The holiday season is already here, and there is much speculation about how this year’s events will affect the traditional economic impact of this time of year. Here are the payment trends we expect for: 

Retail

You’ve probably noticed that retail stores have been advertising their Black Friday sales way before Black Friday. A primary reason is that it’s not practical during a pandemic to try to drive large crowds to physical stores on one day, but also retailers need to recoup the losses from the shutdowns of this year. In fact, 2020 holiday retail sales growth is predicted to be less than the 4.1% annual average since 2010. If there are no more mandated store closures, CBRE Retail Research forecasts holiday retail sales growth of less than 2% this year. 

The good news: Retail sales have progressed more quickly than expected, and sales are up 8.6% since January. Interestingly, 42% of consumers started their holiday shopping sooner than normal this year. 

E-commerce

Predictably, you can expect consumers to be making more payments online vs. in person for what they need. Last year, according to the National Retail Federation, there was a record 14% growth in holiday e-commerce sales ($167.8 billion). That record is anticipated to be shattered this holiday season to more than double to at least 40%. Data from October already shows that online sales were up 3.1% month-over-month seasonally adjusted and up 26.3% unadjusted year-over-year. 

Some of the optimism around e-commerce for the holiday season can be attributed to increased savings from consumers forgoing travel and dining out during the pandemic, the need to shop online in order to quarantine or social distance, and consumers splurging more on gifts to compensate for time apart from loved ones. 

Personalized Omnichannel Experience

Customers are expecting more personalized, omnichannel experiences. Businesses are also more prepared, improving or investing more in services like curbside pickup and expedited delivery. Companies can offer more personalized service by offering tailored offers and messaging. The opportunity to do more is clear, just last year over 70% of consumers reported a personalization gap (e.g., failing to recognize recent purchasers as existing customers or sending irrelevant offers). 

Offering payment options that customers prefer is important as well. A recent PYMNTS and PayPal study showed that 40% of consumers who prefer digital wallets won't buy from merchants that don’t accept them, and 37% won’t shop someplace unless their contactless card is accepted. 

Fraud

Every year, criminals take advantage of the increase in payment activity during the holiday season, and this year will be no different. This year, online shoppers are a bigger mark. Only 16% of U.S. shoppers plan to shop in-person for Black Friday, which will result in a 28% increase in 2020 online Black Friday shopping from 2019. Consumers can protect themselves by not clicking links in emails, opening attachments from retailers (which may be fraudulent and contain malware), avoiding pop-ups that contain spyware, and steering clear of e-skimmers. E-skimmers can install code on retail websites to gather data when consumers check out, and that can be avoided by using third-party payments providers such as PayPal, Venmo, or Amazon. Financial institutions can help their customers avoid fraud by using robust data analytics to better profile their customers or members' payment habits, so fraud is easier to discern.

Popularity of Installment Payments

Buy Now Pay Later programs will become more popular this holiday season. It’s a polarizing offering as critics believe these programs encourage people who are already in financial difficulties to take on more debt. However, the data shows that 70% of BNPL users earn more than $75,000/year and three-quarters of them have a Bachelor’s degree or higher. Whatever the stance, it’s clear that this feature is becoming more important to consumers. In a PYMNTS study with Paypal, BNPL was found to be a primary factor motivating consumers to shop with one merchant versus another. Forty-eight percent of consumers who prefer BNPL would not buy from merchants that did not offer it.