ireland, with a wide variety of payment methods across Europe. As cross border payments expand, we have also witnessed an explosion of alternative methods of payment, Buy Now Pay Later options, and the huge choice across Google Pay, Amazon Pay, Apple Pay and others. Merchants are moving toward supporting these alternatives, and as a payments provider we can also offer choice – especially with locally relevant payment methods, which are so important in APAC and Europe.
Added to this mix is the potential for bitcoin and cryptocurrency. So far, we haven’t seen client demand for this, but volumes are very small but we are already looking to a future where we need to set up a solution at point of sale, exchange bitcoin into local currency and then process to a merchant account.
4. Focus on security
E-Commerce does not come without risk, and online and credit card fraud is a constant threat for merchants. It’s not only the losses that are problematic, but it also leads to a bad customer experience and a huge operational effort for clients. Managing and minimizing fraud is of the utmost importance. In response, industry has been innovative in organizing methods of payment, to the extent that lots of clients don’t even have a touchpoint with customer data anymore, but rather it is the payment providers - unknown to the consumer – that manages this sensitive data.
Additionally, an increasingly critical factor in payments is managing consumers digital identity. If you can identify someone correctly, you can ensure more easily that a transaction is correct.
These security enhancements have also had the added benefit of bring a seamless experience to the consumer: easy online checkouts, frictionless payments and pre-authenticated experiences. All of this contributing to higher conversion rates, and better payment acceptance.
5. Demand for omnichannel
Another trend driven by consumer behavior is that of omnichannel, and the need for different channels to be used interchangeably. The typical use case is to buy online, change your mind, and exchange for another in store. Being able to manage payments cross channel is key to facilitate this demand.
6. Bringing biometrics to life
Biometrics and identity management is the future, and we are focused on shaping that. Questions of how consumers will pay - using face, wave or other biometric means - also requires even higher security standards. These standards are still emerging, but whoever owns the biometrics will control a huge segment of the process.
In all of these, technology is critical: critical in delivery, but also critical in shaping these trends and what is possible. It also shapes consumer expectations – what a good process looks like, and what an easy checkout experience can be. This convergence of consumer preferences has driven us from cash economies to digital wallets and beyond, to a world where payment acceptance is the pinnacle of payment technology.
In response, we have pushed our merchant acquiring business to become a lot more global, opening in seven additional countries across Asia Pacific plus Mexico and Brazil in the last 18 months. We plan to continue to push the boundaries, expanding the horizons for what is possible as payments continue to shape the world around us.
Max Neukirchen hosted the keynote session of MAG 2022 Annual Conference and Tech Forum (September 18-21)
Explore the other key topics from this year’s MAG 2022 conference, focusing on the latest payments-industry trends
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The views and opinions expressed herein are those of the author and do not necessarily reflect the views of J.P. Morgan, its affiliates, or its employees. The information set forth herein has been obtained or derived from sources believed to be reliable. Neither the author nor J.P. Morgan makes any representations or warranties as to the information’s accuracy or completeness. The information contained herein has been provided solely for informational purposes and does not constitute an offer, solicitation, advice or recommendation, to make any investment decisions or purchase any financial instruments, and may not be construed as such.
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