Lisa Ellis is one of the top-ranked and most-respected Wall Street analysts covering payments, processors and IT services.
When she thinks What the Future, she’s bullish about the convergence of in-store and online shopping and the payment systems that will enable them.
Kate MacArthur: How you would describe the state of shopper payments since the pandemic began?
Lisa Ellis: I would highlight the acceleration of the shift to online shopping. We finally saw broad-based adoption of the order-ahead concept, which for the consumer is often a far better experience than going and having to pick out all their items, wait in line, load them in the car, et cetera. Consumers have already been using cards or other forms of digital payment more and cash less. But the pandemic dramatically accelerated that, particularly the use of contactless payments.
MacArthur: Are there any indications of what may stick and what may not?
Ellis: My view is that most of it will stick. If anything, we believe that the acceleration that we’ve seen in adoption in many of these areas is only going to continue at an elevated pace, not slow down and not go back the other direction.
MacArthur: What is telling you that?
Ellis: There’s a certain amount of investment required for merchants to enable a lot of these capabilities, and that couldn’t be done overnight. On the consumer side, behavior change takes time. We typically see that it can easily take half a dozen or a dozen times of trying something before a consumer really fully adopts it. So, our outlook for things like e-commerce and cash displacement are actually still elevated in 2021, 2022, even though they obviously saw a huge boost in 2020.
MacArthur: Take me to 2025 or 2030. How might things work in how we pay for shopping?
Ellis: I don’t think we will have this distinction anymore between going to a store and buying things online. It’ll all be one thing called commerce. It will be very fluid, where you start or initiate looking for something on your phone or at home and you go to the store. Or vice versa: You are in a store, and you start to look at something there and then finish it later. Payments-wise, we’ll use very little cash. We’ll use digital forms of payment for almost everything. Credit-wise, I am a believer that revolving credit lines will maintain their appeal. And that installment lending—the “buy now, pay later” concept—will be a niche product that is used by certain consumers for certain types of purchases.
MacArthur: In our research, 21% of Americans said they’re financing through a “buy now, pay later” app. What do you make of that?
Ellis: The “buy now, pay later” phenomenon is a really interesting perspective on consumer behavior and consumer preferences. Perhaps it got visibility and traction in the pandemic because of people being under financial duress. Or, “I know I’m getting a stimulus check, so the installments work very well.” But then once people try it, these services have a remarkable amount of appeal.
MacArthur: What does that tell us about the future relationship that people may have with credit?
Ellis: It certainly revalidates that people like credit. Sometimes people look at that data and suggest that the adoption of “buy now, pay later” means people don’t like credit. But it is credit. What I find interesting is that for many consumers, they compartmentalize different types of spending into different models very naturally in their head. One of the other things that has enabled this trend is this explosion of various forms of digital banking apps or fintech apps. Whether that is PayPal or Venmo, but also SoFi or Chime, these are apps that provide you with really easy-to-use tools for compartmentalizing your spending.
MacArthur: Will making it easier for people to spend end up creating a risk for a financial bubble?
Ellis: As much as consumers (and retailers, for that matter) want spending to be frictionless, it always increases the concern of the buyer’s-remorse issue. In parallel to that, the entrance of very consumer-friendly mobile apps associated with managing your finances has also provided consumers with a far better set of tools for managing their finances.
MacArthur: Another buying experience is in apps like Instagram and Houzz. What’s your outlook for transactions to happen like that in the future?
Ellis: Interestingly, what has happened so far—and this is a raging debate—is that remarkably, many consumers don’t actually want to buy through the social media site. They’re perfectly happy to essentially click on the placement, the jeans or whatever, and be redirected over to the retailer’s website.
MacArthur: Our data show that people miss going into stores. How might these payment options change the in-store shopping experience in the next three to five years?
Ellis: This is one of the things I’m so excited about. This is empowered by the underlying payment system that connects the dots. In the store environment, you’ll have the combination of the best aspects of in-store combined with the best aspects of online. Both had good parts, both had bad parts and they were completely siloed from each other. And one of the big things post-pandemic is that as retailers rethink their whole experience, we’re going to see a lot of convergence happening. It’s pretty cool. I can’t wait.