With a new year and new decade about to begin, I have been thinking a lot about emerging trends and how they will shape the installment payments landscape. Innovation in payments is happening faster than we have ever seen. In parallel, we are on the cusp of significant changes with both shoppers and retailers.
I’ve come to the conclusion that 2020 will be a watershed year – the “Year of Installments” if you will. Across developed markets (U.S., Canada, U.K., Western Europe, and Australia), the demonstrable shift to more flexible payment options will pick up its pace. Shoppers want to pay their way, on their terms and be treated fairly, and that puts the focus on using credit responsibly and not encouraging shoppers to overextend with new credit.
Retail and E-tail Merging
The lines between online and offline retail will become even blurrier in 2020 and beyond, following in the footsteps of brands like Casper, Allbirds, Warby Parker, and Away who have become omnichannel leaders. With these new norms, new ways to pay will be increasingly prevalent, from installments to alternative financing. Consumers expect to see and use technology such as the same payment methods in brick-and-mortar stores as what they see online. The more omnichannel innovators open up physical stores, the more I believe payment innovation and flexibility will become the norm no matter where people shop.
We have reached a point where nearly two-thirds of Internet traffic comes from mobile devices, and the growth rate shows no signs of slowing with 5G, allowing for a lot more interactivity, augmented reality shopping experiences, etc. We’ve just started to imagine what we can do with this new bandwidth. In addition, mobile payments are set to see explosive growth as we reach ubiquity of acceptance. For example, over 75% of retailers now accept Apple Pay. More than ever before, the shopping experience will be influenced by the devices we carry and wear. The last thing mobile shoppers want at the end of this experience is a cumbersome purchasing process. Retailers will have to offer easy ways for people to pay quickly, choosing the payment options that work for their budgets, and doing it all with an absolute minimum of friction.
The “Year of Installments” is likely to have a real impact on business payments, too. Most B2B payments are still made by check, contributing to stubborn, persistent cash flow problems because of late payments. The appetite for B2B payment innovation is huge. And so is the market. Both buyers and suppliers are clamoring for ways to break up B2B payment logjams. Small businesses will adopt new technologies to differentiate themselves and focus more on superior customer experiences, and this demand will result in overdue innovation for payments.
Beyond 2020, I see the coming decade as a time when AI and Machine Learning will even more dramatically impact our shopping and payment experiences. At the same time, consumers will demand greater levels of protection of their data. It will be interesting to see how the tension between those two trends will resolve.
It’s a great time to be an innovator in this industry. I’m looking forward to seeing years ahead and embracing the opportunities we have to continue growth and innovation.