By Delia Pedersoli, COO of MultiPay Global Solutions
2023 has been a tough year for retailers. The combination of high business rates and the cost-of-living crisis reducing consumer spending have squeezed retailers’ finances when many are still recovering the revenue they lost during the pandemic. The most recent figures from Black Friday sales highlight the situation retailers find themselves in. Looking at our own payment data from the Black Friday weekend, we saw an 8.4% increase in spending across European brick-and-mortar stores compared to 2022. While this is good news on the surface and suggests consumers are happy spending again, the longer-term trend the spike in Black Friday sales indicates is more of a concern.
In particular, what should worry retailers is consumers’ appetite for the irresistible deals and discounts offered over the Black Friday weekend. As shoppers struggled to navigate the cost-of-living crisis, many took advantage of the discounts, offers, and limited-time promotions to make savings. While the boost in sales during Black Friday meant retailers kickstarted the holiday shopping season on a high note, it also underscored the pressure shoppers are under with their interest in promotions and deals.
The Death of Loyalty
Unfortunately, the need for shoppers to hunt out and search for deals and promotions has a negative impact on retailers. As customers shop around for lower prices or wait for promotions, brand loyalty is being killed. The need to save money means consumers who once only shopped at their favourite brands are now much more open to switching to a competitor if the price is right. Data from McKinsey has found that around half of consumers reported switching brands in 2022, compared with only one-third in 2020. More worrying still is that 90% said they’d keep changing the brands they shop with. Consequently, retailers cannot rely on customer loyalty alone to maintain their sales volumes.
To combat this change in consumer behaviour and avoid being caught in a race to the bottom, retailers must prioritise delivering a first-class customer experience (CX). Focusing on CX helps both customer retention and acquisition because while shoppers are looking for deals, they will not settle for a second-rate experience. One area of critical importance to CX is payment and the payment methods offered. Failure to provide the payment methods shoppers want creates an unnecessary friction point in the customer journey, undermining the CX and increasing churn. With the payment industry experiencing a boom in innovation as new payment methods arrive almost daily, it can be challenging for retailers to know which to prioritise.
The Rise of Pay By Bank
While there are many new and exciting payment methods arriving, there is one that retailers should ensure is one of the payment options they offer: Pay By Bank. Already established in e-commerce, Pay By Bank is set to cement itself as the in-demand in-store payment method in 2024. Allowing customers to make payments via an account-to-account transfer, Pay By Bank provides a quick and simple way for consumers to pay. In fact, transactions are enabled by customers scanning a QR code that automatically opens their mobile banking app to authenticate and authorise payment. For retailers, Pay By Bank offers lower transaction fees that create savings that can be passed on to shoppers or used to invest in other business areas. Combining a quick and simple way for customers to pay with lower transaction fees creates a rare win-win situation for brands and shoppers.
The other advantage Pay By Bank offers is that it creates a data footpath. Increasingly, retailers are realising the power of the data they hold, with payment data being one of the most valuable. In 2024, forward-thinking retailers will increasingly use payment data footpaths to aid strategic decision-making and support long-term growth. In this sense, payment data can be seen as breaking out from being the preserve of CX and sales teams and making its way into the boardroom.
Creating New Revenue Streams with Data
The use of payment data in 2024 won’t be confined to aiding business decision-making processes either. Such is the value of the data that retailers hold that they will flip supplier relationships on their heads and start selling access to the data to suppliers. Selling access to anonymised payment data will enable suppliers to understand consumer habits better and develop products accordingly. At the same time, payment data can be fed into a supplier’s business planning, aiding their own long-term strategic decision-making. By selling access to their payment data, retailers can create new, lucrative revenue streams that add to their bottom line.
Undoubtedly, 2023 has been a challenging year for the retail industry, and the early signs suggest 2024 will be similar. However, as the recent Black Friday sales results show, consumers still want to spend when the time is right. To capitalise on these moments and reduce customer churn, retailers must double down on CX in 2024. Focusing on payments and providing the latest in-demand payment methods, such as Pay By Bank will not only help improve CX but also lower operating costs and support the creation of new revenue streams through the sale of data. Forward-thinking retailers that focus on payments will be putting themselves in a strong position not only in 2024 but also in the years to come.
