What Does the Balance of 2021 Hold for Digital Commerce?
2021 was supposed to be the year that things got back to normal. But so far, it has not played out that way. Instead, we have had an unprecedented positive trajectory early in the year. Particularly in digital commerce, it has continued to be an unpredictably positive year. New fin-tech SPACS have raised billions of dollars for investment. Mastercard announced it would support crypto-currencies on its payment networks. The stock market has surged even further, and economists predict consumer spending will surge 6% or more in the US.
So will the boom times continue for digital commerce? What’s on the horizon for the balance of 2021?
As CEO of one of the leading global trade associations in digital commerce, I am a keen observer of the key trends that will drive our industry over the next year, particularly the risks that could derail our progress. Below is a forecast of risks and opportunities based on extensive analysis and conversations over the previous year with DCA members from top tech companies, banks, and merchants in North America, Europe, and Asia, including Samsung, Microsoft, Bank of America, MasterCard and many others. So here is what will happen next:
1) The Rise of Commerce With Conscience
We‘ve all heard of ESG investing, or Environmentally, Social and Governance responsible investing. ESG investors look not just at a company’s bottom line but also at the organization’s behavior: Does it pollute the environment? Does it contribute to gender or racial discrimination? Or, does it tie its brand to the social causes that matter today?
In 2021, consumers will take a page out of the ESG playbook and apply a lens of social benefit to everything they spend money on. This coming year, whether buying stock of an excessively shorted company to get revenge on a hedge fund manager or using cashback from a digital coupon to donate to charity, shoppers worldwide expect their spending not just to meet their consumer needs but to make the world a better place. Commerce with a cause is here to stay, and 2021 is the year it goes mainstream.
2) Fin-tech Regulation Goes Into Overdrive
The challenges of 2020 demonstrated the indispensability of numerous commerce and fin-tech technologies, including social media, e-commerce, digital offers and cloud services. Societies worldwide realized their dependency on a handful of powerful digital commerce companies, including Amazon, Alibaba and Facebook, among others.
While these digital commerce technology companies scaled during the pandemic and helped the wheels of commerce spin, I predict that in 2021 consumers and governments will become increasingly uneasy with their market power. Increased digital financial data (and digital commerce competition) regulation is the inevitable result, which will occur not just in the US but also in China and Europe. But in many ways, smart new regulations may lay the groundwork for accelerated innovation and consumer choice in our industries. Many industry participants will also collaborate to implement new self-regulation approaches.
3) Tech Trade War Escalates
2020 started with the US and China trading reciprocal new tariffs on various industrial and agricultural goods. For the balance of 2021, I predict that the tech trade war between the US and China will escalate in a different arena—namely, technology services.
China has been emboldened because it was the only major economy that experienced growth in 2020 and is pushing hard to get trading partners in Japan, South Korea, and Europe to adopt its technologies in finance/payments, telecommunications, and other areas. The US will counter by pressuring long-time allies, i.e., democracies like Germany, UK, and Japan, to align around Amazon, Apple, Paypal, and others, in the areas of e-commerce, payments, social media and data privacy.
4) Credit Bubble Grows Larger, Then Pops
Normally during recessions in the US and Europe, access to credit is tighter for consumers and corporates. This time it’s different. Central banks have been quick to deploy stimulus to prop up capital markets and consumer lending. Tech companies such as Paypal Venmo follow Apple’s lead in issuing new credit cards tied to their digital wallets. New entrants like Affirm have followed by extending buy now pay later loans.
But, consumers aren’t playing along and have actually shied away from using credit, instead choosing to pay off debt and increasing savings…for now. However, as the pandemic drags on and stimulus runs out, more consumers will max out credit in late 2021. I predict that higher unemployment will combine with the negative trend of increasing rates of e-commerce purchase fraud to drive significantly higher rates of default for credit card issuers and buy now pay later firms in late 2021.
5) Commercial Cyber Wars Engage State Actors
Until now, cyber hacks have largely been the turf of private criminal syndicates. In 2021, I predict this scenario will change significantly as governments will increasingly be accused of stealing corporate secrets. So while credit card processing systems will continue to be hacked by petty criminals, expect state agencies to increasingly be in the business of pilfering intellectual property in vital sectors like digital commerce. Some governments around the world will target large corporations looking for trade secrets rather than state secrets. The prime suspects? Russia and North Korea.