It’s time to talk more about what we’re really trying to accomplish for consumers — and for our businesses — and less about the tactics some are trying, with mixed success, to accomplish that.
It’s seemingly all about tactics these days.
The 2018 predictions seem more like a laundry list of trends and tactics that’ve emerged over the last several years than a discussion of the profound impact these trends have had on the consumer and business payments experience.
It’s seemingly all tactics all the time in conferences filled to the gills with sessions dedicated to that same laundry list than a conversation about the frameworks needed to examine the ability of these tactics to solve real business problems that real businesses have — and then to do it at scale.
You can especially see it when we examine the progress, or the lack thereof, of some of the “next big things” in payments and commerce that have neither turned out to be all that big, nor what most end users would say they want next from a payments and commerce experience.
Maybe the reason that no one is talking about profound impacts is because so far, there haven’t been that many.
So, this should be the year to tone down the talk about tactics — and to turn up the discussion about what’s needed to take full advantage of the opportunities to transform the future of payments and commerce.
Starting with mobile wallets.
Instead of talking about 2018 as the year mobile wallets will finally ignite tactic, let’s talk instead about why this might be the year they could end up taking a backseat to something else that solves a more important problem for consumers and businesses.
Mobile wallets were built to solve a payments problem in the store that no consumer ever had.
And, with a few exceptions — Starbucks and Walmart Pay, to name two — it’s a platform the average consumer hasn’t really wanted to use at all — or consistently enough to make it a habit.
Online, mobile wallets were a digital tactic pointed at a problem consumers actually had — faster friction-free checkout on the smaller screens that were driving the growth of online sales.
But the chance to use those wallets was offered to the consumer at the very end of her online/mobile shopping journey. And often, only after forcing that consumer to complete the friction-filled, merchant-required login or registration that risked driving her away.
The real problem mobile wallets are trying to solve is actually three problems in one: eliminate online buying friction for the consumer, increase conversion rates for the business and ensure that payments happen in a secure and compliant way.
That should make the job of a mobile wallet less about eliminating friction at checkout, at the end of the shopping experience, and more about authenticating that consumer and her account credentials at the beginning of her shopping journey.
Where “buy” becomes an affirmation of a transaction she’s already started, shown an intent to complete — and then does.
Tomorrow, we’ll publish our latest online Checkout Conversion Index (CCI), a study we do every quarter. It measures the friction associated with checking out online and via mobile devices. For the last two and a half years, we’ve shopped the same random sample of 750 online merchants, which collectively represent 70 percent of online commerce sales, exclusive of Amazon.
We examine more than 50 features critical to delivering a streamlined online shopping and buying experience, from the time the consumer hits the homepage to the time they exit. We look at a range of things, like the availability of live help; shipping, delivery and pickup options; inventory availability and the number of payments methods offered, including buy buttons. We estimate the lift or loss in conversion — and therefore sales — by merchants, by segment and collectively across the 750 merchant portfolio, based on the friction encountered on those shopping experiences.
What’s surprising — or maybe not, since all of you are also online/mobile shoppers — is how little change there’s been to the overall Index score since we started.
That’s not good news.
What we’ll publish tomorrow shows an aggregate Index score of 51.4 — out of 100 — for the portfolio of merchants we track. On a scale where 0 is “How can you even be in business?” and 100 is perfection, there’s still way too much friction in the online checkout experience for consumers.
Let’s not say that 51.4 is a failing grade; let’s just say it means we’re barely halfway to our destination, about five years after consumers have had fast enough cellular networks to access merchants and conduct commerce anytime and anywhere with their smartphones.
That friction costs merchants big.
Collectively, we estimate the opportunity cost across our sample of merchants to be on the order of $200 billion a year.
That’s not real money lost, of course, since to the merchant with the best online experience goes the spoils of higher conversion rates and those sales. In our report, we examine what makes a top-performing merchant a top performer — but I’ll save those details for you to read when it publishes.
What I will offer in the meantime is that the overall poor performance isn’t because of a lack of wallets or acceptance marks that make checkout easier. We show that, on large and small sites, the availability and use of wallets and buy buttons reduces checkout friction and improves conversion appreciably when a consumer shows an intention to buy things from that merchant’s site.
But for most sites, the ability to use one of those options is a well-kept secret until the very end of their shopping experience.
And by that time, it’s just as likely that many of those would-be buyers have long since said bye-bye — and not buy.
In an increasingly digital world, where connected devices — mobile phones, cars, speakers, wearables, appliances, televisions — will become more relevant channels for how consumers will pay for what they buy regardless of where they might be at the time they’re buying it, the general purpose mobile wallets that were designed to reinvent checkout by making it faster may need to do some of their own reinventing.
Authenticating that consumer at the start has the potential to shape not only how consumers pay and the payment method they use when they do, but, ultimately, from whom they buy.
It also suggests that one of the power plays we’ll see unfold in 2018 and beyond is the someone, or someones, emerging as the trusted enabler(s) of that identity and the secure account credentials that travel with her.
Who that will be will most likely be up to the consumer.
Last year’s Equifax breach did something that the 2013 Target breach didn’t: It gave every single consumer a reason to believe their identity had been somehow compromised.
There’s a very good reason for that: The identity credentials of nearly every adult in the U.S. were stolen and are now being sold for a couple of bucks on the Dark Web.
That breach happened at precisely the moment digital commerce opportunities outside the classic online and mobile channels — wearables, speakers, even cars — began to surface. Consumers, once confident their issuers had their backs if their account credentials and/or physical cards were lost or stolen, suddenly became nervous that cybercrooks were setting up accounts right and left in their names and robbing them blind.
There were even concerns, fueled by media coverage of the breach, that their banks might not know what was happening until fraud had already been perpetrated.
At the same time, consumers are being asked by a growing list of players to establish a profile and store their account credentials.
It’s not just the proliferation of “Pays” that are asking — it’s social networks, merchants, tech giants, search engines, mobile operators and just about anyone with a commerce ambition.
These days, that’s just about everyone.
In May of last year, we asked a random sample of more than 2,500 U.S. consumers to tell us who they regard as trusted enablers of payments in a world where payment can happen using a variety of connected endpoints. That was two months before the Equifax breach was made public.
Three points were made clear.
First, that consumers, overwhelmingly, show enthusiasm about using connected devices other than their smartphones to buy and pay for things. More than two-thirds of consumers said the learning curve wouldn’t keep them from trying new ways to pay. In fact, many of them had already tried new payment methods using a variety of devices — and liked it.
Second, there was concern over the uncertainty of the safety and security of their account credentials and the privacy of their data when tapping into new, connected devices for commerce. If anything would blunt the chances of commerce expanding to those new endpoints, security and data privacy were it.
And third, consumers said they’d trust their bank and card networks to enable these new payments experiences on their behalf. Seventy-seven percent of consumers responded that way, and even more who owned six or more connected devices. PayPal and Amazon were rated highly by consumers too. Merchants, the general purpose “Pays,” mobile operators and tech giants were way down on the list. Social networks didn’t break double digits.
(Even though all of these various players, including the “Pays,” ask consumers to register bank-issued, network-branded accounts as part of their set-up.)
The “Pays” have some work to do.
As wallets, they’ve been presented to consumers as the way to make checkout easier — convenient, fast, efficient. That doesn’t seem to be enough. In our own recent studies of mobile wallet adoption, we’ve started to see a slight uptick in concerns over security by the large majority of consumers who don’t use them.
That’s a change from where we were two years ago.
In a world where the certainty of a consumer’s identity and her authorized use of those credentials is essential to building trust in a world where the consumer and her credentials become more and more intangible, he who cracks the authentication code will take payments and commerce to its full, digital potential.
And even become the tailwind that moves identity and authentication beyond the retail payments use cases we speak about today.