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Fintech Industry Dos and Don’ts for Black Friday 2023

What began as a mark of the Christmas shopping season in the US, the first Friday after Thanksgiving has become a worldwide shopping phenomenon: Black Friday. While it began as a day of price slashes, shopping frenzy and scraps over the last TV in Walmart, Black Friday is changing: it is going digital. 

In fact, Black Friday online sales grew 3.5 per cent to $65.3billion globally in 2022. But macroeconomic conditions across the globe may be putting continued growth in danger this year. As the cost of living increases for consumers right the way across the globe, many are being forced to tighten their grip on the money left in their pockets.

With this in mind, we hear from a number of fintech experts which explore what firms can do to ensure they enjoy the best success on Black Friday, and how consumers can avoid falling victim to bad decisions and fraud.

Changing shopping habits 

Despite the continued popularity of traditional payment methods such as debit cards (67 per cent) and credit cards (50 per cent) for holiday shopping, new research by payments platform Paysafe highlights a noticeable shift toward alternative payment methods (APMs).

Overall, 48 per cent of consumers favour digital wallets when shopping online during the holiday season, with 41 per cent regularly using bank transfers and 25 per cent embracing online cash payment solutions, also known as eCash.

Rob Gatto, chief revenue officer at Paysafe, explains that in order to capture the most consumer attention on Black Friday, retailers must embrace a wide range of payment methods: “There is more competition than ever between retailers to ensure they are the final shopping destination for consumers.

“Merchants who offer multiple payment methods and a seamless payment experience will create differentiation, cater to new audiences and increase conversion rates.”

Is Black Friday losing its shine?

Part of a broader trend of Black Friday losing its shine for shoppers, findings from open banking firm, Tink, show consumers are steadily more sceptical of the value it provides.

Thirty-four per cent are less likely to participate because they already get regular discounts throughout the year. And findings from merchants demonstrate this isn’t unfounded, as 48 per cent say the discounts they offer during Black Friday are not significantly better than other times of the year.

Meanwhile, despite 46 per cent of merchants saying that Black Friday puts their margins under significant pressure and 43 per cent agreeing that Black Friday no longer delivers the business benefit it once did, many feel they have no choice but to participate in Black Friday as 43 per cent agree that it is a ‘necessary evil’ for their business.

Tom Pope, SVP payments and platforms at Tink, comments: “It’s clear merchants and consumers alike are being hit with costs from all sides, and that will inevitably have a knock-on effect for Black Friday this year.”

Getting refunds right

One thing that a significant increase in sales volume on Black Friday brings is an eventual rise in the number of refunds. In fact, the recent Tink research estimates that one in three items ordered on Black Friday were returned last year.

Tom Pope
Tom Pope, SVP payments and platforms at Tink

A particular sticking point in the returns process is repayment settlement, as 33 per cent of merchants say the length of time it takes for a customer to get their money back is an issue in the returns process.

Pope also explained the importance of returns processes: “A smooth returns process can make or break the customer experience, especially when the cost of living cashflow issues mean consumers need their money back as quickly as possible.

“For merchants already working with major PSPs like Stripe and Adyen, Tink’s Pay by Bank solution can be swiftly added at checkout to turn a major peak season challenge into a strategic edge as we embark on the year’s most important quarter.”

Manuel Sandhofer, SVP & General Manager Europe, Nium
Manuel Sandhofer, SVP and general manager Europe at Nium

Manuel Sandhofer, SVP and general manager for Europe at Nium, also explained the significance of offering real-time refunds: “Poor payment experiences are driving customers away from online sellers; those retailers offering refunds in real-time will see repeat business and better returns in the long run, not to mention reduced operational costs and improved cash flow.

“For too long, payouts have been overlooked as a crucial piece of the e-commerce payments puzzle, whether it’s retailers sending refunds to consumers or online marketplaces transferring money to their merchant sellers around the world. Ultimately, the platforms and merchants embracing global real-time payout infrastructure will be the real winners this Black Friday – and beyond.”

The risks of BNPL

As consumers adjust their online shopping habits and embrace new technology, buy now, pay later (BNPL) solutions remain at the forefront. However, despite the seemingly ever-growing prevalence of BNPL, knowledge about these services is still lacking.

In a new study, responsible lender Creditspring found that 31 per cent of people still don’t think that BNPL purchases can lead to debt. Worryingly, this statistic jumped to 51 per cent for those aged 18 to 24.

Similarly, 29 per cent of people remain unaware that BNPL is a form of borrowing, similar to using a credit card. Again, this is significantly higher for younger people, with 39 per cent of 18 to 24s not aware of the risks.

Recent research from TSB also revealed that 42 per cent of people plan to make purchases over Black Friday – with 56 per cent of those spending set to use a credit product. The research also shows that BNPL spending spiked over this period last year, with Black Friday spending 77 per cent more than the 2022 average.

Neil Kadagathur, CEO and co-founder of Creditspring
Neil Kadagathur, CEO of Creditspring

Neil Kadagathur, CEO of Creditspring, commented: “It’s hugely concerning that shoppers remain unaware of the risks of relying on BNPL for their purchases ahead of Black Friday. After a couple of years of rising costs, savings pots have been wiped out and household finances have been stretched to breaking point and with Black Friday landing before most people’s payday this month, many view BNPL as a crutch until payday without being fully aware of the risks of doing so.

“If used correctly, BNPL offers flexibility to UK shoppers – however, lenders don’t communicate the risks of entering these agreements clearly enough and there is a worrying lack of transparency in the total costs that shoppers face or the impact of not paying.”

Is personalisation the key?

Around 66 per cent of UK shoppers expect a personalised experience from the brands they regularly shop with this Black Friday, according to new research from Twilio, the customer engagement platform that drives real-time, personalised experiences.

Twilio’s survey of 2,000 UK consumers also revealed a big opportunity for brands to engage with new audiences, with 36 per cent saying Black Friday is the day of the year that they are the most open to trying out new brands.

With this in mind, it is becoming increasingly obvious that brands must do more to ensure they keep their existing customers.

Sam Richardson Black Friday Fintech
Sam Richardson, customer engagement consultant at Twilio

Sam Richardson, CX consultant at Twilio, comments: “Black Friday presents a unique opportunity for brands. Big discounts and limited-time offers mean that consumers are open to exploring something new – but this does mean the pressure is also on retailers to keep existing customers engaged.

“As this research shows, personalisation is key. Brands need to use consensually collected first-party data to make sure they are offering loyal customers relevant products and that they are made to feel special on this day.

“Customers don’t want to waste time trawling the internet for deals – instead, they deserve to quickly and easily see items they haven’t bought before and that complement previous purchases.”

Black ‘fraud’-day

Black Friday is synonymous with huge discounts and deals on expensive products. However, this can make scams significantly harder to spot, leading to greater fraud losses for consumers across the board.

Emma Lovell Black Friday Fintech
Emma Lovell, chief executive at the Lending Standards Board

As Emma Lovell, chief executive at the Lending Standards Board, explains, there has never been a greater need for collaboration in the midst of increasing fraud levels: “As the cost-of-living crisis continues to grip the UK, this Black Friday could be the most profitable one yet for fraudsters targeting holiday shoppers looking for deals, creating convincing bogus websites, false deals, and scam emails to drain victims’ accounts.

“Scams can have a devastating impact on customers, causing both financial and emotional distress, so whilst reimbursing lost money is an important part of the picture, preventative measures that stop scams from happening in the first place must be the priority to prevent a spike in fraud losses over Black Friday and Cyber Monday.

“Cross-sector collaboration between financial services firms, retailers, and e-commerce organisations is also vital going forward and will help to ensure that all sectors in the scam journey are sharing knowledge to prevent, detect, and respond to scams – and stopping Christmas from coming early for fraudsters.”

Asger Hattel, CEO of Signicat, a digital identity solution provider explained: “With fraud on the rise, providing security and compliance at every stage of the journey is a major challenge that companies face. This goes for instance for transactions like payments in many businesses including the financial sector, fintech, digital marketplaces and retailers.

“During peak shopping times such as Black Friday or the Christmas holidays, the number of transactions heavily increases, so the seriousness of any attacks on consumers or businesses will also increase in this period.”

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