The Future of Payments for Retailers
24-Jun-2015 12:29 PM
Opinion piece as featured in Inside Retail June/July 2015 By Mike Ryan, Vice President American Express Global Merchant Services
The rise of new technologies and changing customer behaviour is transforming payments.
Terms like ‘contactless’, ‘digital wallets’ and ‘wearable technology’ are among a slew of new vernacular consumers and retailers are attempting to decipher to understand their implications and how business should best be done in today’s marketplace. We are at an important inflection point in the payments space and retailers need a strategy to meet the opportunities ahead.
Behind the payments transformation
The technological overhaul of the payments sector was driven by large merchants looking to speed up the purchase process at the point of sale. The result was contactless payments, an innovation which satisfied consumers’ increasing desire for speed and convenience. Australia now has the highest adoption rate of contactless payments in the world.
Over time, companies also seized on consumers’ insatiable appetites for smartphones and the increasing popularity of mobile shopping. According to PayPal, a third of Australians have bought products or services using smartphones.
Advancements in Near Field Communication and iBeacon technology have fostered the creation of payments platforms coined ‘mobile wallets’ which allow consumers to pay in-store at a terminal using their smartphone. Gaining significant attention has been the 2014 launch of ApplePay in the US which is expected to accelerate much of the growth of in-person payments through mobile devices as it rolls out across the globe.
Security has been an important benefit of the payments transformation, giving consumers and retailers additional reasons to change their existing behaviours. American Express’ own research shows the number one perceived benefit of having a credit card is security. Mobile payment technology has given consumers added comfort thanks to ‘tokenisation’, which replaces the 16-digit card number with more secure encryption.
Today, payment providers are also looking for ways to innovate through technology to make online shopping more seamless. The goal: to lower cart abandonment rates and improve customer satisfaction.
American Express launched Amex Express Checkout in Australia to remove one of the biggest inconveniencies in online shopping, the need to enter in personal details, delivery and payment information at every purchase.
The real excitement around mobile wallets isn’t paying with a phone. The opportunity for retailers is using mobile wallets to build customer loyalty. We’re already seeing businesses present targeted marketing offers and messages straight to a customer’s phone once they’ve made a payment, or using mobile phone geo-targeting to entice customers into a store. There will certainly be more innovation in this space.
We also expect in-app purchases to take-off locally, based on overseas trends. This is where consumers can purchase directly in an app simply by selecting the item and entering in their password.
Wearable technology is another ‘watch this space’ area which has enormous potential. Recently American Express announced the launch of an exclusive partnership with Jawbone, a leading fitness tracker in the US that will enable our US Card Members to tap-to-pay using the new UP4 fitness band.
What this means for retailers
This is an exciting time for retailers as the industry stands on the precipice of a new payments landscape. The big challenge, of course, is adoption. For mass consumer take-up to occur, consumers need to believe technology will make their lives easier and give added benefit, especially when it comes to making payments, something that is already relatively simple. Once that nut is cracked, real change will occur in the industry.
It’s important for retailers to take a keen interest in this evolution and closely monitor customer interests and preferences. For American Express we will be certainly working with partners to be where our customers are to ensure we’re truly meeting their needs.
What’s becoming clear is innovation in the payment space is not just about payments. It’s about forging a deeper connection with consumers and using data to drive continued innovation, trust, convenience and security.
Those retailers who are in the front seat have a real opportunity to set themselves apart.