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5 challenges facing the payments industry in 2021

by | September 21, 2021

In 2020, over two billion people purchased goods or services online, and during the same year, e-retail sales surpassed 4.2 trillion U.S. dollars worldwide (source: Statista) and more people are making digital payments than ever.

Covid-19 has meant many industries have been forced to navigate unchartered waters and the payments sector is no exception.

The restriction on physical commerce has driven the rise of retail spend online, the transition from cash to digital payments has been accelerated, and a growing preference for contactless and mobile payments is challenging credit cards.

Brands have had to re-think their strategies – or risk losing customers that have radically changed the way they shop.

We look at five of the key challenges facing the payments industry right now.

1. Uncertainty

One of the biggest challenges for the payments industry is the continuing state of uncertainty. This is making it increasingly difficult for businesses to balance the need to make changes to adapt to the here and now, with longer-term planning and strategy. Many have been forced to change their business plans for this year, but it has become increasingly hard to forecast the future and this is adding another level of complexity.

Will the changes in consumer behaviour and preferences remain the new norm, or will they revert back to pre-pandemic? And what will the knock-on impact on regulation be?

2. Innovation

As consumers embrace online shopping and digital payments, they are also looking for innovation in terms of user experience. They are already very familiar with consuming content digitally and are expecting that same slick experience when it comes to eCommerce. Sometimes overlooked, this needs to continue all the way through to the payment experience.

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Consumers want convenience, simplicity and security when it comes to making purchases – and for more choice when it comes to payment methods. One payment method doesn’t fit all; the most discerning consumers are likely to use different payment methods in different scenarios. Shoppers will abandon baskets because their preferred payment method isn’t supported or the process is too onerous.

Businesses need to keep a close eye on industry developments, emerging customer trends and identify opportunities to innovate to remain competitive.

3. Localization

The shift towards eCommerce may have made it easier for businesses to gravitate towards global expansion, but with this comes localization challenges.

Businesses operating across borders – or globally – need to address local languages, currencies, and payment methods to drive sales conversion and gain market share.

When it comes to localizing payment methods, it’s no longer just about deciding which card providers to support in each country. Consumers are becoming more discerning when it comes to payments and demanding a choice of payment types, including direct payments. This is also playing out differently in different markets.

Using local payment vendors in every country to manage the complexity of localization isn’t a supportable model for global businesses who are gravitating towards payment service providers with the capability and expertise to localize across many countries.

4. Regulatory compliance

The regulatory landscape for the payments industry is complex and continues to be a major challenge.

Changes in regulation put huge pressure on businesses. The need to fully assess and understand new requirements, implement policies and processes to address them and ensure compliance is achieved and maintained takes its toll on time and resources.

The key to meeting and maintaining regulatory compliance is making sure requirements are fully understood by the business. Many companies look to external advice and resources to help with this.

5. Cybercrime

Cybercrime continues to be a huge challenge for any business, and for companies handling payments, the stakes are even higher.

Techniques adopted by fraudsters are getting more and more sophisticated, and although new fraud prevention and detection solutions are being developed; it’s a constantly changing playing field and businesses are finding it hard to stay ahead of the game.

To avoid being the next victim of a cyberattack, businesses processing highly sensitive payment data need to have robust controls in place and keep on top of any vulnerabilities by regularly updating their software and backing up their systems. Cybersecurity awareness among employees is also critical and needs to be maintained as fraudsters become even more clever.

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