January 22, 2020
Digital payment options are about to have more of an impact than any of us might have expected.
The meteoric shift in payment experiences is obvious - whether you’re considering the surge in popularity of e-tailers in Asia, the rise of the challenger banks across Europe or payment innovations like Amazon Go in North America; there’s a global move in how we think about, and interact with, our money.
For many of us, the concept of cash may already be obsolete, and with financial ‘detachment’ comes a sense of financial freedom; by developing payments that are so seamless, so frictionless, so easy … paying might not feel like paying at all. So what does that mean for retailers (and consumers) in this new era?
The payments industry has very quickly transformed from an infrastructure of cards and terminals to one that is dominated by phones and fobs … with the next stage being phone-to-phone dominance. Payments are now made at the point of sale, online and between individuals using an app (1)
I think it’s safe to say that mobile payments are going to take off over the next year. Thanks to APIs and Open Banking technology, whether traveling on the metro or buying a coffee, the freedom to leave home with only your phone is a game changer. From person to person (P2P) payments, to person to business (P2B) transactions, new technologies are making it easier than ever to take control of our money and pay how we want, when we want and, excitingly, wherever we want.
Let’s consider payment giant PayPal who has responded to the requirements of the ‘instant gratification’ generation and offered their customers a mobile/app-based credit service that works online but also in-store. Retailers offering ‘PayPal Credit’ can appeal to those spontaneous purchasers who might otherwise have walked on by … with seamless mobile/app payments sealing the deal.
PayPal list a growing Gen Z audience who are quickly catching up with Millennials in terms of spending power and influence. As digital natives they have never known anything other than digital transactions and if they can’t pay digitally, chances are they won’t pay at all. That’s a big slice of your consumers to cut out if you can’t offer them what they want.
Amazon Go gave us all an insight into what’s possible with Computer Vision, sensors, WiFi Personalization, RFID and NFC technology; all technologies working together and enabling the shopper to walk in to a store, take what they want and walk straight out with the payment automatically leaving their online account. For the grab-and-go generation, being able to meet their immediate needs in such a frictionless way is a major step forward for the industry.
But can it work for all retailers? Probably not … at least not yet. For smaller retailers or independent stores, this kind of infrastructure is going to be expensive and disruptive to implement but what will be interesting to see, is how much of a part to play these new payment systems have in the resurgence of brick-and-mortar stores.
Customer experience is the massive differentiator, and even online retailers have seen the value of having a physical presence. These new concept stores are capitalizing on brand impact and emotive experiences to increase conversions and that makes self-checkout options (as seen at Zara) all the more attractive. Ok, it still requires a card payment, but if we can continue to identify the retail pain points - think long queues and slow checkouts - and replace them with customer friendly payment options, why wouldn’t we?
According to a report by Accenture, Consumers want more rewards and are willing to switch cards to get it. Payments players have the opportunity to deliver rewards that meet consumer lifestyle needs, delivered seamlessly in real time (3)
Reward structures don’t just offer retailers opportunities to win market share, it gives them a great way to capture customer data. We know that consumers are more likely to hand over their data if they are getting something in return, so a 10% off voucher to reward their loyalty is a win-win situation for retailers and consumers alike. What about going one step further and sending a personalized push notification to customers when they enter the store? These kinds of digital touch points are keeping consumers engaged, incentivized and, importantly, converting.
As with all digital innovations, many of these will take some time for consumers to become comfortable with and fully accept. Whilst those of us in the 25-45 age bracket are probably used to many of the themes mentioned above, we have to remember that there are sectors of society who still wholeheartedly rely on cash transactions and physical payment interactions. From first jobbers being paid in cash to the smartphone-less elderly generations who not only depend on cash payments, but also on the social interactions that paying another person face to face involves.
The plus point is that this transition period gives us the time we need to consider what will and won’t work for companies. Whether you are a smaller retailer, a mid-sized company or a global giant, there are digital payment solutions to match your needs and the expectations of your customers.
The important thing is that you know that these things are on the horizon and, whether you are doing the buying or the selling, that you are prepared for the changes to come.
To talk about how Valtech can help you prepare for the future of payments and retailing, why not get in touch with one of our experts?