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Roger Niederer, head merchant services, SIX Payment Services, offers up insight on how technology is not only changing consumer behavior and needs, but also the choice of payment options that retailers can and must offer customers online and in-store.
By Roger Niederer, head of merchant services, SIX Payment Services
Modern payment methods such as mobile payments are clearly influencing consumer behavior and their impact starts to be visible in some industries. Which new payment trends are up next? How can retailers take advantage of the evolving landscape and what can they do to ensure they are not left behind as their customers embrace the new payment world?
The way consumers shop has changed dramatically over the past decade. The 'traditional' way of shopping, entering a physical store, choosing your items and then queuing up to pay at the checkout, was completely revolutionized with the introduction and subsequent eruption of internet services.
If we examine the fashion retail sector as an example, it is now common for consumers to follow their favorite brands on social media, browse the online shop or even try clothes on in a virtual dressing room. Consumers can then pay simply by clicking on a button and the items are sent directly to them — sometimes even delivered on the same day. This dramatic re-orientation of the retailer/customer relationship has changed almost every aspect of the shopping experience.
However, this is not the case for all sectors. While many consumers have now moved online when shopping for groceries, most of us still opt for a more traditional experience: take a look in the fridge and kitchen cabinets, see what’s needed, write a shopping list and take a trip to the supermarket.
However, emerging capabilities means this is also changing. Intelligent refrigerators are becoming increasingly popular due to the steady evolution of the Internet of Things (IoT). ‘Smart’ refrigerators are able to automatically monitor their fill level at any time, send a message to their owner when a product is about to run out, and suggest a shopping list. If this shopping list is confirmed, the homeowner only has to pay for the items, select a preferred place to pick up the goods and then visit the supermarket where their order will be waiting for them. The days of shelf searching and waiting in line to pay at the checkout are most definitely numbered.
Technology is not only changing consumer behavior and needs, but also the choice of payment options that retailers can and must offer their customers online and in-store. In order to prevent retailers from losing customers and revenue due to a lack of payment options, it is particularly important to keep a close eye on their customers’ payment trends.
As the payment landscape is continually evolving, omnichannel is very much a reality and as a visionary concept, it has existed for some time. It is the natural next step of multi-channel distribution, providing a seamless shopping experience across all retail channels. It is a tangible method for retailers to create additional touch points to connect with their customers at the right time, in the right place and build on existing relationships. It is also a useful tool to reach out and attract new customers.
The key to omnichannel success is a fully integrated payment system that ensures efficiency and continuity across the board. Synchronizing all touch points and payment points on a single platform may be challenging for many retailers as this implies the need for integrated solutions for point of sale and ecommerce, which support use cases such as "click and collect" and "click and return."
Click and Collect: The customer orders and pays for goods online and picks them up in store.
Click and Return: The customer orders and pays for goods online and has them delivered to their home. After having tried them on they can visit a store to exchange or return them. They will be credited with the refund amount without having to present the card used in the initial payment.
Endless Aisle: Goods that are not on stock can be ordered in store on mobile devices or an info-kiosk
In the first two cases, a purchase — and the respective payment or cancellation — is initiated online and completed in store. The process is reversed for endless aisle.
Mobile payment: Apple, Google and Samsung are just the beginning
Technology companies such as Apple, Google and Samsung have been offering new payment options for some time. By simplifying the payment process, they promise to intensify and enhance customer loyalty. Retailers have similar hopes when they accept one or more of the many payment options available in their physical or online shop in order to expand their payment horizons. However which payment methods compete with traditional credit and debit cards and cash?
In 2006, Google took its first steps along the path of alternative payment options with the launch of Google Checkout, which was replaced in 2011 by Google Wallet. This is currently available in the U.S. and the U.K. In 2017, Google once again leapt across the pond and Android Pay was launched in the United Kingdom.
In July 2015 Apple Pay was launched in the U.K. and since August 2016, Apple Wallet, where a fingerprint is enough to confirm payment has been available in France and Switzerland. However, others have not been far behind. In 2016, Samsung acquired LoopPay, which allows customers to make payments via traditional POS terminals with magnetic stripe readers. So far, this is only available in Spain.
Undoubtedly, mobile payments will continue to gain traction among consumers as they are become an indispensable part of everyday life. Regardless of the form factor (card, sticker, bracelets and others are already in the market), contactless payment methods will likely dominate high frequency/low value transactions. Of course there will always be fans of cash, as well as people who are not willing to share their data so we can confidently assume the coexistence of cash, cards, smartphones and many other forms of payment for several decades to come. The key for payment providers is to support the entire payment landscape with efficient, reliable and secure services.
Payment options have to adapt to customer habits
Despite their ingrained and increasing reliance on smartphones, customers are conclusion driven — they want to use a convenient method of payment, without much thought for the processes behind the transaction. But there is a difference between hurried, often contactless low-value payments and those in a more exclusive high-environment, or in a web shop.
Some retailers, even entire businesses such as the big fashion chains, are increasingly focusing on ensuring that tech-savvy millennials and Generation Z have a smooth check-out process both in-store and online. This is driven by the desire not to lose sales through abandoned purchases and to strengthen customer loyalty. At the same time, security is a must, and merchants face the challenge to strike the balance between customer experience and related cost.
The payment behavior of consumers varies from business to business, industry to industry and region to region. And this is exactly where opportunities for retailers lie. Those who integrate modern payment options into their systems can increase their customers' satisfaction levels, attract new business and increase their operational efficiency. However, choosing the appropriate payment methods can be a real challenge, where seeking advice of an experienced payment provider in analyzing customer profiles may be an option.
As consumer habits continue to evolve, the payment processes behind each transaction also need to evolve to keep up with demand and technological developments. I expect that over the next five years consumers will be able to pay at any time throughout the shopping experience with a wide choice of payment methods. The appropriate payment method will be automatically identified and an individual shopping experience created. In addition to the obvious advantages for the consumer, the new processes reduce the number of abandoned purchases and most importantly increase added value.