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Why the Channel Needs to Shift Focus from Card-Present to Card-Not-Present Payments

eCommerceConsumer behaviors continually change, often in response to their circumstance and available technology. Cash, which had been king for most of U.S. commerce history, fell from its top spot in October 2018, when debit cards became the most common form of in-person payment. That trend continued, according to the findings from the 2020 Diary of Consumer Payment Choice, conducted annually in October. Again in 2019, Debit cards topped the list of payments as the method for 30 percent of all transactions.

As consumers’ payment preferences changed from cash to card-present transactions, so did their shopping behaviors overall. During the 2019 holiday shopping season, e-commerce sales grew 13.2 percent year over year, although total retail sales grew by only 3.7 percent. As more people discovered the conveniences of shopping online, more also chose to make their payments that way, even if they drove to the store to pick up purchases.

Just a few months later in early 2020, the coronavirus pandemic began to sweep through the United States, driving changes in consumer behaviors once again. IBM’s U.S. Retail Index tracked a 25 percent decline in shopping in physical stores in Q1– and that increased to a 75 percent decreased in Q2. The turbulent early months of 2020 resulted in brick-and-mortar retailers bracing for a 60 percent decrease in in-store purchases, while predictions put e-commerce growth at 20 percent overall for the year.

Consumer Payment Preferences Have Changed, But Have VARs’?

This shift in consumer behaviors has merchants demanding new point of sale (POS) functionality from the channel. POS ISVs and their value-added resellers (VARs) that typically focused on traditional POS systems, designed for transactions at the checkout counter, need to set a new course for their businesses. They must now find ways to enable their clients to accept online orders and payments, manage shipping or delivery, or have orders ready for curbside pickup.

Merchants also need to be ready to safely provide customer service in person. Consumers are likely to prefer touchless experiences, expecting the ability to use their mobile wallets or contactless cards or take advantage of options such as QR code payments or text-to-pay. Depending on the type of business, customers may appreciate the option to use self-checkout to help maintain a safe social distance from other shoppers and store employees.

Your brick-and-mortar-only clients may have been able to maintain their market share up until now, even though they trailed the competition in terms of omnichannel customer experiences, but in 2020, that lack of functionality could have literally put them out of business.

Terminal POS-focused ISVs and VARs not only have to expand their focus and their solution portfolios to help their clients weather the current crisis. They also need to adapt to maintain their client base. Competitors like Toast or Clover have solutions designed for traditional POS functionality as well as online ordering and mobile POS and easy adaptation to touchless processes. Even though the POS solution you sell may be robust and feature-rich, the competition that can solve your users’ pain points with a virtually off-the-shelf solution can give you a run for your money.

Correct the Mistake of Viewing Card-Present and Card-Not-Present in Silos

The good news is that you can fight back, but it will take a change in strategy. Instead of keeping card-present transactions siloed from online and unattended payments, begin to provide merchants with one, integrated system that allows consumers to engage and to pay however they choose.

Although your POS software may lack some of the features that merchants need, partnering with an omnichannel payments company that offers value-added services can be an easier path to the total system your merchants need. Your software plus the features integrated with the payments solution can meet consumer expectations and provide merchants with the flexibility they need in the COVID-19 era or when change occurs again in the future.

Working with one vendor that can enhance your POS system with additional functionality will also eliminate the need to search for and vet multiple vendors and integrate your software with their solutions. Your payments partner has done that work for you, saving time and enabling you to deliver a total system with features that work together seamlessly.

Be Everything Your Clients Need

ISVs and VARs, as trusted advisors, should help their clients evolve from brick-and-mortar businesses accepting only card-present payments to a business that engages customers on multiple channels. And, to also ensure your business’ continued success, you need to demonstrate that your clients don’t need to find a new vendor for online solutions and card-not-present payments – or a new provider that can deliver all the functionality that doing business in 2021 will require. Partner to expand your offerings and prove that your business is the one-stop-shop for everything your clients need.

Consolidate card-present and card-not-present payments with Datacap!