Payment Innovation TrueLayer

For the latest in our Payment Innovation series, we take a deeper exploration of Tribe Payments’ recently released European Merchant Insight Report.

The firm’s VP of Customer Success, Lynda Strutton spoke to Payment Expert on the evolving nature of digital payment methods from BNPL options, to multi-currency offerings in a post-pandemic world, as she revealed how an ‘overwhelming’ amount of companies are unaware of what payment methods are popular with users. 

Payment Expert: Following the release of Tribe Payment’s European Merchant Insight Report, what do you believe has been the most challenging aspect for merchants when adopting new payment methods post-pandemic?

Lynda Strutton: We can clearly see that the dominance of cards is continuing across Europe, even in those countries where domestic payment methods are popular, like the Netherlands. The real problem highlighted by over half the merchants we surveyed is that they are unclear what payment methods are actually in demand from customers. 

They are lacking both market insight and visibility of payments data, which makes it difficult to make a case for implementing new payment methods. Even for those who do have the inclination to do so, many are struggling to justify it because over half of merchants find it overly complex to change anything in their payments processes.

While this issue was already a challenge for merchants pre-pandemic, there was a huge shift in customer behaviour preferences during and post-pandemic – but merchants’ visibility of that in terms of payment methods and preferences will have been limited if they don’t have access to payment trend data.

PE: Digital payments have surged in usage since the pandemic, but a lot of their providers in the fintech space have seen losses in valuation in 2022. Is this mainly due to the current economic climate or other drawbacks to the sector that have not been identified yet? 

LS: The pandemic gave great credence to – and growth in – digital payments, and this itself has led to the continued growth of the valuation of fintech businesses.

Post pandemic, it appears that profitability metrics are becoming extremely important in this space, and those valuations are being adjusted accordingly. In our view, it’s not that there’s a declining faith in these companies, just a reflection of unprecedented and highly changeable market and economic conditions. 

It is possible we might see more consolidation of providers in the coming year or so, but that’s natural selection within our industry’s evolution – which is nothing new.

PE: With the current cost-of-living crisis in the UK, the Post Office reported 20% more people are withdrawing cash as a means of saving. Does Tribe have any insight into UK cash handling figures, and will card and digital payments decrease as the crisis is expected to worsen?

LS: It’s important to remember the context for these figures. The 20% increase is compared to last year, when many restrictions were still in place in the UK and many merchants were not accepting cash. So, arguably, some of this adjustment may be due to a partial reset in these circumstances. 

But this isn’t the only factor – people often withdraw cash to have a better sense of control – notes and coins are tangible objects and this can be important when people don’t know how long a financial crisis will last or how badly they will be affected. Having physical control of your money can help you budget, especially if you don’t have an easy alternative to managing your money – or if you’re not a digital native.

However, habits don’t die easily and while that’s true of particular generations’ preference for cash, it’s also true of those who have made digital payments part of their everyday lives. Many people are used to making payments digitally at the touch of a button or the tap of a card and the comparative inconvenience of cash will likely mean people largely stick with easier ways of doing things. Of course, in the rapidly expanding worlds of ecommerce and mobile commerce, cash has little practical use.

Whether this is a temporary or permanent change, it shows the importance of businesses offering their customers different payment options and responding to changes in the market. If we’ve learned anything in the last 2 years, it’s that these consumer preferences and market changes can change faster than anyone expects.

PE: 75% of merchants accept mobile/digital wallets and are increasing in popularity. What are some of the key reasons merchants benefit from digital wallets and can their growth be traced back post-pandemic?

LS: The key benefit for merchants in offering mobile and digital wallets is relatively simple; it’s one of the easiest ways a merchant can offer a more frictionless customer experience at the checkout. 

Digital natives have virtually grown up with the likes of PayPal for online transactions – and regardless of brand, digital wallets are built for fast, slick digital experiences – no inputting card or CVV details where the shopper has the potential to make an input error that could cause the transaction to fail.

The pandemic obviously provided a catalyst for contactless payments with more cardholders demanding / expecting merchants to accept this form of payment and it even became the recommended payment choice for many merchants

Even in the physical store environment, mobile wallets enable customers to leave their cards at home and securely transact with their smartphone or wearable, in a contact-free way. This can also help with queue busting and open up more unmanned in-store checkout options, without the need for PIN terminals.  

Ultimately, consumers are starting to trust digital wallets a lot more, and they want the convenience and speed that they can get from using digital wallets. It has become widely accepted that mobile wallets, such as Google and Apple Pay, are essential for merchants to accept – they are fast becoming the “cardholder’s” choice for payments.

PE: Within Tribe’s findings, only 11% of businesses surveyed offer a BNPL option. What are some of the concerns merchants raise about BNPL and has the sector’s momentum halted this year?

LS: The SME merchants we surveyed overwhelmingly said that they don’t have a clear understanding of what payment methods are popular, so there is a definite knowledge gap around which payment methods they should be offering for their target customer groups. 

For merchants, embedding BNPL options at the checkout is fast becoming an absolute necessity to make sure they are supporting their customers’ preferred payment methods across generations. There is widely shared evidence that merchants who offer BNPL as a payment option have seen increased conversion rates and transaction volumes, along with repeat custom. 

There is undoubtedly a firm place for BNPL and it’s certainly in demand from digital natives. BNPL adoption has grown immensely in recent years and in many ways the digitisation of credit has gateways and merchants playing catch up with the likes of Klarna/Amazon etc. 

What is clear is that the pandemic, rising costs and the demand for checkout convenience has made it easier for customers to see BNPL as a viable, more trusted payment option, so we fully expect the volume of merchants supporting it to increase over the next few years. 

The regulation of the BNPL sector ensures providers are held to the right standards and this in turn will help inspire trust and confidence from both merchants and customers, which will undoubtedly drive further adoption.

PE: Can you explain why merchants are looking to focus more on multi-currency payments options moving forward?

LS: There are a number of factors at play here. Merchants are very focused on delivering a slick and personalised customer experience which improves conversion rates and repeat business. 

As consumers increasingly shop across borders to purchase the goods and services they want, offering multi-currency options is vital. As a shopper, there are few things more confusing that having to navigate pricing in an unfamiliar currency (except, perhaps when coupled with an unfamiliar language!) and it can lead to frustration further down the line when those customers see the amount they actually paid in their own currency – after that purchase is complete and they’ve received their bank or card statement.

Building trust with customers depends on ease and trust – offering a choice of currencies at the checkout can help to build that experience and also makes it easier to attract customers from other countries as well as those who might live locally but bank in other countries. 

The other big factor to note from our survey was that while 55% of businesses are looking to add multi-currency options (on top of the 32% who already offer it), 60% of the merchants we spoke to are also looking to expand geographically in the next three years, and 81% believed that there would be an increased demand for cross-border shopping in the next five years. 

So, merchants looking to support multi-currency transactions fit neatly in this context – it’s a means of helping to access those growth opportunities.

Innovating in the payment journey will be a key topic at this year’s SBC Summit Barcelona 2022, which takes place at Fira Barcelona Montjuïc on 20-22 September. 

To find out more about the event – visit the SBC Summit Barcelona website to book your All Access Pass.