PayPal Combines COVID Learning With Digital Transformation to Pursue ‘Commerce 2.0’

If you remember Internet 1.0, it looked like a pinball machine and wasn’t very smart, making search results an adventure that often ended in disappointment. Selling is much the same, passing through its early “just slap up a website” phase and graduating to the experiences we now know and expect.

For all the ground gained during the pandemic, that digital shift revealed what’s possible in a truly connected economy that’s bringing about the rise of what PayPal Vice President – Merchant Platforms, Integrations and Dev-Experience Nitin Prabhu calls “commerce 2.0.”

This forming iteration of the new-new digital commerce impacts consumers and merchants in different ways, with common themes emerging to inform the commerce 2.0 concept. The new retail is decidedly omnichannel, and that trend isn’t going away.

Prabhu said of eCommerce, “Now it has become essential. As stores are opening up, what we have seen is customer behavior has changed for good. A lot of times the journey starts online, on their desktop, on their mobile, but may end in store. It’s a challenge.”

To embrace commerce 2.0, “Merchants can’t afford to look at these channels separately, because if they do, the experience is broken and consumers will go to competitors,” he continued. “The challenge merchants have is [working] with a multitude of partners. That’s where companies like PayPal can bring in a one-stop solution to manage customer experience end-to-end.”

See also: PayPal’s Reverse Logistics Unit Brings ‘Happy’ to the Dreary Returns Biz

Choice in All Things

Choice is now a deciding factor in where people buy and how they pay. Not surprisingly, commerce 2.0 revolves around the many choices now available to consumers.

“The way I see it is consumers are now not thinking about in store and online,” he said. “They look at the best experiences. They want choice, they want flexibility, and they want to make sure that merchants, brands and payments serve their needs.”

Citing a Forrester study finding that 71% of consumers view brands offering choice more favorably, Prabhu said, “It’s choice in payment methods, choice in shipping and choice in returns. That’s a huge advantage. Especially with brands that are not well known … [there is a] 54% increase in conversion when the merchant showed the PayPal brand.”

PayPal signifies choice at checkout, explaining the uptick. It also signals less checkout friction.

He said loyalty rests on three tenets — the right combination of product, the right economics and the best customer support model — and checkout is where it all comes together, or else.

Citing PayPal data that 25% of customers find the checkout process overly complex, Prabhu said, “Roughly speaking, that translates to $236 billion of lost payment volume. We also saw that if a customer gets declined twice, they never come back to that payment method or brand.”

Consistent with PYMNTS’ research on how payments experience impacts loyalty, the commerce 2.0 model asks merchants to “try out different experiences and see which converts best. Reduce the number of steps. Make the language, the color scheme very customer friendly.”

He added, “Auth rate is also extremely important because every percentage point improvement in conversion is millions of dollars that the merchant has generated in revenue. Returns are also very important. A combination of this is what can help the merchants win and keep happy customers.”

PayPal is so serious about the returns component that it acquired returns processing startup Happy Returns in 2021. Payments option like buy now, pay later (BNPL) are table stakes, too.

“U.S. merchants who accept PayPal Pay In 4 have seen a 21% increase in volume, which is an amazing lift,” he said. “PayPal doesn’t charge late fees. Our intent is to make sure merchants can do business, and consumers can have the flexibility to pay over time.”

With the PayPal platform empowering 429 million consumers and merchants in more than 200 markets, Prabhu believes PayPal is bringing this all together as an example of commerce 2.0 in action.

Read more: In Bid to Raise the Checkout Bar, PayPal Urges Industry to Boost Authorizations

Commerce 2.0 Will Be 3D

It’s not as if commerce 2.0 is a PR stunt. It’s a movement where consumer goods, technology, logistics and other complex systems are harmonized into a convenient, customer-centric flow.

How individual companies pursue the goal depends on factors from industry verticals to whether legacy operations must be further modernized beyond fast steps taken during the pandemic.

“I was talking to a very large retailer, and they said of every 100 customers who come to their website, only seven end up purchasing,” Prabhu said. “That’s a huge drop in funnel. What we have been working with them on is how to take that seven to 10, 11, 12, because that is incremental business and consumers [are] already there.”

He added that merchants implementing PayPal Checkout are seeing “a 28% increase in conversion, and around an 8% increase in Net Promoter Score.”

Other PayPal research finds that 44% of consumers who are falsely declined never return to that merchant or recommended the merchant to others. That’s another area where a commerce 2.0 mindset and strategy can turn lost sales into found revenues.

“My first call out to every product manager and merchant is test your own product and think about the end-to-end customer journey,” he told PYMNTS. “Don’t solve only for sophisticated customers, but solve for different demographics and work with a trusted strategic partner. A few tenets are less clicks, easy language, faster checkout and best auth rates are all important.”

Ongoing use of QR codes is another example of commerce 2.0 not only saving paper on menus, but more importantly streamlining the ordering process at a time of labor shortages. Similarly, drone deliveries and smarter online-physical retail coordination can enhance the experience.

It’s a relatively simple formula to solve the complex issues of retailing post-pandemic.

“I fundamentally believe commerce 2.0 and the customer journey are going to be three dimensional,” Prabhu said. “It is going to be a combination of mobile, [desktop] and in-store. This experience has to work seamlessly because consumers don’t and shouldn’t have to think about these differently.”

Related: PayPal: BNPL Complements Store Cards, Drives Additional Purchases