Inflation impacts everyone, from consumers to businesses to decision makers. And unfortunately, it’s continuing to rage at a 40-year high. Merchants will feel the impact of inflation in several ways, from growing overhead and inventory costs to trying to keep up with cost-of-living increases for their employees.
However, inflation will impact merchants in another way: their customers will curb their spending. Expanding the payment methods merchants accept can reduce that pain by giving consumers affordable options for payment. Align with these trends and enhance payment experiences.
More Consumers Are Using Credit Cards
The current balance of supply and demand is contributing to higher prices. Shortages, notably the semiconductor chip shortage, have driven up prices on electronics but also on household appliances. Consumers are pulling out their credit cards to purchase or replace must-have household items.
This has driven a shift in consumers’ go-to payment methods. PYMNTS reports that in July 2022, credit card transactions outpaced debit. Credit card purchases increased 15 percent year over year, compared to a 6 percent rise in debit purchases. With more consumers turning to credit cards, it’s essential for merchants to optimize their checkout experiences. While many customers will still dip their EMV cards in payment terminals, others are looking for different experiences.
PSCU data from early 2022 reveals that 22 percent of all credit card transactions are contactless. In addition, mobile wallet credit transaction volume was 75 percent higher in May 2022 than the year before, and mobile wallet debit transactions increased by 80 percent in the same period. Furthermore, a 2022 Marqueta survey found that 56 percent of consumers prefer contactless payments and find entering a PIN “irritating.”
To enhance customer experiences (CX), merchants need to enable contactless payments. Regardless of whether consumers are purchasing essentials with a payment card or mobile wallet or splurging on luxuries, they always want the most convenient payment experiences. Now, many consider contactless the optimal way to pay.
Buy Now, Pay Later Makes Big-Ticket Items More Affordable
Not all consumers want to build credit card balances –– and some don’t have credit cards. These consumers may benefit from a buy now, pay later (BNLP) option. These “pay-in-four” plans enable people to split the cost of large purchases into interest-free installments.
E-commerce enterprises have offered BNPL options for major purchases for some time, but fintechs now offer it to brick-and-mortar retailers, including small and medium-sized businesses (SMBs). Offering a buy now, pay later option can make the difference for these businesses between a consumer following through with a purchase or walking away because it isn’t affordable.
Analysts predict this payment method to grow in popularity in the near future. BNPL payments totaled about $49 billion in 2021, and it’s projected to grow at a 32.5 percent CAGR through 2028.
Brace for Change
A study from Numerator found that 95 percent of consumers will change their spending habits if prices continue to increase. That’s likely the last thing merchants want to hear after adapting their processes to evolving consumer behaviors since the beginning of the COVID-19 pandemic. However, change in the payments space is always a fact of life.
Moreover, the impact of inflation may drive more people to discount, thrift, or consignment stores, which may now have to update their payment systems to keep up with customer expectations. Shoppers may also gravitate toward businesses with generous loyalty rewards and attractive promotions – and point of sale systems capable of managing them quickly and efficiently.
The impact of inflation is driving evolving payment preferences that require merchants to update or deploy new payment solutions to continue competing based on CX. Be ready to meet the demand. Contact Ingenico to learn more.
If you are looking to implement contactless payment acceptance and an open payment system in your transit business and would like to learn more, get in touch with us.
Ryan Ahearn is Head of Retail Solutions & Support, NAR at Ingenico