The payments landscape has moved light years beyond the traditional days of keeping cash on hand, in the till, ready to make the correct change to a customer who has in turn proffered legal tender in coins and bills. Now, retailers, merchants and their financial intermediaries must contend with omnichannel shopping, a continued shift toward mobile payments and the labyrinth of fraud prevention.
In a white paper titled “Pay it Forward: Solving Three Key Challenges in Payments Processing,” IBM cited the challenges it found as chief among those standing in the way of truly frictionless payments through an omnichannel prism.
It may come as no surprise that customers are wont to abandon transactions at checkout if they face a daunting task of actually paying for the goods and services they have selected. The consumer today is savvy about technology and the ways to pay, and, according to IBM, looks to enjoy a secure and seamless experience across smartphones and tablets, and cashless transactions that happen in-store.
Indeed, the rapid growth of eCommerce is calling for seamless payment processing and a robust checkout experience to remain top of mind among retailers. IBM stated that its IBM Digital Analytics Benchmark, which ties data across hundreds of merchants, found that mobile devices accounted for as much as 39 percent of eCommerce sales in the United Kingdom and 24 percent in the United States as of March of this year, and global eCommerce spending is on track to rise by 56 percent through the next three years. The key, IBM found, is to ensure that the mobile eCommerce experience is at least on par with a user’s desktop experience.
Contactless payments are also gaining momentum. For example, in the U.S., Forrester Research has projected that the mobile payments growth rate will come in at more than 173 percent from 2014 to 2019, reaching a value of as much as $142 billion by then, and roughly 80 percent of retailers will have enabled in-store mobile payments by then.
Challenge #1: Satisfy customer demands for payment options and localization.
Yet, against this backdrop, said IBM, “consumer expectations are far ahead of merchant capabilities in most areas of omnichannel commerce, and payments is no exception.” The shopping cart abandonment rate may be a bit alarming, as IBM found that rate to be as high as 74 percent in the U.S. as of March 2015. Cart abandonment has been steadily on the rise since 2009, which begs the question as to what shoppers want.
A few things they do want, as IBM found 52 percent want to have a variety of payment options at their disposal at checkout, and 24 percent have abandoned a transaction because the method they preferred to use was not in fact available. For global enterprises, support of local currencies and banks remains key, but international payments still remain mired in complexity.
Challenge #2: Meet security, privacy and regulatory requirements
News headlines have been dominated by seemingly daily hacks and data breaches, with Target, Home Depot and others serving as only a few of the larger marquee retail names that have been under siege. The costs, of course, have been substantial, with a 39 percent jump in 2014 alone from the year earlier, with losses tied to credit card fraud at $32 billion. Fear is pervasive, as IBM found that 59 percent of consumers fear that their card data is at risk – and that “fear factor” is higher than fear ratings over events such as war, terrorism or banking online.
There has, of course, been the transition to EMV as of last month in the U.S., with its attendant liability shift. But that shift carries with it costs to merchants in terms of time and money spent upgrading to new terminals, at roughly $2.6 billion. And as has been widely anticipated, the payments industry has been gearing up for a jump in CNP fraud. That growth is presaged by experiences in Europe and elsewhere, as CNP indeed soared in the wake of EMV adoption. The U.S. may see as much as a doubling of CNP fraud through 2018, IBM said, citing Aite Group.
Challenge #3: Minimize complexity across the payments ecosystem
The effort to minimize complexity across payments has merchants a bit flummoxed over where to allocate resources and time, with operational costs and maintenance expenses to grow in tandem as firms embrace mobile and global eCommerce. That is especially true as reporting and reconciliation of transactions take place on an increasingly global stage.
Costs increase, of course, as new channels are added, said IBM, and top operational challenges include data protection, integration difficulties and consolidating payments data. One way to circumnavigate these challenges, said IBM, is to move beyond in-house solutions toward a relationship with a provider that offers cloud-based solutions, which operate, ideally, across countries and currencies.