In the ever shifting retail payments landscape, the transaction itself is just a point on a broad spectrum of services and data that range from bricks-and-mortar locations to mobile apps.
An ACI-sponsored white paper released last month titled “The New Payment Landscape for Retailers: Think Mechanics and Marketing,” and published by Harvard Business Review Analytic Services states that “the retail industry finds itself smack dab in the middle of a revolution,” powered by technology – as revolutions so often are.
The increasing adoption of mobile payments is a powerful change agent for retailers. According to Capgemini, mobile transactions grew at a 60 percent clip over the past four years, and will reach $142 billion in 2019, up from $52 billion last year (as Forrester Research projects).
With such a heady pace of adoption in the works, retailers themselves need to play a bit of catch up, and many companies will have to fund “massive investment in a new payment infrastructure,” the white paper stated, which will need to go beyond mobile payments themselves to embrace security and marketing platforms.
“This is the first time in history that the industry has had so many profound disruptions at the same time, relating to multiple technologies, including mobility and analytics,” Jean Lassignardie, corporate vice president for global financial services at Capgemini, said in an interview for the white paper.
“But there’s something even more fundamental going on,” the executive said. “When you look at payments, you’re looking at something that is part of everyone’s life. The payment process is deeply embedded into any successful interaction between a customer and a retailer.”
Retailers themselves may encounter a bit of confusion as to just where to put their money – and there are two trends at work, and converging, that offer at least some direction in where investments should be considered.
One trend is marked by the digitization of transactions, and the other centers on the information that can be gleaned both before and after a transaction is completed.
The initiative lies not only with the retailers, according to ACI. There needs to be change, and acceptance of the transaction up and down the payments landscape, from consumers to banks. Banks, for example, are likely to need to upgrade their payments cards with new features (including security). Consumers themselves need to have faith that their data is protected and need to feel at home with the physical act of using mobile payments as well.
For retailers, broadening the relationship with the consumer may be a key incentive to adopt new technology, and there is also the “operational bonus” of keeping transaction costs down. As noted in the white paper, a survey by Ovum Research found that 49 percent of retailers have seen increased payments costs through the past year and a half, and a majority, or 56 percent of respondents, said they expected those costs to keep going up. That’s a concerning trend to retailers, given their typically low margins.
According to ACI, retailers have an advantage in legislation recently enacted through the Durbin Amendment contained in the Dodd-Frank Act, which allows retailers to find and adopt “least cost” routing systems for their debut transactions. ACI also recommended that a new, or enhanced, payments system should feature a “direct connect” link between retailers and the partner/issuing bank. That direct link reduces the time before consumers can access their funds and has the added benefit of helping retailers cut their average transaction costs.
Turning back to the relationship between retailer and consumer, retailers can benefit from having their own apps to improve the customer experience. The white paper offered as an example Walmart’s tie in to its “everyday low prices” motif, and consumers can scan receipt codes to prompt an Internet search that searches for lower prices at other retailers and offers up automatic credits and rebates for any price differentials. Apps also cement loyalty among brands and customers, and can help reduce the costs associated with debit and credit transactions, according to the report.
Retailers also must grapple, of course, with security. In the changing payments landscape, fraud opportunities are evolving in lockstep. It is crucial, ACI noted, for retailers to adopt stringent fraud detection and prevention systems across all channels in which they have a presence, most immediately through tokenized payments.
If retailers put the time, effort and money into building out appropriately nimble infrastructure, they will reap the benefits of understanding customers with patterns-based analysis and even begin to anticipate their needs, tweaking their promotional activities and reducing marketing costs.