Real-Time Payments Tracker® Series Report

Gift Giver: Payments Innovation Delivers Cheer to Holiday Shoppers

January 2024

During this past holiday season, customers flooded retail and eCommerce spaces, as is the annual tradition. However, there was more on their minds than just buying gifts. What truly brightened customers’ holiday season were innovative and fast payment experiences.

PYMNTS
01

As consumers become accustomed to the convenience of online shopping, they now seek out that same level of ease and efficiency when shopping in-store. Streamlining payments is one of the most effective ways to provide that seamlessness.

02

Merchants seeking to bolster customer loyalty and to provide a superior customer experience are turning to new payment systems. Among the payment options being explored, real-time payments punch above their weight in terms of enhancing customer satisfaction.

03

Customers have more choices than ever for their holiday shopping needs — from brick-and-mortar retailers to a limitless selection of online merchants. With so many options available, it is no wonder that customers are willing to switch merchants should their payment needs go unmet.

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    Consumers tend to spend more during the holidays every year, driven by retailer deals, the increasing penetration of eCommerce and new and exciting merchandise to purchase for themselves and their loved ones. The 2023 holiday shopping season was no exception. With the retail space having become ever more competitive, retailers pulled out all the stops to gain an edge over their rivals. To this end, numerous retailers leveraged cutting-edge payments technologies, including contactless and real-time options. In the crowded holiday shopping space, any advantage in this arena can spell the difference between profit and loss going into the new year.

    Customers Seek Faster Payments During the Holidays

    As consumers become accustomed to the convenience of online shopping, they now seek out that same level of ease and efficiency when shopping in-store. Streamlining payments is one of the most effective ways to provide that seamlessness.

    1 in 5

    consumers spend more during the holidays due to improved payments technology.

    Payment technology led one in five consumers to spend more during the holidays.

    While worries about inflation led many consumers to curb their spending over the holidays, one in five planned to spend more money thanks to the ease and convenience facilitated by modern payments technology. Consumers’ preferred methods include tap-to-pay, digital wallets, peer-to-peer (P2P) apps and QR codes, all of which offer a faster payment experience over traditional debit and credit cards. For the 2023 holiday season, however, plastic remained at the top of the heap, with 55% of shoppers planning to use credit cards and 54% debit cards.

    Customers expect faster shipping and refunds.

    Similar to their preference for convenience, online shoppers hold high expectations for speed, with 78% saying they look for same- or next-day shipping when purchasing. While most online consumers are willing to pay more for expedited shipping, 71% insist on free returns, saying they would purchase only from sites offering them. Swift refunds for these returns should be a top priority for eCommerce merchants, as customers needing to return items are also wanting their money back just as quickly, mirroring their expectations for fast and efficient service.

    Merchants Deploy Alternative Payment Methods

    Merchants seeking to bolster customer loyalty and to provide a superior customer experience are turning to new payment systems. Among the payment options being explored, real-time payments punch above their weight in terms of enhancing customer satisfaction.

    52%

    of U.S. retailers either accept real-time payments or plan to enable them in the near future.

    85% of merchants plan to accept alternative payment options in the coming years.

    Digital wallets, account-to-account (A2A) bank transfers and buy now, pay later (BNPL) are just some of the latest alternative payment methods merchants are currently exploring, spurred by customers’ insatiable demand for fast and easy checkouts. More than 70% of merchants surveyed said that failing to implement these payment options could negatively affect sales, with payment volume through these channels hitting $19 trillion globally in 2022. Most of these payment methods offer much faster transaction speeds than traditional methods such as cards, cash and checks.

    More than half of retailers aim to implement real-time payments in the next three years.

    Real-time payments proved crucial during this past holiday season, and the demand for these accelerated transactions will only grow more pronounced and indispensable for future holiday shopping seasons. PYMNTS Intelligence research found that 52% of retailers in the United States and 56% of their counterparts in the United Kingdom currently accept real-time payments or plan to do so in the next three years. These payments not only deliver a superior customer experience but also provide retailers with extensive data that they can leverage to make marketing and purchasing decisions. This means that any shopping done during the recent holiday season will allow retailers to make strategic changes before the next one.

    The Risks of Limited Payment Options

    Customers have more choices than ever for their holiday shopping needs — from brick-and-mortar retailers to a limitless selection of online merchants. With so many options available, it is no wonder that customers are willing to switch merchants should their payment needs go unmet.

    75%

    of millennials would shop more at small businesses if they offered the same level of convenience as big-box chains.

    Customers are likely to drop retailers for a lack of payment options.

    PYMNTS Intelligence research found that 65% of U.S. merchants believe customers would be very or extremely likely to switch merchants that fail to offer alternative in-store payment options. Fearing customer abandonment, retailers are adopting real-time payments en masse, with nearly one-third of U.S. retailers planning to introduce the payment method in-store over the next three years. Real-time payments are designed to resemble the eCommerce experience more closely than traditional in-store POS transactions, further boosting their appeal to online-savvy shoppers.

    SMBs are struggling to meet younger generations’ payment expectations.

    Just 21% of millennial and Generation Z consumers feel that small to mid-sized businesses (SMBs) offer a convenient online experience. This poses a dire warning to these merchants, as millennials and Gen Zers contribute a larger share of holiday shopping revenue each year. One survey found that 73% of Gen Z shoppers and 75% of millennials would shop more often at small businesses if they offered the same level of convenience as big-box chains. And real-time payments are a vital part of that customer experience.

    Real-Time Payments Are Vital for Holiday Success

    Real-time payments play a crucial role in bolstering retailers’ efficiency and competitiveness, especially during increasingly rivalrous and lucrative holiday seasons. These payments enable swift and secure transaction processing, elevating the overall shopping experience and fostering customer satisfaction and loyalty, vital qualities in a competitive retail landscape. These payments are no less important for online retailers, offering fast and reliable transactions that reduce the risk of abandoned shopping carts and ensure that retailers capitalize on the increased digital traffic.

    In addition, real-time payments facilitate better inventory management for retailers. A streamlined payment system helps retailers keep track of stock levels in real time, minimizing the risk of overselling and stockouts — which is especially critical during the holiday shopping frenzy. This ensures that customers receive their orders promptly, fostering positive consumer sentiment while strengthening the image of their respective brands. As the retail landscape evolves, adoption of real-time payment technologies has become a strategic imperative for those seeking to succeed during the seasonal shopping rush.

    About

    The Clearing House operates U.S.-based payments networks that clear and settle funds through ACH, check image, the RTP® network and wire transfers. The RTP network supports the immediate clearing and settlement of payments along with the ability to exchange related payment information across the same secure channel.
    Learn more at www.theclearinghouse.org.

    PYMNTS INTELLIGENCE

    PYMNTS Intelligence is a leading global data and analytics platform that uses proprietary data and methods to provide actionable insights on what’s now and what’s next in payments, commerce and the digital economy. Its team of data scientists include leading economists, econometricians, survey experts, financial analysts and marketing scientists with deep experience in the application of data to the issues that define the future of the digital transformation of the global economy. This multilingual team has conducted original data collection and analysis in more than three dozen global markets for some of the world’s leading publicly traded and privately held firms.

    The PYMNTS Intelligence team that produced this Tracker:
    Managing Director: Aitor Ortiz
    Senior Writer: Andrew Rathkopf
    Content Editor: Joe Ehrbar


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