Changes in 2020 affected everything – including payments and the demands on digital goods and services. How retailers use new technology to adapt is going to be key to their success in 2021.
Social changes brought about by the pandemic affected both consumer behaviour and retailers’ responses. Combine those factors with the relentless pace of change in transaction technology, and now seems like a good time to consider what lies ahead for retailers in 2021.
VAS goes from nice-to-have to profit-maker
There’s no doubt that digital goods and services have grown in importance – and complexity. Initially, VAS was dominated by Tier 1 retailers, with their access to the cash market. Cash sales may still have relevance in 2021 but they don’t necessarily account for the higher-value VAS transactions, and it’s clear that digital payments and customer engagement through apps are growing in importance.
New payment methods and new services are attracting customers in greater numbers, and, importantly, retailers are seeing increased profits from their VAS offerings. As a result, they’re optimising profit-and-loss strategies for their VAS business. Having the right focus can help them achieve higher margins by broadening their VAS offering beyond their competitors’, and negotiating better commercial agreements with VAS providers. Ensuring an omni-channel approach is key, and it helps to have access to multiple providers via a single, production-tested VAS switch, like Electrum’s, to take advantage of the best commercials and to give customers the best experience.
For Tier 2 and 3 retailers, VAS is a convenient service they can offer to their customers, rather than a business unit that drives strategic revenue. Nevertheless, as a competitive offering, it’s not part of the business that can be ignored.
Quicker ways to expand the VAS menu
Speed to market has been a sticking point whenever new digital goods and services are added to a retailer’s systems. Typically, utilising existing payment rails for processing VAS transactions and the lack of in-house technical expertise to enhance existing structures have been some of the problems encountered. More and more, retailers have been interested in moving to cloud-based SaaS solutions, like Electrum’s Transaction Hub. This allows retailers to quickly integrate new providers with a reliable, versatile platform.
A wider array of services, with convenient payment methods, is becoming the expected retail experience for customers. A VAS platform like Electrum’s Transaction Hub also allows integration with other digital payments processing solutions, so retailers can offer customers an array of payment methods, including digital wallets and vouchers, loyalty points, QR and more.
Back-office functionality can also be built into these platforms, essential for this fast-growing, high-volume business.
Automated recon and settlement become a necessity
We’ve discussed the opportunities that new VAS offerings and new payments bring, but with these come added complexity. How will retailers be able to process, reconcile and settle a variety of transaction types across multiple parties? In 2021, it’s going to be essential to have the back-office tools that can keep up.
High quality, automated recon and settlement makes sure the right amount of money changes hands at the right time, no matter how many (or how quickly) new services are added to the offering. Beyond simply determining the settlement obligation for a transaction, Electrum’s back-office tools allow users a real-time view, spanning the full lifecycle of a transaction, with immediate visibility on operational issues, and offering valuable business insights.
When choosing back-office tools, retailers are also looking for flexibility, so that their own teams can rapidly deploy or change elements as needed.
New depths to QR
In 2020, we wrote extensively about the rise of QR code payments. In summary, it’s already huge in China, and with the spike in contactless payments uptake in the wake of coronavirus, it’s set to grow more in 2021.
Even before the pandemic, major retailers were starting to add closed-loop payment options to checkout offerings, ensuring they made the most of their store of value. As more customers migrate from cards to apps, and with retailers vying to offer their customers an array of payment options – from store accounts, lines of credit, grants or loyalty points – closed-loop QR will remain an important tool.
It’s also now possible to leverage these in order to grow payment offerings by integrating with a single platform, like Electrum’s Digital Payments Platform. Customers appreciate the cashless, frictionless experience of QR, while retailers capitalise on the potential to drive loyalty through the identification of customers, allowing customisable specials and communications, and the ability to bundle virtual gift cards.
Digital wallets open up new possibilities
Smartphone penetration in South Africa is already at 87%, and with South Africans’ willingness to take up new technologies, digital wallets and retailer apps are turning into a contested area for businesses. Customer experience is vital in a competitive retail market, and those who can offer convenient ways to pay – plus a few targeted, welcome rewards in a strained economy – will win customer loyalty.
While there’s plenty of uncertainty ahead, there are also opportunities in 2021. If you’re looking to prepare your retail business for the year ahead, please chat to us.