Tracking The Trends That Shaped 2020’s The Digital-First Economy

This year, the PYMNTS data and analytics team published 252 reports that tracked the data, innovations and disruptive thinking that are reshaping the payments and commerce business. The Trackers use a number of creative methodologies and frameworks that measure and benchmark an ever-changing landscape.

As part of our special year-end coverage, here’s a sampling of 10 Trackers that stood out in a crowded field.

Buy Now, Pay Later

Presented by Afterpay and featuring an interview with Daniel Demsky, co-founder of travel clothing retailer Unbound Merino, this report detailed the way installment payment plans’ popularity have surged during the pandemic, and research correctly suggested it would become only more popular during the holiday season. Many consumers were still facing pandemic-related financial strains going in to the holidays, making flexible payment options all the more important as they began buying gifts.

Buy now, pay later (BNPL) solutions hold promise in alleviating some of these issues, but many retailers are still taking hands-off approaches to dealing with pandemic-related shifts in consumers’ spending habits.

“I think, when you’re spending close to $200, BNPL can make it more palatable and make the items more accessible,” Demsky said. “We suspect this is going to broaden the demographic.”

Digital-First Banking

Banks will need to seriously revamp their in-branch experiences to accommodate the new normal as customers are growing used to the unparalleled convenience and speed that mobile banking has to offer. This tracker brought NCR Corporation together with Avidia Bank and was notable for the stat that showed that one-third of bank customers said they would visit physical branches more often if they could compete with the ease of mobile banking, and banks are deploying or workshopping a number of technologies to make this convenience a reality.

Smart ATMs are being leveraged en masse to provide a similar range of banking transactions as can be accomplished by human tellers, and many banks are also deploying virtual video meetings so customers can interact with bank staff without leaving the comfort and safety of their homes.

“You hear a lot about the new normal and stuff like that, but I really see it as banking at the speed of life,” said CarrieAnne Cormier, senior vice president of Retail Operations and Strategy at Avidia. “Financial institutions in general have had to adapt at our consumers’ and our business clients’ paces and how they’re conducting their lives and how fast or slow that’s going.”

Disbursements

Featuring Ingo Money and an interview with Americans For Financial Reform, the Disbursements Tracker detailed the predicament of living paycheck to paycheck. One out of every three Americans said they had experienced a loss of income as a result of the pandemic.  This loss can be crippling for consumers who live paycheck to paycheck or have little savings.

Approximately 40 percent of U.S. consumers cannot pay for a $400 emergency. This all means that the payments individuals expect from the government and corporate entities such as insurance companies must be made with significant speed so individuals can pay their urgent bills. The pressure is on for these government agencies to upgrade their legacy infrastructures to facilitate a modernized, digital disbursements experience.

“The IRS is ready to deal with direct deposit if you have a regular bank account, and they are ready to deal with paper checks, [but] they are not used to dealing with [more] payment methods on a widespread scale,” said Linda Jun, senior policy counsel for the AFP. “I have noticed, with a lot of these systems, with [the pandemic], that available systems are either entirely internet-based or completely old-school, like paper. We need to push the government to do more to reach those places where neither of those is an option.”

CFOs Guide To Digitizing B2B Payments

Companies are reexamining their payment tools as they work to more swiftly and seamlessly pay vendors. Featuring Comdata and IBM, this report validated the fact that paper checks are proving increasingly difficult to print and deliver as many employees work remotely during the pandemic, forcing firms to innovate their payment methods and systems. Many businesses are finding that newer digital payment tools, like virtual cards, offer key advantages to optimizing their B2B processes during the health crisis.

“We have [billions of] digitally organized individuals on the planet who have learned how to transact life for the last eight months in the virtual world,” according to Mike Cooke, senior partner and head at IBM Payments Center.

Mastering Multichannel Commerce Playbook

This report looked at what treasury leaders and financial executives must know about the shifting dynamics of digital commerce — and how they can make the most of these emerging opportunities. As told by Citi and GE, the pandemic prompted a massive online shift as stores closed and consumers became wary about venturing out.

There was another inconspicuous but remarkable dimension to these trends, however. Cross-border online sales in the United States as a share of total eCommerce surged by 40 percent in May compared to the same month in 2019, and the rate of growth was six times higher than in the previous month. The year-over-year increase in cross-border online sales was even more dramatic in other regions.

“There's always a continuous assessment regarding your top line [as a company], but you also have to think about the bottom line, and cost efficiency becomes a huge metric in that space,” said Shreya Fatehpuria, inter-company and FX payments leader at GE.

Credit Union

The past year has been one of the most trying in recent memory for lenders as well as consumers. The pandemic-induced challenges have also been taxing for community financial institutions (FIs) and credit unions (CUs), as many were not designed to operate remotely. Banks and CUs had already been planning to implement new technologies and processes when the year began, but they were forced to dramatically accelerate their digital initiatives after pandemic-related stay-at-home and social distancing protocols gave them no other choice.

“Since the onset of the COVID-19 pandemic, PSCU has leveraged its robust data warehouse and analytics capabilities to publish a weekly analysis comparing year-over-year transactions of owner credit union members to identify the impact on consumer spending and behavioral trends,” said Dean Young, executive vice president and chief experience officer at PSCU. “We have distributed these reports weekly to the market and published infographics on our dedicated COVID-19 microsite to provide our owner credit unions with timely data to make strategic decisions.”

Preventing Financial Crimes

Featuring NICE Actimize and Zelle, this report showed that this year was tough on the fraud front as financial crime stressed FIs that were already confronting the pandemic, economic struggles and an unpredictable political climate.

Digital and mobile payments are surging as businesses and consumers transact from home, and this increased digital engagement has opened the door to more financial crime. Twenty-one percent of all fraud attacks were waged on mobile transactions in the first half of the year, and 37 percent of them originated from mobile devices.

“We do things to help people ensure they're sending money to the right place; for example, making sure that when they enter a phone number, it comes back with a name prompt to let them know who they're sending money to,” said Jamie Armistead, vice president and business line leader for banking app Zelle. “We also have warning messages that remind people to only send money to people they know and trust.”

Digital Identity

FIs have been searching around the digital identity ecosystem for ways to satisfy privacy and security regulations without causing potential customers to abandon what can be a complicated and lengthy application process since authentication became a requirement. This report, featuring Jumio and Capital Float showed verification measures are in place for good reason, with know your customer (KYC) rules enacted with the Patriot Act in 2001 after 9/11 to help curb funding to terrorists and prevent money laundering activity. Allowing money laundering to occur right under their noses can lead to hefty fines for FIs that fail to meet KYC requirements.

“In a number of European, Latin American and Asian countries, regulations allow banks and other FIs to use video-based customer identification for KYC, enabling customers to remotely onboard instead of requiring them to physically visit a branch office,” said Philipp Pointer, chief product officer at Jumio. “We are in a time when people do not want to vis- it a bank branch to open up new accounts. With video-based KYC, onboarding time can be cut from days and hours to minutes.”

AML/KYC

Money laundering is a global plague, with the estimated amount in a given year ranging from $800 billion to $2 trillion — or anywhere from 2 percent to 5 percent of the global gross domestic product (GDP). This report, featuring Trulioo and BitGo showed that the growing popularity of online banking has also pushed money laundering into the digital realm as drug dealers, terrorists or human traffickers who might once have set up brick-and-mortar businesses to launder their ill-gotten funds can conduct the same operations today completely virtually, even establishing multiple websites as backups in case authorities catch on.

“Crypto is still a very new industry,” Anthony Botticella, CEO of BitGo Trust, said. “Some of the players that are coming up may not understand all the requirements. So, we take a very educational approach when dealing with clients and we have to explain what we’re asking for, why we’re doing it and how we’re going to be compliant with U.S. regulations.”

Whole Paycheck: The Battle For The Digital-First Consumer

Between them, Amazon and Walmart aspire to grab as much of the U.S. consumer paycheck as possible. The Whole Paycheck Tracker series is both a gauge of how they stack up in that mission and a measurement of how they stack up against each other. In this installment, the PYMNTS team broke down the second-quarter earnings results from each of the giant retailers and founds Amazon in the lead as it almost doubled its revenue and profit numbers while spending more than $9 billion on capital improvement projects.

“Amazon and Walmart tried to find a place within the business dynamics of the pandemic,” the Tracker stated. “And those dynamics were extraordinary during the month of April, for example, when the assignment of essential versus nonessential retail made Walmart, Target and grocery retailers the only game in town for essential goods. And if a consumer could wait long enough through possible shipping delays, the other essential retailer that was open was Amazon.”