Six payment trends to watch out for in 2021

This year has been like no other for digital payments. Even as economies came to a standstill, consumers pivoted to online shopping and businesses turned to remote delivery and digital acceptance. 

The pandemic-fuelled adoption of all things digital uncovered distinct possibilities in consumer and business behaviour. Consumers formed brand new habits – using digital technology for work, working from home, and ordering online en masse. Here is a look at six such trends that we believe will shape the future of digital payments in Sri Lanka in 2021.

Mainstream emergence of integrated commerce

In early 2020, digital took centrestage as many offline and neighbourhood stores closed and some pivoted to remote delivery and payments. As the economy opened slowly, businesses started implementing new methods like buying online, delivery services and curb side pickup. A cohort of first-time e-commerce shoppers emerged. Consumer buying patterns and preferences also changed significantly with shoppers depending on stores that have an online presence.

2021 will see further evolution in this behaviour; as seen with online FMCG (household goods) purchases expected to grow from 20% to 70% on Daraz, one of the largest e-tailers in the country1 . Integrated commerce will not remain a fad but become commonplace with new-age distribution channels and market aggregators inserting themselves into the value chain. To provide seamless shopping experiences in this rapidly changing environment, businesses will become nimbler by focusing on app-centred buyers and a multi-channel strategy for consumers shopping online, in-app and in stores. Omni-channel commerce will come of age in 2021.

Rise of pay later 

There is a growing affinity towards credit-based products being witnessed in Sri Lanka over the past few years– indicating the vast opportunity in consumer credit. The acceleration to digital-first experiences this year changed consumer expectations on how and when they pay. 

With personal and discretionary expenditures plummeting, affordability has become a central theme, leading to businesses and consumers welcoming Buy Now Pay Later (BNPL) options, injecting speed, flexibility and convenience in paying. The coming year will witness the explosion of mass affordability solutions triggered by the flexibility and benefits of BNPL options offered by merchants, manufacturers, marketplaces and, of course, banks and Fintechs. 

Contactless future

This year, in more ways than one, was about ‘contactless’. People used contactless cards not only for their convenience but also due to safety concerns, leading to an uptick in contactless payments in high footfall segments like grocery.

Besides the safety, speed and convenience of this method, the decision of the industry to increase contactless payment limits to Rs. 7,500 is opportune, as it expands the category of purchases which can be made by tap and pay mode, likely to be QSR, dining, fuel, supermarkets and pharmacies. Expect brand new categories to go contactless like transit and tolls. 

MSMEs to embrace digitisation

In 2020 MSMEs increasingly adopted digitisation as the year drastically altered the way businesses operate, whether to source materials, pay employees or accept payments from customers. In 2021, small business owners will continue to look for ways to stay connected to consumers and leverage digital marketplaces. 

In addition to gaining exposure to new segments, it will help them secure new leads, provide 24/7 access to products and create experiences for digital-first customers. Increased digital MSME footprint in turn will open the gates to MSME credit going mainstream in 2021.

No compromise on security 

World Economic Forum’s Global Risks Report 20202  pegs cyber-attacks to garner data/money amongst the top risks that businesses are likely to face in the year ahead. As businesses and consumers adopt digital payments for myriad needs, fraudsters too are getting smarter, putting payment security back in the spotlight. 

It will be crucial to consider checkout experiences and fraud activities, particularly with Card Not Present transactions, from the lens of payment security. Given the shift to online-first offerings, investments in cybersecurity and authentication will take precedence, especially for small businesses that are not as equipped to handle large-scale fraud as big firms. 

Redoubling business commitment to security will catalyse innovation in payment security. For our nascent digital payments journey to mature in 2021, a continued focus on Risk and Cybersecurity to protect consumers and keep fraudsters at bay is an area all of us in the payments industry have to be vigilant about.

Footnotes:

1. Lanka E-commerce develops rapidly – Daraz Index

2. The Global Risks Report 2020

The writer is the Country Manager for Visa in Sri Lanka and Maldives.