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IDC partnered with PayPal to gain insight into how eCommerce-enabled enterprises are adapting to today's digital economy, and which business-level objectives are driving technology investments. Find out below what global decision-makers had to say in our white paper, ‘The Future of Enterprise Payments is Focused on Enabling Seamless Customer Experience’.
Consumer adoption of eCommerce and digital payments skyrocketed in 2020, accelerating the need for enterprises to modernize their payment technology in order to accept customers’ preferred payment methods.
IDC partnered with PayPal to study how enterprises with >$50 million annual revenue in the United States (>$10 million elsewhere) and 100+ employees are adapting to this new digital economy, and which business-level objectives are driving their technology investments. The results show that most eCommerce-enabled companies consider digital payments a top priority for business growth. However, many do not have the organizational readiness or IT capabilities to meet anticipated consumer demand. These gaps represent significant opportunities for organizations to: invest in digital payment capabilities, focus on enabling new customer experiences with agile vendors, and partner with an integrated payments solution provider for efficient scaling and expansion.
Digital transformation of engagement and payments has long been a strategic imperative for eCommerce-enabled enterprises. However, recent changes in consumer behavior and expectations have significantly accelerated the need for organizations to modernize their payment architectures in order to accept the digital payment methods buyers prefer, and help provide a seamless customer experience.
In IDC’s September 2020 Consumer Experiences Survey, we reported that nearly three-quarters of retail spending occurred online, with more than 20% of U.S. consumers using touchless payments, video, kiosks, and mobile ordering for the first time. As a result, major global retailers reported online sales growth of 100% on a year-over-year basis, which, in some cases, accounted for 50-60% of their overall annual sales growth. In addition, nearly one-quarter of the customers (23%) we polled said they now pay for goods via mobile payment or alternative payments, such as peer-to-peer money transfer, digital wallets, or prepaid cards. More than one-third (38%) reported feeling safer when touchless processes are in place.
These fundamental changes in consumer behavior came on rapidly and tested the digital commerce and payments infrastructure of every eCommerce-enabled enterprise. Many merchants were able to rise to the occasion, but others are still struggling to acclimate. Either way, every enterprise must now build the business case for investment in digital payments, and continue to adapt to technological advancements and evolving consumer trends.
For insights about these concerns, IDC partnered with PayPal to study how eCommerce-enabled enterprises are adapting to today’s digital economy, and which business-level objectives are driving technology investments. The study asked directors, vice presidents (VP), and CXO-level leaders around the world about their business-level needs, their operational pain points, and their thoughts on where the digital payments industry is headed. The businesses surveyed were either Business-to-Consumer (B2C) (48%) or both B2C and Business-to-Business (B2B) (52%), and headquartered in the United States, the United Kingdom, Australia, or Canada. All respondents accepted online payments, and most derived more than half of their revenue via online channels, signifying a baseline level of digital maturity.
In this summary, we will cover some of the key findings of the report, such as what businesses think will help them to grow over the next five years, and what they expect will have the biggest impact on customer engagement and online payments, as they work towards a seamless digital experience.
When we asked survey respondents which technologies and innovations they think will help their businesses grow over the next five years, the top result was digital payments (52%), followed by cloud-based SaaS platforms in distant second place (32%). These findings reflect widespread recognition that consumers now expect a seamless customer journey – and that customers will be more likely to buy from businesses that cater to their payment preferences. Implementation of digital payments provides an opportunity to fuel growth, but it is also worth noting that, with the right partner, digital payments are a relatively easy area for merchants to make improvements, requiring less resources and faster, less complex integration projects compared with some of the other transformative objectives and technologies listed.
These findings are consistent with ‘IDC FutureScape: Worldwide Payment Strategies 2021 Predictions’ (IDC #US46502320, October 2020), which described how leading companies realized that digital payment capabilities are key to corporate-wide digital transformation initiatives. In that document, IDC predicted that digital payments would expand to support contactless payments, integrated risk and compliance, local payments, and B2B payments.
Digital payments are increasingly considered a key component of the overall customer experience. Accordingly, enterprises must direct their efforts to accommodate consumer preferences for online payment methods. In another recent PayPal-sponsored IDC survey detailed in ‘Consumer Bill Payment Behaviors and Preferences Trending Toward Digital Wallets’ (IDC white paper #US47590321, April 2021), we found that the adoption of digital wallets by customers is growing in popularity because consumers find them easy to use, convenient, and secure.
In fact, among the 1,000 consumers surveyed for that study, the vast majority (87%) said that they are familiar with digital wallets and almost as many (72%) currently have a digital wallet account. In addition, the data indicates that use of digital wallets is on the rise. Nearly 6 out of 10 of the consumers polled (59%) said they use their digital wallets at least a few times per week, with 53% reporting that their usage has increased over the past year.
Enterprises appear to be aware of these shifts. When asked which future trends in digital commerce and payments they expect to have the biggest impact on how their organization engages with customers and processes online payments, respondents’ top answer was digital wallets (31%), followed by speed of transaction (which happens to be a key attribute of digital wallets) at 24%.
This is consistent with the forecast in ‘IDC FutureScape: Worldwide Digital Transformation 2021 Predictions’ (IDC #US46880818, October 2020) that, by 2025, driven by volatile global conditions, 75% of business leaders will leverage digital platforms and ecosystem capabilities to adapt their value chains to new markets, industries, and ecosystems.
More than half of all survey respondents (57%) said they are likely to invest in advanced analytics to better understand their customers and increase conversion. The tools they anticipate using include predictive analytics, machine learning (ML), and artificial intelligence (AI). U.S. enterprises were the most likely to say that they plan to invest in advanced analytics (63%), followed by companies in Australia (59%), the United Kingdom (55%), and Canada (47%).
Enterprises must recognize that AI/ML requires large sets of data to create accurate predictive models, and that payments data can be leveraged as part of an overall buyer behavior analysis to guide the customer journey and increase conversion. Payments data is also critical to building fraud prevention models and processes powered by AI/ML.
In ‘IDC FutureScape: Worldwide Digital Transformation 2021 Predictions’ (IDC #US46880818, October 2020), we forecast that, by 2022, 70% of all organizations would have accelerated use of digital technologies, transforming existing business processes to drive customer engagement, employee productivity, and business resiliency.
The businesses we spoke to outlined a number of key challenges they face, as well as some of the potential opportunities that partnering with PayPal could provide. Below we go into more detail about the perceived obstacles and advantages we encountered.
When we asked respondents about their biggest challenges when deciding whether to select a new online payments service provider, we uncovered a sobering reality: There are several competing issues. The top challenge was legacy systems constraints (26%), but numerous others were close behind, including switching costs (25%), operational complexity (24%), and internal resistance to change (23%). Many companies lack the IT capabilities to overhaul payment systems and associated back-office processes.
“. . . one of the most important things you need to have on the website is a seamless way of placing the order, paying for the order, and receiving the order. A seamless website experience. When you develop a website and you bring on a new payment method, it’s really important that you have seamless integration. It’s all around ensuring that the code integrates. That the gateways that we have in place integrate and we have a real, true end-to-end experience that doesn’t change the performance or use of our website using a different containment method.”
— IT director, major consumer retailer
The PayPal network extends to more than 360 million consumers, and according to the survey results, 81% of growth companies accept it for online purchases today. Beyond offering one of the world’s most popular digital wallets, PayPal for Enterprise provides businesses with a single payments platform enabling global scale, customer insights, and end-customer flexible payment options.
With PayPal, enterprises can build end-to-end commerce experiences across multiple channels and payment methods. PayPal also enables enterprises to streamline operations by supporting global payments options, optimizing card processing, and managing risk. PayPal offers the customer acquisition and retention technologies to help merchants deliver a more seamless omnichannel experience.
PayPal can help businesses to deliver a seamless customer experience in the following ways:
Using PayPal, businesses will be able to:
“I think it’s going to be more important for digital commerce in the next five years simply because, when it comes to PayPal, there’s a significant energy and it’s very easy to use, it’s very easy to access, and it’s a very global provider. PayPal works the same way here as it does elsewhere. I think it’s going to grow particularly as our own online commerce increases, so there’s PayPal being an easy-to-use offering, and then there’s PayPal as being this global offering that everybody can use.”
— Senior director/digital product architect, leading consumer transportation provider
2020 served as a litmus test for eCommerce-enabled enterprises around the world, raising the level of urgency to modernize their payment architectures in response to changing customer behaviors and expectations. Now, these organizations must build the business case for investment in digital payments. In addition, merchants must understand how to maintain the agility required to respond to future technological advancements and evolving consumer trends.
Our study illuminated how enterprises must think strategically about digital payments, and fill the gaps between customer demands and organizational readiness.
More specifically, they need to:
Steadily invest in digital transformation. Enterprises that have modernized their payments architecture are able to adapt to change rapidly and gain a competitive advantage. Revenue increases when businesses remove payment friction.
Focus on customer experience and digital agility. Forward-looking enterprises view digital payments as an essential technology that will help their businesses grow. Digital wallets, in particular, help provide a seamless customer experience and are growing in popularity as consumers find them easy to use, convenient, and secure.
Seek an integrated payments solution partner. It is critical for an enterprise to partner with a payments solution provider that understands its unique environment, requirements, and customers. The provider must have the technology not only to meet those needs but also to keep up with changes in the market.
Following these three best practices will align the necessary elements of people, process, and technology so enterprises can create a holistic digital payments strategy that helps deliver a seamless customer experience, as well as sustained digital payment capabilities and competencies over time.
Download the PDF for a full copy of the report and to find out more about how PayPal can help to create a seamless digital experience.
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