What does a post-pandemic payment acceptance strategy need to consider?

What does a post-pandemic payment acceptance strategy need to consider?

Mark Beresford
October 28, 2021
Five changes in retail driven by the pandemic

Partly accelerated by the pandemic, the retail industry is experiencing tremendous change, and payment acceptance is the area that has seen the most significant shift.Payment acceptance must be approached with a strategic eye, as customers expect to shop when they want, where they want and with their preferred payment methods. Customer’s shopping demands change, and as their payment preferences continue to be fickle, this has meant retailers have had to modify and adjust. The role of the store and what it means to have a good payment acceptance strategy is becoming more complex. There are more customer touchpoints, more points of interaction, and more customer journeys that require meticulous customer experience design. This is even beyond what a standard omnichannel commerce strategy can achieve, and merchants are beginning to think about the next frontier of doing business: a unified commerce strategy across all customer touchpoints. Merchants need perfect execution at every point of interaction, even in unhappy customer journeys, such as refunds or returns. As retailers around the world recover from the pandemic and look towards Christmas sales to help their 2021 revenues, we ask - what has changed in the last 18 months? We already know that the COVID-19 pandemic has polarised retail. Supermarkets and online retailers have never had it so good. In contrast, many other businesses, such as luxury brands and hospitality, have had to deal with forced lockdowns and an uncertain future. A successful payment acceptance strategy in a post-pandemic world has seen significant changes. This article looks at five changes driven by the pandemic and what it means for retail.

Online First Design

The pandemic has provided new opportunities for retailers to embrace change and accelerate their omnichannel payment acceptance strategies. Some retailers were forced to close their brick-and-mortar stores which meant their entire focus had to be on their online channel. Likewise, this new focus has altered their investment priorities. We also saw during the lockdown an increase in omnichannel customer journeys such as Click & Collect, Ship from Store, and Curb Side Pickup. Physical and digital shopping have merged, and there have been a further blurring of what is online and offline. The physical store remains the most important customer and brand point of interaction, but it also significantly influences the customer’s spending across all sales channels. Customers expect a consistent experience across the channels. Edgar, Dunn & Company’s Retail Payments Practice predicts consumers will be changing the way they shop post-pandemic, and there will be a reduced footfall at the physical store.

Almost overnight, an online first design strategy has become the retailer’s top priority, with an increase in e-commerce infrastructure investments, such as consolidation and optimisation of payment acceptance strategies and enhanced payment partnerships. Online will be the first point of interaction for most customer journeys. Investments have not only been in payment acceptance technologies but also the operational function. Just a few examples include the need to recruit a head of payments to oversee an online first design strategy. Secondly, an online first design has meant that there have been additional investments in logistics to improve the last-mile delivery. We have also seen investment in ‘ghost kitchens’, where restaurants only have a kitchen and no dining area, and ‘dark stores’ that act as distribution centres for the online sales channel. These are all part of an online first design principle.


Orchestration of payment that aims to help remove complexity in payment acceptance is being provided by an emerging new breed of middleware FinTech companies who connect to multiple Payment Service Providers (PSPs), payment gateways, BNPL providers, fraud prevention technologies, eCommerce platforms and acquirers. Payments Orchestration Platforms (or POPs) can be performed by merchants with an in-house solution or performed by a merchant’s own payment services provider or payment gateway. A Payment Orchestration Platform enables a merchant to take control of payment acceptance, from checkout through to the management and reporting of settled funds into the merchant's bank account. The purpose of a POP is to stay competitive and agile in the constantly evolving payments landscape. Why now? Retailers are increasingly considering working with a POP as they give more attention to the online store, broaden their geographic reach, and accept a greater variety of Alternative Payment Methods (APMs). These APMs could be bank transfers, cash payment schemes, domestic payment schemes, BNPL and e-wallets. The implication for the merchant of all these APMs means they must deal and interact with multiple payment service providers and acquirers. This is where it not only gets more complicated to integrate these different providers, but there are contractual and legal complications, and unsurprisingly, payment settlement and reconciliation challenges. This is where the POP could simplify this arrangement. We hope to see more examples of POPs in action in the next 12 months. That is not to say that the orchestration of payment is not already an established best practice by some larger international merchants through a home-grown in-house built solution.

Big or Small Store Formats

Lockdowns, travel restrictions and remote working have driven millions of people to spend most of their time at home for well over a year now. As employees and employers accept that there will be a greater blend of working from home and working in the office, there has been a knock-on impact on retail. There has been a surge in home improvements. Working at home allows the mind to wander and think about your work-life environment. The Home Improvement Research Institute reported that the restrictions due to the pandemic had driven 86% of home improvement projects since March 2020. Cancelled holidays, the lack of days out, no social events, and postponed celebrations have also boosted the average cash savings for many households. This is being diverted to home improvements. What does this mean for retail? The big-box retailers, such as Walmart, Target, Best Buy, Home Depot, B&Q and IKEA have seen sales soar as many consumers have shopped at the big-box store or online wanting to improve their homes. We have seen sales in everything from garden equipment to paint. Most home improvement products have demonstrated a double-digit increase in sales compared to 18 months ago. As shoppers start to feel safe and return to the high-street there are contrasting opinions as to which retail format will be the winning formula. In the UK, for example, the CEO of John Lewis Partnership, Sharon White, said her plan is to ‘re-purpose’ company-owned premises and develop small-format John Lewis stores within Waitrose supermarkets. This is understood to be in direct response to changes brought about by the pandemic.

On the other hand, in the pre-pandemic time, shoppers abandoned big format stores in droves because of the lack of investment in the brick-and-mortar stores. Post-pandemic, Edgar, Dunn & Company’s Retailer Payments Practice believe we will see a return to department stores and big-format stores that aim to be the ‘everything store’. Improved product ranges and the inclusion of excitement, customer experience and entertainment, the big format stores will see a resurgence. In IKEA, for example, shoppers feel safe and social distancing can be easily achieved. IKEA’s large restaurants, cafés and showroom formats will encourage more ‘showrooming’ - whereby the customer has an enhanced shopping experience. This is more apparent as the larger big-format retailers have invested in blurring the lines of online and offline customer journeys. ‘Retailtainment’, meaning the blending of retail and entertainment, is another way for retailers to improve their customers shopping experience, by interacting with shoppers in a 'gaming' and 'fun' way, to propagate the retailer’s brand messages and sales promotions. What does this mean for payment acceptance? Whether it is a big-format or small-format store, the physical store will change in the next three years, and this means that payment acceptance in-store will also change. It will be contactless, it will be mobile, and it will offer a greater variety of APMs. In other words, an agile online payment experience but in-store will be the new normal for retailers big and small. There is also a direct link here with Cloud Technology – see more below on that topic.

Physical Digital

The physical retail store will remain at the heart of retail. In a post-pandemic world, a retailer’s success will depend on how well they can enhance the traditional shopping experience through digital technology. Edgar, Dunn & Company believes that retailers need to fine-tune their bricks-and-mortar offerings and better help customers in-store. Reducing contact points, making the physical customer journey simple and quicker will be the aim of the game. Consumer patience with long checkout queues is at its end – there needs to be more point of sale (POS) options. As dressing rooms open following the temporary restrictions put in place in response to the pandemic, there needs to be more of them. The greater flexibility in the returns policies put in place because customers couldn’t try on items is becoming the new normal. Retailers need to develop digital options that facilitate shopping and meet consumer needs. The new normal will be the ‘Physical Digital’ experience. Consumers have quickly ditched cash for self-service checkout and contactless payments, partly driven by the pandemic and partly by convenience and speed. Some retailers have even stopped accepting cash because of the concern that the COVID-19 virus could be transmitted this way. The next step is to remove the point of sale (POS) entirely from the transaction. There are examples of retailers, particularly in the grocery sector, where stores are pursuing an enhanced digitalisation strategy. From redesigning the store layout to how customers self-serve and pay for goods, merchants have introduced ‘scan as you shop’ technologies to streamline shopping. All of this in-store hardware is gradually replaced by the customer’s smartphone. Amazon Go took the technology a step further and introduced a checkout-free shopping experience in 2018. Amazon Go stores do not rely on any in-store scanning devices but favours an app on the customer’s own smartphone device and other behind the scenes technology. Tesco, in the UK, opened its first checkout-free store in central London in October 2021. Without the need to scan a product’s barcode but by working with an Israeli company, Trigo, Tesco uses a combination of cameras and sensors to automatically, as if by magic, determine exactly what customers had picked up and charged them when they leave the shop. The Japanese fashion store, Uniqlo, had started to roll out self-service check out a couple of years before the pandemic. When shoppers place clothes they want to buy into a designated area, a self-service checkout machine automatically displays the number of items and price on the screen. Uniqlo uses RFID (Radio Frequency Identification) tags that allow the unmanned checkout to accurately calculate the number and total value of items. The customer doesn’t even have to scan products one by one using barcodes, they use the PIN Entry Device to complete their payment.

Robot technology is another approach that is making the collection part of the click & collect customer journey fully automated. Edgar, Dunn & Company looked at the rise of the robot in retail at the start of the year - see - “Where will robots impact the retail customer experience?”  Leading grocery retailers, including Walmart are using robots in their click & collect ‘pickup towers’ that have made the customer feel safer post-pandemic by reducing the human physical touch points for the customer. Based on Edgar, Dunn & Company analysis, by 2025, 80 of the world’s largest 250 retailers will deploy, or at least consider implementing customer-facing robots within their physical stores. This is only expected to be the norm in a post-pandemic retail industry. Another area that is encouraging social distancing between the physical retail sales assistant and the consumer is Augmented Reality. AR will be another sales tool for retailers to blend the physical and digital customer experiences. In-store high-touch counters such as those for cosmetics and jewellery will use virtual try-on using digital apps that are AR-enabled, allowing consumers to try more items than possible in a traditional store setting or even at home. Wallpaper and paint manufacturers are allowing customers to virtually decorate their own homes before purchasing using AR. Yet, these two examples are entirely digital shopping journeys.


It’s funny to discuss cloud technology with a retailer in a post-pandemic environment because they already understood the value of cloud way before the global pandemic. Retailers already deploy many of their technology and operations in the cloud to provide agility, flexibility and reduce their total ownership costs of IT. Since the pandemic, there are more examples of payment service providers and financial institutions thinking cloud-first in offering their services to retailers. As digital payments and mobile wallets become more the norm than the exception, payment partners must find ways to meet the retailer’s need for speed and ease of use. JPMorgan Chase, one of the largest merchant acquirers in the world, announced in September 2021 that it would replace its US retail core banking suite with cloud-based technology from UK fintech Thought Machine. This is one example of how the banks are catching up with the retailers in deploying cloud technologies. There will be more examples where payment providers and retailers will be collaborating in the cloud. Non-cash transactions will rise in all retail sectors following the pandemic, with instant payments, e-money, and next-gen payment methods, such as Buy Now Pay Later (BNPL) and cryptocurrency. Cloud solutions to support next-gen payment methods and services, such as consumer loyalty, are expected to help retailers to deliver new payment and financial services quicker without the need to change their legacy applications and plan to move away from their legacy systems. Correspondingly, the ownership of a traditional POS checkout has moved to a cloud-based POS system on the retail shop floor. The popularity of cloud-based POS has been seen across the retail landscape before the pandemic. A cloud POS system is a Software as a Service (SaaS) proposition with a subscription model. As a retailer, this means you have access to tech support, automatic software updates, and enhanced PCI DSS encryption security which is a significant improvement on the traditional POS systems. Square, Lightspeed, and EPOSNow are just three examples of providers with their own cloud-based POS propositions. Shopify, Stripe, Checkout.com, Nuvei, Adyen and others are also developing their cloud-based POS offerings.

Has the pandemic changed retail forever?

The Retail Payments Practice at Edgar, Dunn & Company maintains a watchful eye on the impact of the pandemic on retail. Payment is at the heart of all customer journeys regardless of the sales channel, online and offline. Based on our experience, retailers are re-defining customer journeys through customer experience design and have taken a leap forward in responding to a changing customer behaviour brought on by the pandemic. Online-first design, payment orchestration, the changing retail format, digitalisation of the physical store and deployment of cloud technologies will be the five key changes in retail that will see a permanent shift in retail payment acceptance. These will work together and influence the degree to which payment acceptance will change forever. Edgar, Dunn & Company’s Retail Payments Practice has almost two decades of experience of working with leading global retail businesses in responding to change, evaluating, and selecting the right payment partners to achieve payment optimisation. Retailers that are in this for the long haul must be prepared to invest in a post-pandemic payment acceptance strategy that will benefit their future revenues.

The content of this article does not reflect the official opinion of Edgar, Dunn & Company. The information and views expressed in this publication belong solely to the author(s).

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