Over the last 5 years, Azerbaijan was one of the world's leading countries for the growth rate of contactless payments
Mastercard Global Economics Institute has released a report that highlights both the global retail industry and consumer insights in 2023. The report explains the impact of the changing economy on consumer choices, and the importance of data analytics and diverse payment options in customer experience; it also contains clues about the global economic outlook.
The global retail industry is also going through a period of change post-pandemic. It is more important than ever for retailers to analyze this process well, understand consumers, and offer them suitable personalized solutions and payment options.
Prominent industry-related topics from around the world are included in the 2023 Retail Trends Report of Mastercard Global Economics Institute, which presents Mastercard analysis into the insights of both the global retail industry and consumers. The impact of the economy on consumer choice, the role of analytics and loyalty in shaping the customer experience, and expanding payment options and shopping experiences are among these trends.
Despite global inflation, the share of travel and nutrition expenditures will increase
According to the report, despite rising global inflation, many consumers cut some of their daily expenses for the sake of maintaining their travel and nutrition habits. The research notes that the increasing food inflation leads consumers to more affordable stores and brands in their daily food shopping. In furniture, electronics, and fashion, which we can call luxury consumption, consumers apply more limits to their spending and prefer to do shopping through e-commerce channels.
The Mastercard Institute of Economics report shows that the share of travel and experience expenditures in total consumer spending will increase in 2023, while the share of luxury consumption is expected to decrease. On the other hand, Mastercard data shows that debit cards are gradually conceding its years-long dominance, positioned mainly due to global inflation, in shopping transactions to credit cards.
This process is already observed in Azerbaijan. Thus, according to the calculations, debit cards have been the driving force for Azerbaijan's payment systems market for years, but there have been a number of restrictions related to both ownership and use of credit cards. However, simultaneously with the recent double-digit inflation, the attractiveness of credit cards, which enables paying off debts later and offers installment payments, has also increased. This situation was already reflected in the sector figures. In 2022, the number of credit cards grew almost twice as fast as debit cards and credit cards claimed a significantly larger share of overall card transactions. This tendency is likely to continue, with new credit cards being issued with beneficial offers.
Understanding the consumer is more important than ever
Consumers are trying to manage the regular information influx coming through mobile marketing tools such as messages, social media, e-mail, and brand advertisements. On the other hand, economic conditions, data privacy, inflation, epidemics, and various social issues, are increasingly challenging retailers to create a contact point with consumers in an expanding competitive environment.
The Mastercard Institute of Economics report explains that retailers need to take quick action and evaluate the results of all steps due to the constant change in consumer habits and at the same time they should be proactive in applying multi-channel marketing tools.
According to Mastercard's analysis, in the last 5 years, Azerbaijan ranked among the top countries in terms of the growth rate of card payments. The increase in the share of card payments in household consumption from 5% to 25% clearly testifies to this fact. Of course, there are important factors that determine this development. The first is the rapid increase in the number of individuals in the banking ecosystem, as a result of which the total number of cards per person in the country has doubled in 5 years. The second factor is the increase in the number of card acceptance points across the country and the introduction of generous reward programs by banks which helps card transactions exceed cash withdrawals in purchases. The growth of e-commerce and restrictions on the use of cash, especially during the pandemic, also encourage consumers to use bank cards for purchases.
Different payment options provide loyalty
The Mastercard Institute of Economics 2023 report states that before e-commerce became widespread and when in-store payments were predominant, payments were made only by card or cash. Hence, the ability of a business to offer different payment options is one of the key solutions to increase customer loyalty for retailers in 2023.
Increase in the use of contactless cards
While the pandemic accelerates the use of contactless card payments in face-to-face shopping, the Mastercard New Payments Index (NPI) survey, published in March 2022, reveals that 44% of consumers worldwide prefer contactless card payments. Also, 64% of respondents say they are more likely to make online payments by entering card information manually in 2023.
According to the Mastercard Institute of Economics 2023 report, which backs up the NPI survey results, the future of e-commerce now depends on card issuers, payment solution providers, and retailers' ability to transform contactless card use in the stores into a standard one-click payment solution in e-commerce.
According to Mastercard's country-based data, Azerbaijan is one of the leading countries for the rate of smartphone usage - with smartphone penetration of more than 70%, it leaves behind many European countries. Its effect is also evident in the rapid introduction of new payment methods. More than half of the total card transactions in the country are registered in e-commerce, and this ratio is increasing. On the other hand, after the launch of Apple Pay at the end of 2021 and Google Pay in 2022 in the country, the use of smartphones for physical purchases also skyrocketed. According to the current statistics, 1 out of every 7 physical payment transactions in Azerbaijan is carried out through smartphones. With the emergence of new areas of cashless payment applications such as public transport, it is not difficult to predict that smartphones will be used more intensively than plastic cards in the near future.
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