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Winning the Transaction

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Oct 13, 2020

2020’s holiday shopping experience will be a new normal. Consumers are adapting, embracing new ways of transacting. Are you ready?

Winning the Transaction

The month of October is not typically one in which most start thinking about December holidays, but as the events in the year 2020 continue to disrupt and defy the normalcy of those prior; banks, retailers and consumers are preparing for an early arrival of the holiday season. Are you positioned to win the transaction?

The last six months have accelerated change, led to investments in more advanced technology and provided consumers with greater options for their selected household spend. While still well below February results, consumer spending levels have shown a steady climb in the last three months. What are the critical factors banks need to evaluate and what implications will an issuer face as we approach the beginning of what appears to be a crucial starting point in capturing early retail spend in 2020?

Product Relevancy

Consumers have clearly changed how and when they will pay as well as what type of purchases they will make.   Many issuers are stepping up to meet these changing behaviors and ensure they continue to be relevant as we approach this period in the consumer economic calendar.   We have seen many clients take steps including adding features, options and protections to enhance spend activity in existing portfolios as well as attract new customers and win the transaction.

  • Expanded Payment Options – Some traditional card issuers have added new payment options such as installments; enabling consumers to buy now and pay later with defined payment amounts and loan duration. Once primarily offered by large retailers, more credit cards now offer this feature which is welcomed by the younger generation of consumers.
  • Robust Protection Features - Features to help inform and protect the consumer are becoming more prevalent up and down the market. Enhanced alerts, temporary card blocking and the ability to provide credit monitoring beyond traditional bureau alerts will likely all become market standard for many institutions in the months to come.   For those concerned about having their information exposed on the dark web, identity theft protection and the like have been expanded to include additional components providing banks the ability to offer greater security to their cardholders.
  • Digital Risk Mitigation - Online purchase activity has soared with groceries, household and home improvement goods all now featured prominently in e-commerce statistics. This shift has exposed digital risks from tracking and fulfillment of orders to cyber-crime and fraudulent activity. Ensuring end-to-end protection, robust verifications and minimal disruption is critical to reducing disputes and fraud losses while easing customer concerns.
  • Valued Promotional Offers and POS Options – Given the scope and scale of promotions being offered by retailers through their own cards, some banks have been addressing this head on in a few ways:
    • Allowing points to be gifted to immediate family members
    • Providing the ability to obtain gift cards via 2 for 1 or at discounted rates while earning or redeeming
    • Offering the ability to use points at check-out through merchant partnerships. While this has been a friction point in the past, the process has evolved and terminals and processing loops have become more efficient, enabling quick redemptions
    • Maximizing spend incentives to drive activity in selected categories. While this could create additional pressure on operating performance, targeted and consumer-selected marketing has provided cardholders with greater flexibility and issuers with increased transaction volume to support the offers
    • Issuing contactless cards, widely used in other markets and widely accepted across merchant footprints, demonstrates support for customer safety in response to the new environment

What Can We Expect to See?

The early portion of the holiday shopping season seems to have already started with the big-box retailers battling it out with major sales events. Amazon Prime Day, Target’s “Deal Days”, Best Buy’s Black Friday sales and Walmart’s “Big Save Event” are all happening this week (yes, it’s still October) as retailers work to both boost and spread spending activity over the next several weeks. They desperately need the lift and are also concerned about managing potential bottlenecks in pandemic-affected supply chains.

While the continuing economic weakness and high unemployment levels have injected even more uncertainty into this year’s holiday sales activity, most observers expect consumers to be selective in their spending and continue shifting to digital and online retailers. Brick and mortar retailers have been busy smoothing the purchasing process by offering both merchandise pickup and/or delivery to customers’ cars.

Like many other things in 2020, the holiday shopping experience will be a new normal. Consumers are adapting, they are embracing new ways of transacting and expect their banks to do the same. For those institutions who have stayed the course with minimal evolution, ‘winning the transaction’ will be challenging. Are you ready?

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