Andrew Quartermaine, VP Sales at ACI Worldwide
The last two decades have seen a transformation of the traditional shopping experience. What used to be a simple trip to a store, usually involving a simple cash or card transaction, has morphed in to a huge variety of multi-part customer journeys, involving different channels, payment types and fulfilment methods.
News headlines are continuing to report a decrease in store footfall in key retail markets such as the UK and US and, with e-commerce set to increase its stake in global retail sales from 9% in 2016 to 13% by 2021, it is clear that the switch from the store to digital channels will continue. Other shifts in consumer behaviour, such as the increasing practice of show-rooming and the popularity of click and collect, are also resulting in minimal in-store customer interaction and the payment transaction itself sometimes being moved to a different channel. With the customer (and their payment) moving further away from the store, cash has a limited place in the future of retailing. In the UK and other developed markets, cash has already lost its place as the most popular payment method in retail.
Payment innovation is driven by consumer demand
The growth of e-commerce and the rapid rise in the popularity of smartphones has played a big part in driving retail change, with today’s consumer now able to browse, compare, buy, receive and review products at their convenience, wherever they are.
Highly connected consumers are demanding a more personalized and seamless shopping experience, wherever and however they choose to shop – and retailers have had to undertake a shift from paper to digital technologies to keep up with this demand. Far from being an exception to this, the increase in available payment options and technologies has helped to support this effort, delivering consumers the variety, innovation and convenience they crave.
The much talked about millennial generation – now the largest consumer generation in the world – has come of age in a web-enabled world where customized and highly personal online experiences have become the norm. It is this group in particular who are demanding payment options that fit with their digital lifestyles – and retailers are now introducing those new payment methods that align with changing shopping habits. For example, millennials are comfortable connecting payment information to retailer apps or wearables to speed up payment and, according to a 2015 survey, 44% would prefer to use phones instead of cash to pay for small items.
It is well documented that millennials are not only early adopters of new technology, but trendsetters too, and merchants need look no further than the demands and expectations of millennials today to know how they will need to cater to all consumers within the next three to five years. By 2020, retailers will simply be focused on enabling consumers of every age to shop and pay how they want – and payment innovations and technologies will form a key part of that process.
Retailers are responding to demand to take advantage of opportunities
Retailers are certainly starting to respond to the demands of the new breed of tech-savvy consumers, integrating new payment options into their infrastructure. In a recent survey ‘Payment trends in the European retail sector’, published by ACI and Edgar, Dunn & Company, 48% of the participating retailers said they were already using mobile wallets – a figure expected to rise to 77% within 12 months. In addition, 39% were embracing social commerce, 29% using open APIs and 26% deploying in store wearables.
It is not, however, purely a case of customers demanding new payment options and retailers following their lead. Switched-on retailers also recognise that there are a number of direct benefits in supporting a variety of payment methods – especially in the context of omni-channel shopping.
Accepting payment methods across channels allows retailers to capture more comprehensive customer information, which can help build a picture of customer behaviour – aiding loyalty programmes, powering personalised service and supporting retailers as they look to differentiate themselves and create an enhanced omni-channel customer experience. For example, retailers can use electronic wallets to store customers’ personal and payments information, linking online and mobile channels to provide a consistent customer experience, simplify payments and encourage repeat sales. It can also help to support loyalty options such as push messages or location-based offers to create targeted incentives for customers and help to increase conversion rates.
Embracing new payments technology can also help facilitate payments earlier in the customer journey. Instant pay options on e-commerce sites, contactless and mobile options in store and mobile in-app payments for instance, are not only in line with the speed and convenience that consumers now seek, but they also provide retailers with increased opportunity to capture sales on the go, and encourage consumers to purchase quickly, before they move on elsewhere.
Cash use will decline as retailers strive to deliver a seamless customer experience
Retail is a highly competitive environment and retailers are always seeking ways to differentiate themselves and build customer loyalty. The payment mix can become a significant factor in this effort, especially for retailers operating across multiple channels and geographies. Modern electronic payment methods can allow retailers to build better relationships with their customers, not only by meeting their demands for convenience, speed and choice, but by connecting channels and enhancing the customer experience. With benefits for both consumer and retailer, it is easy to see why electronic and alternative payment methods are becoming the preferred route – and why those payment methods may, eventually, result in the end of cash as a significant factor in retail.
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