Tailored payment preferences: key to navigating inflation?

2023 will be a turning point for SMEs as navigating the economic landscape becomes a top priority. As a result of inflation and the turbulent economic climate, consumers are becoming ever-more cautious with their money, leading to lower consumption levels that could see businesses becalmed.

With reports from various sources indicating that the UK’s GDP is set to shrink in 2023, Global Payments’ own research in partnership with YouGov, which explores consumer spending habits and payment experiences, has also shown a drop in the use of ‘buy-now-pay-later services’:  19% of consumers are now more likely to pay in full to better manage their finances.

These figures mark a shift in consumers’ approach to consumption. Merchants and retailers will have to adapt alongside them to avoid losing out on consumer attention. One critical way that businesses must evolve their go-to-market strategy to mitigate the adverse effects of inflation is by adjusting payment methods to better suit their customers and the economic climate.

Safety first

Rates of fraud rise during tough economic times. Last year there were a whopping 4.9 million reported fraud cases in the UK, with only 0.1% of them ending in prosecution. What’s more, given that many consumers and business owners are low on cash, the stakes are far higher. Being a victim of fraud could now mean losing your business or livelihood. 

In addition to this, as new innovative technology takes over from legacy systems, the payments landscape has become fragmented. Often both new and legacy systems are operating side-by-side, creating cracks between them that fraudsters can exploit.

To counter rising rates of crime and new digital methods of fraud, businesses must use technology to protect their customers. Integrating new payment methods and technologies, such as open banking and tokenisation, into transaction flows goes a long way in protecting them from malign online threats. These new technologies offer higher security and make cybercriminals work harder to keep up with the pace of anti-fraud systems. Therefore, modernising all payment streams is vital to reducing crime in ecommerce.

Keeping customers on board

Given the security landscape that I’ve just laid out, it’s no wonder that consumers are feeling wary of ecommerce. It’s evident that businesses have a lot to lose if they don’t adapt to their customers’ payment preferences, and we shouldn’t forget that consumers feel comfortable with what they understand and know is safe.

Preventing cart abandonment in ecommerce is a crucial way that retailers can get ahead of current market trends and survive the economic downturn by boosting their revenue. The solution is simple: tailored payment options. 

Businesses need to understand their different customer bases, and how they like to pay. For example, younger consumers tend to have a higher affinity to more seamless tech-oriented payment methods, such as through QR codes or open banking, whereas older customers often prefer traditional methods, such as debit cards or cash. In many cases, offering a broad selection of payment methods will reduce cart abandonment rates by making sure that almost everyone can pay their preferred way.

Looking ahead

Finally, there’s a lot to be said for open banking’s ability to help businesses navigate inflation. In addition to being more secure, offering open banking payments provides a faster, more seamless experience for the customer, boosting retention rates.

Open banking is set to continue growing, making it an especially promising future payment method, particularly as younger generations become more comfortable and accepting of technology. What’s more, open banking payments are cheaper to facilitate, making it the more efficient option, and helping business owners to cut costs at times when it really counts. 

All in all, focusing on solutions that can remove complexity in ecommerce through unified digital payments, and fostering more robust security, allows merchants to take advantage of the innovation within the payments space, to better look after their customers. This builds trust, increases retention, and reduces abandonment. 

Ultimately, upgrading to a more tailored payment offering will allow merchants to keep pace with inflation and a fluctuating economy whilst also allowing them to focus on what they do best; running their businesses.

About the author

Alan Irwin, VP of Products and Solutions – Europe, has 10 years of experience at Global Payments, during which time he has held a variety of different roles contributing to his knowledge and expertise in the payments space, including in enterprise platforms, sales engineering, customer solutions and product. Alan also devotes his time to working with Calcutta Connect to support education projects in West Bengal.