The British Retail Consortium's annual Payments Survey is out for 2021, and it points towards a fast-approaching cashless future, enhanced payment security and more. We've read the full report (so you don't have to) and collected the top five takeaways for retail business owners below.
Conducted by the BRC, the Payments Survey uses an exclusive set of data from retailers to assess the changing approaches in how customers choose to pay for goods.
We're going cashless
According to the survey, cash purchases fell by 7% in 2020, making up just 30% of retail transactions. What does this look like exactly? £60.9 billion worth of goods were purchased using cash in 2020, compared to £77.6 billion in 2019. This drop might not surprise you. Switching to contactless services in all areas of life, including when buying goods, has been a major COVID-19 mitigation tactic, making contactless payments one of the key trends of 2021 in general.
Plus, as more and more alternative payment methods enter the scene (more on that below), it's easy to see how cash might lose popularity faster than previously expected.
But, with over £70 billion worth of notes currently in circulation and eight million adults in the UK still relying on cash to make payments every single day, it's unlikely to be ousted just yet.
With approximately 1.7 million people in the UK without a bank account to their name, cashless might be the reality for many, while the few are left behind.
So for you, as a retail business owner, having an inclusive, card-first, digital-friendly approach is crucial to capture as many customers as possible.
Cut the time you process card transactions by opting for a super fast card machine like the Dojo Go and take payments 80% faster than the industry standard. This should free up your time, so you can focus on helping customers that might need your support instead.
Debit cards take the central stage
So while we're on the move to become a cashless society, it comes as no surprise that cards have emerged as the leader. They were used to pay for £326.2 billion worth of goods in 2020, accounting for a whopping 81% of all retail sales (compared with £308.5 billion in 2019, or 78% of sales).
But the big winner, according to the Payments Report of 2021, is debit cards, in particular, making up 73% of all retail purchases by cards, or 79% of card purchases by volume. While credit and charge cards account for the remainder.
In fact, almost £239 billion were spent via debit cards alone – meaning that for the first time ever, debit cards processed more than half of all retail transactions by volume in the UK. In contrast, credit card sales share has remained broadly consistent year on year.
This can come as excellent news for retail business owners, as in general, debit card processing fees are lower than credit card ones.
Don't get left behind – ideal for retail businesses of any size, our Dojo card machines are your sleek solution to accepting all major card types and mobile payments. Plus, you'll enjoy next-day transfers and free mobile connectivity as standard.
The rise of alternative payments
Another key report takeaway is that alternative payments had doubled their share of retail sales from 2% in 2019 to 4% in 2020. Referring to online payment methods such as PayPal, Clearpay, Klarna or Laybuy, the rise of alternative payments has been driven by ecommerce. Which, in turn, was accelerated during the pandemic, giving alternative payments a huge boost along the way.
In retail, alternative payment methods used to account for almost 20% of the market in 2019. Fast-forward to 2020, and that number was 36%, according to the Office for National Statistics (ONS).
A lot of this has to do with the global generational shift towards buy now pay later (BNPL) options attributed to the spending habits of both millennials and Gen Z. Younger generations are reinventing their entire relationship with retail – they aren't simply paying for a product, but rather are 'immersing themselves in the experience [of buying].' Queue in the rise of alternative payment platforms that go big on signature branding, social media presence, and as a result, are creating a new, emotional connection with their audience.
Crucially, what this trend showcases is the increasing need for multiple payment options. As a retail business, your key takeaway should be that you should offer flexibility to your customers to stay ahead of the times (or at least move at the same pace as them!).
Be it accepting various payment methods (including chip and PIN, contactless, and Apple Pay, amongst others), or simply updating your online store to accommodate for a frictionless, user-friendly experience.
The need for Strong Customer Authentication
This increased popularity of ecommerce and alternative payment methods and the increased contactless limit has boosted the need for an enhanced Strong Customer Authentication (SCA). Essentially, this will enhance payment security and affect the way banks check if the person making a payment is permitted to do so.
In the same report, the BRC has pointed out that the deadline for implementing the new SCA rules is 14th March 2022 – by this date, "full SCA compliance for ecommerce transactions can be expected".
What are the new SCA rules, and do they affect your retail business?
To meet the new SCA requirements, two-factor authentication is required for many online card payments in Europe. The extra authentication step aims to prevent card fraud by asking a customer to respond to a prompt from their bank. The scope of the SCA is quite broad, and it can apply to both remote and face-to-face transactions, including payments through an app, browser, and mobile. Find a complete list here.
The main focus is a technology called 3DSecure which will help facilitate the authentication of card-based transactions – but there are other SCA compliant solutions available too (such as Apple Pay or Google Pay).
To help you out, UK Finance has also compiled this extensive list of frequently asked questions specifically dedicated to merchants and retailers.
It's also good to note that a programme is currently underway by banks that will see customer transactions declined for retailers who are not ready for Strong Customer Authentication by the stated deadline.
You should visit the BRC or SCA PMO website for more information and review the most up-to-date guidance.
Finally, a key finding from the BRC report is that the average transaction value increased in 2020.
So while a decreased footfall was a given during lockdowns, resulting in fewer trips to physical shops, consumers spent more across fewer purchases. As a result, the report states, the average transaction value (ATV) of any retail transaction increased to £24.15 in 2020 (up from £20.61 in 2019).
ATV refers to the average amount of money spent by a customer on a single transaction. Suppose you want to calculate the ATV for your retail business. In that case, you need to divide the total value of transactions within a specific period by the number of transactions during that period.
As a retail business owner, focusing on increasing your ATV could mean that you can increase your takings while processing the same number of transactions as before.
Strategies to optimise ATV include training your staff so they interact better with customers from the moment they enter your store and create more upsell and cross-sell opportunities.
This could be something as simple as rearranging your merch or optimising the space you've got to your advantage.
For example, don't clutter your store but neatly present each item, so you give your customers some breathing space while also making each product stand out. Or, strategically position some eye-catching things near the till.
With a Dojo Go card machine, you can stay on top of the increased footfall and serve more customers faster. You can take payments 80% faster than the industry average and receive your takings the very next day, even on weekends and bank holidays. Find out more or request a pricing plan online today.