Guy Harris, senior VP, head of merchant services at Bank of America, writes in the PYMNTS eBook, “Baseline 2022: What the Next Six Months Holds” that the digital shift has expanded consumer choice and given retailers new channels for boosting revenue, but the corresponding rise in card declines could hurt customer experience without the right tools in place.
It shouldn’t be surprising, but we expect the continued growth of eCommerce. Many consumers have returned to in-person purchases, but they’ve grown used to shopping in various new ways, and their current spending reflects a mix of old and new behaviors. In fact, PYMNTS recently shared an excellent analysis of revised census data that illustrated a post-crisis reduction in online sales, but that “return to normal” is still above the pre-pandemic trajectory. Whether this year’s data represents a new baseline or an acceleration of the pre-2020 trajectory for eCommerce payments remains to be seen, but we’re certainly watching that.
There’s been a massive shift in how consumers shop and a pivot to hybrid models of buy online, pick up in store, locker systems, curbsides pickups, home deliveries and more. The pandemic pushed consumers to adopt new behaviors more rapidly, and it’s clear that they like the added convenience of choice. Businesses that haven’t kept up with this technology, or that choose not to maintain these new channels of commerce, are going to miss out.
But while the shift to a more digital economy and expanded choices for customers has the power to boost revenue, it also has the potential to harm the customer experience. The increase in card not present transactions has a concurrent increase in card declines. Card not present (CNP) transactions have a three times higher decline rate:
A large portion of that incorrect data is tied to cards that have been reissued per the payment network — 30% of card accounts are reissued every year. There are multiple solutions that merchants can implement to help improve these authorization rates. As an example, Bank of America works with business clients to optimize their transaction data submission and provides insights into their decline reasons. We feel that improving authorization rates is one place that businesses can focus and improve their customers’ experience in the near term.
Overall, what we’re seeing is not a temporary “work-around,” but true embedded behavior changes. eCommerce has aligned to the broader transition to a more digital economy. As of January 2022, Bank of America had 16 million active Zelle® users, including small businesses, and clients sent more Zelle® transactions than physical checks in 2021. Today, 86% of deposits are made through digital or ATM channels. Small business digital sales are nearly 300% above pre-2020 levels, and digital sales account for nearly 50% of total sales. Customers have seen the speed and convenience with which they can do business without going to a financial center or waiting for physical payments. We don’t expect them to walk away from that.
Disclosure: Zelle, and the Zelle related marks are wholly owned by Early Warning Services, LLC and are used herein under license.
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