How interconnection can set the pace as holiday shopping gets more digital

The arrival of the holiday shopping season always brings sharp focus onto ecommerce, which just keeps disrupting how retailers and consumers shop. But it’s striking just how much running room remains in front of this trend, which already has a couple decades of Christmases under its big black Santa belt.

According to eMarketer, ecommerce sales will grow more than 23 percent in 2017 – and still only account for a tenth of retail sales globally. Opportunities remain huge in the online shopping sector, but only if companies can continue to keep the digital payments at the heart of it simple, fast and secure for consumers and retailers alike. That’s a perpetual challenge.

The ease of clicking a virtual button to make a digital payment masks the complexity of a transaction that involves a variety of counterparties, all collaborating digitally at incredible speeds. Interconnection – direct, private data exchange between businesses – is needed to make online shopping as speedy and smooth as possible as it plays an ever-larger role in global commerce.

A continuing evolution

Online shopping has been around in some form for more than 35 years (Michael Aldrich claimed to have invented it in 1979). The early and mid-1990s, which saw the invention of the web browser and the founding of online retail stores like Amazon.com seem a reasonable marker for when things really started rolling. Consumer shopping habits weren’t going to change overnight, but the influence of online shopping has steadily grown, and anybody with a connected device is probably shopping differently now than they were a few years ago. Some stats and projections for online sales this holiday season show this continued evolution:

• Abode Digital Insights predicts the 2017 holiday shopping season will be the first to break $100 billion in digital sales in the U.S., growing from $94.4 billion last year to $107.4 billion this year.
• For the first time, respondents to Deloitte’s annual holiday consumer retail survey said they planned to spend more of their budget online than in-store (51 percent to 42 percent). Last year, it was an even 47 percent split.
• Forrester projects online holiday retail sales will grow by 12 percent this year and account for over a quarter of total U.S. ecommerce sales for the year.

At minimum, the digital payment that accompanies every online sale involves instant collaboration between the credit or debit card network, the financial institution where the funds are held or borrowed from, and the merchant offering the goods or services. If the payment is being made on a mobile device, the mobile networks that carry the transaction become part of the equation. And don’t forget that many online advertising companies are also working to grab that consumer in that moment with a relevant ad or offer that could inspire another purchase.

A lot is happening in those seconds, and interconnection ensures those digital payments happen in ways that protect the customer and deliver a good experience. With online shopping becoming more prevalent, and working to attract and retain customers already so competitive, companies can’t give customers any reason to look elsewhere when they buy online. Interconnection helps make certain they won’t.

Making digital payments faster, safer, better

A first principle of interconnection is that it links several different entities at once, which is a bare requirement to execute a digital payment. This one-to-many or many-to-many connectivity is flexible, involving as few or as many parties as needed at a given moment. 

Another key principle of interconnection is proximity between the various parties exchanging data. When it comes to improving performance and lowering latency, there’s no substitute for being as close to counterparties as possible. Attempts to solve latency with more bandwidth don’t work because that does nothing to reduce distance, and distance is the key variable.

Direct connections that don’t touch the public internet are another characteristic of interconnection. Direct connectivity isn’t just higher-performing, it’s also the safest connectivity available. That’s critical for consumers, who won’t make digital payments with a given retailer if they’re worried their personal information could be compromised.

Finally, interconnection can’t happen without access to globally dispersed exchange points where companies can distribute their IT. By deploying IT at these exchange points – often found on global co-location platforms – they can get closer to dispersed partners and customers, wherever they are. They can directly connect to the ecosystems that support the digital payments essential to ecommerce.

Who knows what the 2018 holiday season will bring? Here’s a decent guess: more people buying more things online than ever. As this long-time trend accelerates, companies building their digital payments systems around interconnection will be best equipped to keep up with the pace.