COVID-19 Impact on merchant payments ecosystem
What payment trends are emerging? What do merchants need to consider? What about security? Anna Bejaoui, General Manager of EVO Payments, answers these and other questions in an interview with the retail magazine POSitivity.
1. How do you see the direct impacts of COVID-19 on the merchant payments industry? Will there be changes In Transactions Volume and in business models/propositions (services) of payment providers?
Anna Bejaoui: As a result of the corona crisis, the number of electronic payment transactions has increased although this increase varies greatly depending on industry and sales channel. In e-commerce, we primarily see an increase in technology retail sales. At POS, we are seeing a drastic increase in everyday goods such as supermarkets and bakeries, but a hefty decline in all parts of retail and hospitality that had to close during lockdown.
It is striking that the Germans, who actually love their cash, are increasingly open to cashless, especially contactless, payment solutions at POS - even for smaller amounts. Digital wallets that process payments in less than 1 second are increasingly being used here too. Consumers are becoming more flexible when it comes to cashless payments and at the same time retailers are proactively promoting to use contactless payment options. This will have a positive impact on the speed of product development in payment solutions.
We assume customers will get used to new convenient payment options and will also keep on using those post Covid-19. In the future, changes in purchasing behavior should be expected in some industries. In the travel industry, customers may no longer be willing to take on longer term and high cost bookings, and payment service providers will increasingly have security mechanisms in place for changes to usual transaction activity which occur in the event of a pandemic.
Online and brick-and-mortar retailing are no longer to be considered separately, but are seen by consumers as increasingly coherent which as a result build the basis for the consumers’ expectations towards payment options. At EVO Payments, we therefore are encouraged to continue supporting retailers in implementing multi-channel or omni-channel solutions that meet their needs.
2. How can payment providers help Merchants navigate through COVID-19 and in the new post-COVID reality to drive frictionless payments?
Anna Bejaoui: At EVO Payments everything starts with personal conversations and an individual, tailored approach. It is important to find the right payment mix. Not only large and medium retail chains, but also the small individually owned café around the corner can make use of our solutions. Online payment options for retailers, such as Pay-by-Link, are particularly high on the list of services in demand in recent weeks. These are ideal solutions for vendors who do not have an online shop in place or for when the purchase is pre-ordered and is paid online for pick-up-service. Not only the catering industry benefits from this, but also retailers who process customer orders and payments by phone, SMS, online or by email.
3. Shopping behaviours of consumers is radically changing. We are increasingly embracing digital wallets and contactless payments and many consumers are buying online the frequently purchased products/items previousy (like groceries). Do you expect that e-Commerce will grow in the new "post-Covid" Normal and how may this affect the payment Industry?
Anna Bejaoui: In the area of e-commerce, we assume that “Post-Covid-19” products for everyday needs such as drugstore items with a low shopping cart value will be increasingly purchased online. It remains to be seen whether credit card organizations will lower fees which can accelerate this growth trend. Increasing e-commerce volumes will come with increasing refund rates and an increase in fraud also – and as a result all the precautions already undertaken by merchants and their payment providers will become even more important.
4. How can payment providers help merchants with setting up payment processes to cater to the changing shopping behaviour (from in-store to online/mobile)?
Anna Bejaoui: EVO Payments is working hard to offer customers the best possible consultancy in order to find the right, tailor-made payment solution for each individual business. Together with the merchant, we develop solutions with the right payment mix. It is extremely important that customers find the suitable payment methods that fit their business model. We rely on multi-channel solutions that correspond to the processes and service range of the individual retailer. Standard payment solutions can be tailored to fit the merchants.
5. A significant increase in refund and chargeback levels, spurred by the coronavirus, are expected in the payments industry as purchases, events, and trips are being canceled. Merchants are overwhelmed by disputes and cancellations. Customers demand to refund money for travel and accommodation. What are the new challenges for merchants, payment providers and the industry on the way to efficient chargeback management?
Anna Bejaoui: To avoid chargebacks, retailers should proactively offer their customers solutions and communicate very clearly. These solutions may include vouchers for later redemption or credits. The conditions for any solution should be communicated very clearly, not only to the customer, but also to the partners involved, such as travel agencies, hotels, agencies, etc. This way, high chargeback levels can be avoided.
6. Fraud and security – the coronavirus pandemic is going to be an opportunity for e-Commerce merchants, bringing also a massive wave of fraud attacks into an online environment. What are the new security & risk challenges for acquirers, PSPs and merchants? Are there any new specific fraud types we see an increase in during the COVID-19 crisis?
Anna Bejaoui: Based on our customers’ feedback and our own systems, we have so far not seen a big increase in fraud cases. New fishing sites, which have already been created and are now being created referencing COVID-19 specifics, are of course a risk that must be closely monitored. However, the basic principle is that payment applications must be secure and comply with the statutory standards. The fraud risk can be further minimized with internal risk checks using appropriate software.
7. Contactless & biometrics: Banks are faced with the perfect opportunity to take their contactless card strategy to the next level. Are Biometrics a remedy to contactless concerns connected with the rise of more payment fraud?
Anna Bejaoui: We continue to see the strong trend especially towards mobile payment methods, which allow higher volumes made contactless thanks to biometric methods. Our terminals have been supporting mobile payments such as Apple Pay and Google Pay since the market launch. The advantage of mobile wallets is that there is no transaction-specific limit. The limit for contactless payments was raised from EUR 25 to EUR 50 for credit cards, a step in the right direction at the right time. Now it is time to see whether and how quickly banks will follow and offer mobile processes too.
8. Regulation in COVID-19 times: The UK's FCA announced to delay the implementation of SCA rules by six months in an effort to minimize disruption to consumers and merchants during the ongoing Covid-19 crisis. The FCA's ruling is likely to be followed by national authorities across Europe. What are the challenges on the horizon regarding pan EU compliance? The European Commission announced that the deadline for Strong Customer Authentication will remain in place for 31/12/20 - how do we expect this to play out?
Anna Bejaoui: With the FCA being the first mover, it can be expected that other national regulators will follow suit. At the same time, it is desirable that merchants as well as the payments industry keep a high pace in implementing SCA in the timeframe that was originally set forth. Due to the corona crisis there is a likelihood though that there will be some slow-down as focus has shifted, for many merchants as well as for some players in the payments industry.
9. Preparing for the new normal – this crisis will have made many consumers think differently about the way how they shop and pay. What is your advice for merchants, how to prepare for this new normal, and how to improve their long-term ability to service demand and create a great online payment experience?
Anna Bejaoui: In Germany, many retailers still have to close gaps in the POS area, i.e. to accept card payments in the first place. The higher demand for card payments will spur on all card payments, be it by girocard or by credit cards. Credit cards have the advantage for consumers of securing short-term liquidity. In addition, when travel is possible again retailers should ideally be equipped for international customers who want to pay with their credit card.
As already mentioned, there is a strong trend towards contactless and above all to mobile payments. This trend is unlikely to return to the previous level. For e-commerce retailers, it is more important than ever to optimize the mix of payment methods and reduce cost. However, newer trends in online payments such as instalment payments should also be taken into account, provided they fit the merchant offering.
About EVO Payments:
EVO Payments International GmbH
EVO Payments International GmbH is a European subsidiary of EVO Payments, Inc. (NASDAQ: EVOP) and a payment institution licensed in Germany. As a payment institution and a principal member of Visa and Mastercard, EVO Payments International GmbH is the exclusive provider of card acceptance solutions for Global Transaction Banking (GTB) for Deutsche Bank in Europe or Postbank - a branch of DB Privat- und Firmenkundenbank AG, and have repeatedly been honored as the best provider for internationally active retailers.
EVO Payments, Inc.
EVO Payments, Inc. (NASDAQ: EVOP) is a leading payment technology and services provider. EVO offers an array of innovative, reliable, and secure payment solutions to merchants ranging from small and mid-size enterprises to multinational companies and organizations across North America and Europe. As a fully integrated merchant acquirer and payment processor in over 50 markets and 150 currencies worldwide, EVO provides competitive solutions that promote business growth, increase customer loyalty, and enhance data security in the markets it serves.