The end of payments as we know it

Nov. 4, 2016 | by Andre Stoorvogel

Money20/20 is over for another year. And as sore feet (and heads) recover and the dust starts to settle, attention is turning to the big trends and key themes. 

The show has always been focused on the future and this year’s installment was no different. 

In particular, there was much to make retailers sit up and take notice, for it is readily apparent that payments are in the midst of unprecedented transformation.

So, what forces are driving the change and what does the future of retail look like?

In-store on the way out?

Brick-and-mortar stores are under threat from all angles. 

From a payments perspective, the in-store checkout experience is increasingly incompatible with modern lifestyles and expectations.

For example, 86 percent of consumers avoid stores with long queues, and frustration with waiting in line costs retailers billions in revenues each year. Too many retailers invest huge sums into the look and feel of stores, but neglect the pragmatic elements that can streamline the consumer experience. 

In addition, many have been slow to adapt to consumer behavior and demand. Here’s an example. We are living in a digital era, yet half of U.K. small businesses only accept cash, even though the U.K. has one of the most advanced contactless infrastructures in the world, over 50 percent of UK adults carry less than £5 in cash and 54 percent of Europeans paid using a mobile device in 2016. It is this inherent conservatism and disconnect that is driving consumers away from the high street. 

In-apptitude 

It is not only the in-store payments experience, however, that poses challenges to retailers. 

Despite the fact that consumers use their mobile devices more than their PCs, desktops account for 85% of online spending. In addition, 23 percent of users abandon mobile applications after only one use, and a staggering 86 percent have abandoned a mobile basket due to the frustration of a lengthy checkout experience. Even more concerning is that only 4 percent of small retailers even offer a mobile application that accepts payments.

It is clear, therefore, that retailers must rethink their approach to fully seize the m-commerce opportunity.

Despite the differences between in-store and in-app payments, the steps to improve them are the same. One is to remove as much friction as possible from the payments process to eliminate consumer frustration and prevent abandonment. Another is to enhance the 'buying experience' to make payments more than just, well, paying. 

The road to invisible payments

The 'contactless payments revolution' has undoubtedly gone a long way to reducing friction across the payments ecosystem and shortening queues at the checkout. An advancing contactless infrastructure, an increase in near field communication (NFC)-enabled mobile devices and the launch of big name platforms has triggered explosive growth across the mobile payments industry.  

And this is only the start. The wider integration of payments functionality into wearable technology is set to further streamline the checkout process, as the consumer does not have to rummage through their pocket in search of their device. This, coupled with innovations such as beacon technology (which underpins platforms such as Google's Hands Free app), means that paying will soon require only the most limited consumer interaction. 

In parallel, the introduction of 'Buy with' functionality within mobile applications by the OEM Pay platforms has simplified in-app purchases. Money 20/20 also saw some key announcements that will further streamline the in-app experience. EMVCo announced that its EMV 3DS 2.0 specification implements intelligent risk-based decisioning to encourage frictionless consumer authentication. The FIDO Alliance also confirmed it is working with EMVCo to enable consumers to conveniently use on-device authenticators, such as a fingerprint or "selfie" biometrics, to securely verify their presence when making an in-app payment.

With the infrastructure in place, retailers must be proactive and embrace these technologies to streamline the consumer experience and reduce checkout abandonment both in-store and in-app. 

Making payments pay off 

Simplicity of use, however, is only half the battle. Enhancing the buying experience is not new age marketing jargon (seriously), but rather a concrete means of integrating value-added services into the payments process to drive adoption.  

The OEM Pay platforms and banks are leading the charge in delivering an added-value 'buying experience'. For example, Android Pay automatically deploys loyalty points and applies offers, and initiatives such as 'Android Pay Day' offer monthly incentives. From the bank world, Royal Bank of Canada has integrated over 150 loyalty programs into its HCE wallet. 

In addition, Samsung Pay used Money20/20 as a platform to launch its 'Payments+' strategy. The platform now works with over 4 million loyalty and reward cards. Not only this, but the utilization of geolocation data delivers a personalized experience that enables users to redeem discounts at nearby restaurants and stores.

The future of retail payments

So, how are retail payments changing? A key takeaway from Money20/20 is that we can expect the concepts of in-store and in-app payments to become increasingly blurred. 

For example, in-aisle payments enable retailers to combine the in-store experience with in-app convenience. Rather than queuing at the checkout, the consumer can simply scan the physical product within their mobile application, perform an in-app purchase and display their digital receipt upon leaving the store.

Predictive analytics and machine-learning are another avenue by which retailers can improve the consumer experience, with mobile applications leveraging past behavior to deliver smart recommendations. 

In addition, augmented reality enables consumers to analyse product information and read reviews in-store and in real time, rather than having to research at home before heading out to the store. 

The end of payments as we know it…and we feel fine

Whatever avenue mobile payments takes us down, it is clear that payments are undergoing an unprecedented period of transformation. Retailers, much like banks, are often accused of being conservative and resistant to change. But they now face a clear choice. Adapt or fall behind. 

Money20/20 showcased a future in which payments are no longer a chore, but rather a rewarding experience. By moving quickly, embracing change and futureproofing their offering both in-app and in-store, retailers can find their place in this brave new world.

André Stoorvogel is the head of marketing at Rambus Bell ID.


Topics: Card Brands, Contactless / NFC, EMV, In-App Payments, Loyalty Programs, Mobile/Digital Wallet, POS, Restaurants, Retail, Trends / Statistics


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