Providing consumers with shopping and purchase experiences that will keep them coming back for more is one of the highest priorities for retailers. In-store shopping needs to intertwine seamlessly with the growing online and mobile aspects of purchasing. Ideally, a retail brand will look, feel, engage and deliver to customers at every touchpoint, with every interaction.
One area that remains a challenge is the in-store payment. Online, many consumers have their payment information loaded on their favorite shopping destinations. The one-touch “pay and ship” arrangement this allows has set a new standard for seamlessness; and the card issuer can achieve a nearly permanent top-of-wallet position for all of a customer’s purchases on the site.
Now consider the in-store payment. Inconsistency prevails, as different retailers are using different processing—some EMV, some swipe. But almost none offer a simple tap – the equivalent of “one touch” in the online world. This is because of inconsistency in retailers’ acceptance and use of processing systems and equipment that allow for the most efficient, speedy and frictionless purchase experience.
And how about that mobile payment option, via a mobile wallet or app? Despite research suggesting that Millennials in particular would embrace a mobile in-store payment experience, which would require just a scan or tap of their smartphones, retailer acceptance is scant. The notable exception is Starbucks, which has flawlessly bundled a loyalty system and the mobile payment into the store and brand experience (music, news feeds, social media).
For most retailers, replicating the Starbucks payment model is a logistical non-starter. The retailer payment system challenges seem to be technical, contractual and financial inconsistency in EMV systems and chip cards acceptance (whether insert/swipe or tap); but payments alone are not the only challenge in creating a more frictionless and integrated store experience. To align the mobile payment stars, retailers need to:
These issues pose a time line challenge to retailers, potentially requiring years to implement. How long will it take for stores and brands to realize a truly omni-channel mobile experience? Retail banking is one bright spot that is rapidly figuring out this need and how to execute fully integrated customer experience across channels; casual restaurants are also moving swiftly into an integrated mobile/in-restaurant experience and payment process.
Understanding the bigger challenges faced by retail apparel and durable products, it would nonetheless seem that more frictionless payments processes don’t necessarily need to remain on the back-burner. While mainstream consumers are not yet demanding mobile payments – not to mention other frictionless methods on the horizon, such as wearables, biometric or eye scan – the potential benefits and appeal have yet to be fully demonstrated – at least in part due to what amounts to a retail/payment industry stand-off on process systems.
While retailers and payments processors agitate each other – including retailers threatening to launch their own payments processing alternative – the generational shift of spending is already in rapid motion. Millennials are increasingly tied to their smartphones and wearables, and this generation will have little patience for an industry power struggle that hinders their preferences and experiences. They will quickly gravitate to the swiftest, most engaging and satisfying shopping solution.
Retailers must embrace the enhancements and potential integrated benefits mobile can bring to the in-store shopping and payment experiences – or, at a minimum, they must improve the existing card swipe/insert checkout systems. As many big retailers will not go “frictionless” on their own in a timely manner, the rapidly evolving marketplace may leave them behind before they know who swiped their customers.
Tom Neri is the Head of Financial Services, North America at GfK. For more information, contact Tom Neri.