What’s Next In Payments

Covid-19 has changed a lot, including the way customers look at payment options. Businesses now shift to 

  • safe,
  • secure,
  • and fast payments

to align with the clients’ expectations. Here’s the list of Gartner’s impacts and recommendations for digital commerce payments:

Let’s make a short review of each Gartner’s point.

Contactless payments


World Health Organization (WHO) assured that “there is currently no evidence to confirm … that COVID-19 virus can be transmitted through contact with coins or banknotes.” Still, lockdowns significantly limited physical interactions, including commerce ones. Some countries even quarantined, disinfected, or destroyed cash as a precautionary measure. 

Also, people talked about contactless payments 40% more in 2020 vs. 2019, according to Gartner’s social media research:


  1. After reopening, the top recommendation for businesses is becoming more customer-centric than ever before:
  • switch from cash to plastic cards, but gently – allow people to choose responsibly, like let them know why contactless payment is easier and safer. Here’s the good example from Dick’s Drive-In restaurant in Seattle, Washington, U.S.:

2. Take care of your operational costs:

  • Negotiate better transaction fees with your financial vendor;
  • Adjust operational budgets, staffing, and cash management expectations in regards to reducing cash amounts.

3. Enable using digital wallets such as Apple Pay or Google Pay for in-store purchases.

4. Think of involving Buy Online Pickup In-Store (BOPIS), or Click and Collect, allowing the customer to shop and pay digitally but receive products in-store.

What’s next in payments regarding this impact

Smart check-out

Gartner defines “smart check-out” as the convergence of various digital technologies to deploy to eliminate the need for consumers to go through the traditional check-out lane manned by a human or machine (see Smart Check-Out: Choosing the Right In-Store Approach for Your Customers). Smart check-out can be achieved through many methods — such as mobile “Scan and Go” apps, RFID, or “Go-style” check-out which leverages computer vision, artificial intelligence (AI), machine learning (ML) and often sensor fusion. These apps allow a consumer to walk through a store, select and scan their own goods from their phone, and then complete payment from their phone and simply walk out of the store, potentially with no human or shared contact.


Livestreaming platforms for merchants

Covid-19 and lockdowns pushed merchants to creative approaches in selling. For instance, Taobao Live is the live streaming service integrated into the Taobao App, offering companies a way to reach a large audience, given the over 800 million monthly active users who visit Alibaba’s e-commerce sites.

According to South China Morning Post, sales on Taobao Live hit 2 billion yuan (US$280 million) just 90 minutes after the midyear shopping festival officially launched at midnight on June 1

Dong Mingzhu, the ‘home appliances queen’, sold 310 million yuan worth of goods in a three-hour live streaming event on the short video platform Kuaishou last month. And here’s the example of how it works:

Source: scmp.com

Technically, a merchant goes live on Taobao live, demonstrating their products. During such live sessions, buyers can view in real-time goods quality and buy them, paying online!

Voice commerce

Enabled by voice assistants like Amazon’s Alexa, Apple’s Siri, and Google’s Assistant, voice commerce is also skyrocketing due to the pandemic. Voice assistants were extensively used in devices by about 3.25 billion people in 2019, but COVID accelerated innovations and their adoption.

For example, ExxonMobil launched an “Alexa, pay for gas” allowing users to pay for gas and unlock the pump completely contactless from an Alexa-enabled device or vehicle.

Other innovations

Among other rapidly adopted trends and innovations, we can mention the following:

  • Contactless shops;
  • Sales channel unification, further blurring the lines between offline and online commerce;

Shifts in payments KPIs

Covid-19 significantly impacted on payments’ KPIs. Payment performance became increasingly important as never before. Here are a few common KPIs and related impacts:

  • Latency (response time in executing a payment) – this vital indicator should be as little as possible. If an online store experiences high loads, latency increases and causes delays and time-outs, which may even lead to sales lost..
  • Authorization and decline rates (how many submitted transactions are approved for payment by the issuer). POS transactions often receive higher approval rates than e-commerce transactions. It’s highly recommended to look at POS and digital rates separately, and most likely to prompt the need for recalibration on the issuer side as well.
  • Fraud detection rates (how many submitted transactions successfully make it through your fraud screening tools and are processed for payment). Fraud is common in digital payments, not in POS.
  • Payment processing costs. “Any in-store volumes that move online are no longer eligible to be paid by cash, so credit and debit card processing fees will apply to a greater portion of your overall sales. Additionally, rates are materially less expensive at the physical POS than they are online, so your credit card processing fees per transaction are likely to increase. These costs include interchange fees that are paid to the issuing bank, gateway fees, processor fees, fraud detection costs and more. Prepare your budgets for a shift away from cash, by factoring in card processing fees for a higher percentage of transactions in 2020 and beyond.”
  • Chargeback rates (how many successfully processed transactions are later disputed by the cardholder). “Many merchants are seeing an increase in chargebacks. This may be due to customers who were unable to receive what they paid for, such as events or travel, or it could be due to canceled subscriptions, delayed returns and refunds, or other customer service issues, many of which have been exacerbated by the sudden turn of events.”
  • Refund rates (what percent of processed sales volume is refunded to customers due to returns or other concerns). Gartner states:

“Ideally, customers will contact you directly rather than disputing a transaction through their bank. Many merchants have adopted generous return policies in an effort to avoid higher chargeback rates and to preserve customer loyalty. It is a common risk management practice to monitor refund rates as a measure of payment health, so these policy changes need to be factored into projections.”


Payment vendors’ volume shifted

Most payment vendors experienced payment volumes shift due to pandemic. Some of them got a dramatic increase that would either threaten their viability or challenge their processing capacity and performance capabilities. Others have been negatively impacted, processing fewer transactions in direct proportion to their client base.


Businesses have to find out how their payment vendor adapt to these volume shifts, and determine how that may affect. Gartner recommends to ask company’s payment vendor a few questions:

  • “How have your fraud models been impacted by the shift to digital and other behavior changes due to COVID-19? Describe any processes and modifications that you have made to improve the relevance of these data models in light of the current situation, or any accommodations you have made for your merchants to better use them with more uncertainty.
  • Describe how your authorization optimization ML and/or AI models have been impacted by the shift digital during the pandemic. What modifications have you made to the models to maintain or increase their efficacy in light of the current situation?
  • What new or revised reports or analytics are you providing to help merchants better understand the impact to their business and their payment processing as a result of COVID-19?”

Also, Gartner suggests:

“A potential payments winner from the pandemic is Buy Now Pay Later (BNPL) payment methods. The impacts of COVID-19 also include global economic fallout. As consumers become more income challenged and cash-strapped, alternative financing options become more appealing. BNPL offers installment and deferred payment options that are typically offered at 0% interest to the consumer. 

It also reported an increase in its net transaction loss (NTL) rate, and it should be anticipated that the same economic conditions that increase the appeal of these payment methods also increase the risk of customer defaults. Merchants should consider enabling one or more of these methods in order to increase sales, but keeping in mind that merchants pay higher fees for these payment methods since the BNPL vendor accepts the risk of nonpayment. Merchants must weigh the increased transaction costs against the increases achieved in both average order value (AOV) and conversion rate.”

Payment vendors offer resiliency

In view of Covid-19, payment vendors adapted and started offering expanded solutions for merchants such as capital lending, and bill payment.

Square and PayPal were both approved to offer loans directly to small businesses through the U.S. Payroll Protection Program (PPP). 

Visa, Mastercard, American Express and Discover all announced increases in payment limits for contactless transactions in many locations around the world in order to enable more usage of this no-touch payment option.

PayPal updated its QR code service to make it easier for small businesses to offer contactless payments to their customers with zero development effort. In July, it made it scalable for larger enterprise business to also offer QR codes as an alternative to NFC (tap to pay) contactless transactions, that are not yet available to many U.S. cardholders (see the image below):