How Frictionless Payment Platforms Are Driving Strong Holiday Sales

The National Retail Federation (NRF) forecasts that 2022 holiday retail sales will grow between 6% and 8% over last year, and could reach $960 billion. According to Adobe, U.S. shoppers spent $35.27 billion online overall during Cyber Week, the period from Thanksgiving through Cyber Monday. That's a 4% gain over last year at a time when U.S. inflation is running more than 7%. Meanwhile, more than 122.7 million people visited brick-and-mortar stores over the Black Friday weekend, up 17% from 2021. 

While some may argue this year's solid sales gains are the direct result of pent-up demand, there is another force supporting holiday sales this year - innovative payment platforms and services. In our work as a digital partner for some of the world’s top financial institutions, winning payments platforms are centered around these three areas:

Customer Experiences: As I wrote in my earlier post, customer experience (CX) is at the very core of digital transformation. That is especially true for payments. Frictionless payments with enhanced customer experience drive sales, revenues, and brand loyalty. Data from Bankrate.com shows that 20% of all in-person credit or debit card transactions in the U.S. are now contactless, making simple and efficient checkouts critical to completing sales. Contactless payments are expected to grow even further. Nearly a quarter of U.S. adults stated that they prefer contactless payments when frequenting businesses. 

Empowerment: Shoppers want choice, especially when they feel financially stressed. Payment options from digital wallets and installment plans are growing in popularity this holiday season. Buy now, pay later (BNPL) orders jumped 85% during Cyber Week compared with the week prior. Those payment choices are powered by cloud-based marketplaces that enable financial institutions and retailers to provide end-to-end payment platforms. Onboarding, gateways, card issuing, loyalty, digital wallets, virtual cards, and many more new payment features can be applied by combining APIs, cloud-native capabilities, and DevOps. These self-service marketplaces, also known as developer studios, enable financial institutions and retailers to innovate faster and build payment products and services to meet demand.

Partnerships: Today’s most innovative payment systems are partner-based. Embedded finance and open banking allow IT partners to bring best-of-breed technology, engineering, and domain expertise together. We’ve seen a complete change in mindset from years past. Companies that may have once been fierce competitors are now joining together to capitalize on the significant opportunities to improve the payments experience. Our team is seeing this trend play out in real-time. We are building a partner ecosystem to drive the new ISO20022 standard for exchanging electronic messages as well as the upcoming FedNow implementation. At the same time, the industry can expect to see more powerful tie-ups like the recent Nasdaq and AWS collaboration aimed at building the next generation of cloud-enabled infrastructure for the world's capital markets.

With the increased adoption of instant payments, digital wallets, and BNPL, it’s clear that financial institutions have an opportunity to rethink and reimagine their payment systems and platforms. Consumers will continue to look for simplified, easy-to-use platforms that fit with their current financial situation. As we’ve seen this holiday season, innovative payment systems can deliver plenty of cheer for retailers.