Last year’s events, led by the global virus crisis, proved to financial institutions, merchants, and consumers that the importance of digital merchant and payment solutions in today’s society is growing at an accelerated pace. While 2020 seemed to be an important pioneer in terms of e-commerce, 2021 will bring a number of significant developments, such as modern digital payments, in this area as well.
The more important digital payments and e-commerce become in people’s daily lives, the less cash is used in their daily operations. According to the 2020 World Payments Report, the COVID 19 pandemic has caused a staggering 53% increase in the use of digital channels encouraging retail customers to consider new ways to pay.
The pandemic situation and safety considerations led people to learn more about using mobile payments, e-wallets, and other digital solutions for shopping. As the new opportunities are also fast and convenient, even if we can overcome the virus this year, the number of cash transactions will hardly start to grow significantly. According to the statistics published by Eurostat shows that 72% of Europeans have purchased goods or services online in 2020 for private use.
One of the most crucial issues for the consumer in regards to digital payment systems is definitely security. People’s data is now more at risk than ever before: according to Google, the number of phishing pages increased by 350% last year during the pandemic. On the positive side, the beginning of the year saw a very timely and necessary change in terms of ensuring secure payments: the use of the new 3D Secure 2.0 protocol became mandatory in Europe. The updated protocol is much more user-friendly than the previous version and is more compatible with smart devices and in-app transactions, as the new requirements require card issuer systems to be able to support mobile devices as well.
Another trend that can be seen in the new year is the increase in the number of different new innovative and user-friendly payment solutions. Traditional solutions, such as bank-linked payments or sending an invoice to the buyer’s e-mail address, will not disappear, but new ones will gradually be added. One such option is, for example, the buy now, pay later payment method. Buy now, pay later solutions allows the buyer to take out a small, zero-interest loan to purchase the product. The same service and other similar payment options that are based on installment payments instead of loans, have already reached Estonia, as in order to remain competitive in the market, product and service providers must be able to offer their customers more and more flexibility and more choices.
The last influential keyword in 2021 is open banking. This may be a slight change for the end-user, but it is an extremely significant change for product and service providers. Open banking refers to the use of open application software interfaces that allow third-party developers to build applications around financial institutions. Firstly, it gives merchants more of a choice: new “aggregators” of bank link payments have entered the market, and more competition naturally improves existing options. Banks have also started offering a combined card payment and bank link service in cooperation with fintech companies (as well as EveryPay), which makes the life of merchants especially convenient, as they now acquire all services and solutions directly from their home bank. Additionally, it is now easier than ever for product and service providers to attract foreign customers who do not have an account with the particular bank supported by the merchant.
Open banking has been well received by both customers as well as merchants: since August 2020, more than two million open banking transactions have been made in the Baltics through the EveryPay platform.