Moving Forward:

12 Payment Predictions
for 2021
 When 2020 began (about five years ago if you
measure by how it feels), fintech and payments
innovations were moving along, slowly but sure-
ly. Then came COVID-19, which accelerated the
shift from people physically paying for goods and
services to digital commerce by five years. It’s
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like time is slowing down but innovation is speed-

ing up. By the end of your next Zoom call, maybe
we’ll have flying cars.

Not since the introduction of the iPhone in 2007

has anything affected payment technology so
dramatically. Corona-Free Payments — methods
that involve no one touching the same piece of
paper or plastic — have exploded in popularity,
forever changing how we shop and pay. There’s
no going back.

Now it is time to move forward. We’re leaving the

craziness of 2020 behind and taking a look ahead
at what to expect for fintech and payments in
2021. BlueSnap’s experts in banking, engineering
and payment regulations gathered (virtually) to
discuss what’s in store for the future of payments.
Here’s what you need to know for the new year.

IBM’s US Retail Index

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 Now, every industry seems to be
embracing Corona-Free Payments,
including medical clinics, law firms,
tradespeople and schools.

67% US retailers now accept 56% US retailers 75% EU in-store payments

no-touch payment accept eWallets now contactless

The National Retail Federation reports that 67% of US retailers

now accept some form of no-touch payment. Breaking that
down further, 58% of US retailers now accept contactless cards
(up from 40% last year), and 56% now take digital wallet payments
(up from 44%).2 In Europe, Visa reports that 75% of in-store
payments are now contactless, signifying at least a 20% gain in the
EU’s largest nations.3

Corona-Free Payments
Restaurants went Corona-Free first because COVID-19 lockdowns
disrupted their business so thoroughly. They signed with vendors
to launch online ordering and curbside pickup ASAP. Now, every
industry seems to be embracing Corona-Free Payments, including
Are Here to Stay medical clinics, law firms, tradespeople and schools. Why mail out
invoices and wait a month or more for payment when, instead, you
could email or text the customer immediately to get paid quickly
and safely?

B2B firms are rolling out digital payments alongside accounts

receivable (AR) automation tools to get paid efficiently and simplify
reconciliation. COVID-19 made the case for digital B2B payments,
and they will be the norm even after the pandemic. Why undo
systems that work better for everyone?

“Coronavirus leads to more use of contactless credit cards and mobile payments despite cost and security concerns,” NRF
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“500 million additional touch-free Visa payments as European contactless limits increase,” Visa
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 Marketplaces are no longer reserved
for automakers and other Fortune
500 companies. Payment technology
now makes it possible for even
small or mid-sized brands to launch
turnkey, affordable marketplaces.

Even before the pandemic, consumer brands were beginning to

establish their own online marketplaces as niche alternatives to
Amazon, Walmart and eBay. Why?

Imagine that you’ve bought an SUV from your favorite automaker.

You want to add a ski rack for up top, a bicycle rack on the spare
tire and upgraded floor mats. Today, you might visit Amazon to
find compatible options, which can be time-consuming because
you need to know (and possibly enter) tons of information about
your vehicle.

What if the automaker had a marketplace where complementary

brands sold accessories guaranteed to fit its vehicles, including
yours? In exchange for providing the marketplace and access to

Expect to See customers, the carmaker would receive a small portion of the
revenue from each sale (just like Amazon). The marketplace would

More Marketplaces automatically handle that split on the backend. Consumers would
benefit from the curated selection of goods, sellers would have
a new sales channel and the carmaker would establish a new
in 2021 revenue stream (wins all around).

Marketplaces are no longer reserved for automakers and other

Fortune 500 companies. Payment technology now makes it
possible for even small or mid-sized brands to launch turnkey,
affordable marketplaces rather than build them from scratch.
For many eCommerce sellers, this could be an easy way to
increase revenue and build shopper loyalty. Expect to see more
marketplaces launch in 2021.
 88% consumers using digital
wallets post COVID

While digital wallets have gained traction as a contactless form

of payment in physical stores, they are also becoming equally
important for online sales. A survey conducted in eight major
economies, including the US, found that 88% consumers now use
digital wallets following a COVID-inspired surge in adoption.4

Digital wallets can help merchants gain parity with Amazon,

which has a major advantage with its one-click buy button that
relies on stored payment information ­­— it removes friction and
reduces cart abandonment. With digital wallets, like Apple Pay and
Google Pay, any online shopping site can offer a similar, friction-
free experience, even for new customers, further building trust by
leveraging technology the shopper is already using.

You’ll continue to see an increase in eCommerce businesses

accepting popular digital wallets.

Digital Wallets
Will Continue to Gain
Popularity Online

2020 Multinational BrandedPay™, Blackhawk Network

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 If you accept payments online, use
a payment platform that has built-
in fraud prevention to minimize
fraudulent activities without
limiting your ability to authorize
legitimate sales.

Online fraud tends to increase proportionally with the volume of

shopping. Cybercriminals may steal and use payment information,
hack into eCommerce accounts to make unauthorized purchases,
or even steal and resell or use loyalty points. If you accept
payments online, use a payment platform that has built-in fraud
prevention to minimize fraudulent activities without limiting your
ability to authorize legitimate sales.

Heading into 2021, there is a new type of fraud to confront:

merchants milking COVID-19 fears with bunk products and
misleading claims. In fact, the US Food and Drug Administration
(FDA) has been sending warning letters “to firms for selling
fraudulent products with claims to prevent, treat, mitigate,

With the Rise in Online Commerce diagnose or cure” COVID-19.

Comes a Rise in Fraud

If you happen to sell COVID-related goods (with good intentions),
do not make medical claims about your products without
disclaimers or genuine certifications. Similarly, if you run a
marketplace, you need to be sure the vendors selling on your
website are not making any fraudulent statements related to their
products and the coronavirus. And, if you’re shopping for COVID-
related items, exercise caution.
 Something only the Something only the Something only the
customer HAS customer KNOWS customer IS

With all these fraud attacks against digital merchants, Europe

has a solution that protects consumers and vendors alike.
Payment Services Directive 2 (PSD2), the European regulation
for electronic payments, goes into effect in much of the EU on
December 31, 2020. From then on, online merchants must use
Strong Customer Authentication to verify the shopper’s identity,
otherwise European banks will decline the transaction.

What counts as Strong Customer Identification? Basically, what

US technologists refer to as two-factor authentication (2FA).
You can eliminate most forms of fraud if you require shoppers to
submit two of the three following forms of identification:

— Something only the customer has (e.g., a smartphone)

— Something only the customer knows (e.g., a password)

While Fraud May Be on the Rise, — Something only the customer is (e.g., a fingerprint or facial
recognition)

PSD2 Is a Solution 2FA won’t prevent cybercriminals from stealing credit card
information, but it can prevent them from using those cards
fraudulently. The potential downside is that a slow or complicated
2FA experience could hurt conversions. Your payment provider
should be rolling out a new checkout process to make 2FA fast
and secure.

Generally, the EU leads the US on data security and privacy

regulation. So, don’t be surprised if a US state (most likely,
California) soon requires card not present payments to be validated
with 2FA. From there, 2FA is likely to become a global norm for
eCommerce payments that consumers value and expect.
 Working with a payment provider
that can intelligently route payments
to local acquiring banks increases
credit card authorization rates by
up to 6%.

COVID-19 has not slowed the boom in cross-border commerce.

In fact, one study of 300 retailers found that cross-border
ecommerce grew 21% year-over-year in the first half of 2020.5

Merchants are particularly eager to look to new geographies

to establish new markets and grow their businesses. To be
competitive in global commerce, merchants must localize
payments. That means:

— Working with a payment provider that can intelligently route

payments to local acquiring banks. That eliminates cross-border
interchange fees and increases credit card authorization rates
by 3% to 6%

— ­­Offering local payment methods like Boleto, a must-have

in Brazil

Merchants Need to — Accepting local currencies

Offer Localized Payments These tips apply anywhere you would like to sell. Merchants need
a payment provider that offers the right currencies and payment
types and that can intelligently route payments through a large

to Compete in Cross-Border Commerce network of global banks.

“Global Cross-Border eCommerce Grows 21%,” Digital Commerce 360

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 30% higher 20% higher AOV
cart conversions

It seems like every eCommerce website now has an option

for Buy Now, Pay Later (BNPL). This is the digital, millennial-
friendly version of installment payments. More than one in three
consumers aged 18 to 37 say that the availability of a BNPL option
has influenced their decision to complete a purchase.6

Installment payments used to be offered only by merchants with a

high average order value because calculating risk was complicated
and relatively expensive. Next-gen installment providers, like
Splitit, use automation, and machine learning to make decisions
in seconds. Retailers that offer installment payments report 30%
higher cart conversions and 20% higher average order value,
according to Splitit. That’s why you’ll see businesses offering
installments on just about any order size.

Installment Payments
Will Be Everywhere

“The Installment Payments Market Is Primed for Growth and M&A,” Forbes
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 50% YoY increase
in chargebacks

Last spring, our partner Chargebacks911 saw a spike in

chargebacks — enough to drive a 50% year-over-year increase
by the end of 2020. Stay-at-home orders, furloughs and illness
stressed America’s eCommerce supply chains. Shoppers, many
conditioned to two-day delivery, initiated chargebacks on goods
that were delayed or never sent. Merchants failed to manage
expectations when logistics went haywire.

Between COVID-19 spikes, wildfires, hurricanes and whatever

comes next, chargebacks are likely to remain elevated. The
lesson going into 2021 is clear: prevent chargebacks by
overcommunicating with your shoppers. And use a payments
platform with chargeback management built in.

Communication Will Be
Key for Avoiding Chargeback Mayhem
 Merchants should turn to lower-
cost payment options such as ACH
payments in the United States, SEPA
in the EU, and other methods that fall
under the Electronic Funds Transfer
(EFT) umbrella.

For high-value goods and services, few merchants want to accept

credit cards, which levy a fee based on order value. However,
paper checks aren’t practical and may even be considered risky
amidst the COVID-19 pandemic. Merchants should turn to lower-
cost payment options such as ACH payments in the United States,
SEPA in the EU, and other methods that fall under the Electronic
Funds Transfer (EFT) umbrella.

ACH payments, for example, have a flat fee ranging from pennies
to a dollar. Most vendors would rather pay cents to receive a
$10,000 invoice than pay the 2.5% US rate, for example, with a
card payment. Expect to see more universities, private schools,
municipalities and others that take large payments accepting ACH
and the like.

Maximize Profits
with Low-Cost Payment Options When
Selling High-Value Goods and Services
 Aggregating and standardizing data
from multiple payment systems was
difficult, and development teams
spent more time writing to different
software than investing in their
own product.

Before COVID-19, some merchants used five or more payment

systems in tandem to cover multiple geographic regions and
payment methods, or perhaps to support a different business
model, like recurring payments. The multiple integrations were
expensive to engineer and maintain. Aggregating and standardizing
data from multiple payment systems was difficult, and
development teams spent more time writing to different software
than investing in their own product. The economic turbulence
of the pandemic motivated businesses to finally address these
unnecessary costs.

Many businesses are finding they can reduce expenses and

minimize technical debt with an all-in-one payment solution.
The right platform can lower costs while providing access to
Merchants Will Minimize additional payment methods and local acquiring banks in
cross-border markets.
Payment Integrations to
Reduce Costs
and Maintenance
 Most businesses are merging their
in-person and online payments
into one system that creates a
single record of each customer’s
transactions and interactions.

Ask a shopper what they think “omnichannel commerce” is, and

you’ll probably get a blank stare. But try asking a customer, “Isn’t it
annoying when you buy something online, go to a physical store
to return it and then they can’t find your order, so you have to hunt
down a receipt in your email?” Or ask, “Isn’t it ridiculous when you
call a customer service line and they have zero record of who you
are and what you bought, unless they ask 10 questions first?”

Shoppers get omnichannel; they just don’t use our terrible jargon.

Historically, businesses isolated their physical point-of-sale

systems from their eCommerce payment systems. Interlinking
them was technically complex and pricey. Thus, only a few major
retailers, like Home Depot, pulled off omnichannel.

Not anymore. Most businesses are merging their in-person and

Omnichannel/
online payments into one system that creates a single record of
each customer’s transactions and interactions. It’s valuable for
processes like returns and especially valuable to marketers who

Omnicommerce want to understand their customers’ purchasing habits and send

relevant offers.

Will Be Less of a Fad and More Customers expect to be recognized as a person rather than as
an anonymous transaction number. Omnichannel technology is
making that possible.
of an Expectation
 $120 trillion
in B2B transactions every year

Worldwide, there’s about $120 trillion in B2B transactions every

year.7 The B2B tech platforms that facilitate a respectable chunk
of these transactions do not make any money on them. But not
for long.

The model of integrated payments — as in integrating a payment

facilitator (PayFac) into a B2B platform — has taken off. PayFacs
are saying, “Hey, integrate us, and we’ll share a portion of the
payment processing revenue.” ISVs realize that is a) an excellent
new revenue stream and b) a valuable service for customers who’d
otherwise have to integrate a payment solution.

Why don’t these B2B platforms become PayFacs themselves and

take all the revenue? Because doing so is ridiculously complicated.
The underwriting process is long and grueling, and PayFacs are
responsible for any fraud or chargebacks on their platform. And,
if they want to become a PayFac in any region beyond the US,
the licensing requirements and compliance costs are even more
daunting — and so are the penalties for messing up.

For a business that facilitates billions of dollars’ worth of

Independent Software transactions, like Amazon, Google or Shopify, becoming a PayFac
makes sense. However, for ISVs that facilitate less than $1 billion in

Vendors (ISVs) Are Choosing annual transactions, becoming a PayFac won’t pay off. Integrated
payments are the better model for the overwhelming majority

Integrated Payments
of ISVs.

Over Becoming Payment Facilitators

“Mastercard Q4 Continues Contactless, B2B Growth ‘Marathon,’” PYMTS.com

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The Big Picture for 2021
COVID-19 accelerated the adoption of digital
payments in every industry. As we move forward
in 2021, we expect to seal the transformation of
2020, as new payment processes become habitual
for consumers, eCommerce businesses and ac-
counting teams.
And hopefully, 2021 will feel like one year instead
of five.

BlueSnap Experts Who Contributed to

This Report

Jeff Coppolo, Ralph Dangelmaier, Faouzi Kassab,

SVP Global Sales CEO SVP Engineering

Susan Madden, Terry Monteith, Mannay Panza,

SVP Operations SVP Global Acquiring SVP Product &
& Payments Solutions Engineering
 About
BlueSnap

BlueSnap provides an All-in-One Payment Platform designed to increase sales and reduce costs
for B2B and B2C businesses. Our Platform supports integrated payments, online and mobile sales,
marketplaces, subscriptions, invoice payments and manual orders through a virtual terminal. With
a single integration to our Platform, businesses can accept any payment with ease. The Platform includes
access to 110 payment types, including popular eWallets, built-in world-class fraud prevention to
protect sales and detailed analytics to help businesses grow. Based in Waltham, MA, BlueSnap is backed
by world-class private equity investors including Great Hill Partners and Parthenon  Capital Partners.
Learn more at bluesnap.com