These days, retail merchants must reach customers, both in-store and online, securely and conveniently. There’s increasingly less middle ground between getting omnichannel right or fading into oblivion. To adapt, let alone thrive, businesses with store locations must embrace EMV, the latest in payments security and authentication, especially considering the retailers themselves have taken on more responsibility for fraud after 2015’s liability shift.
“The challenge for the last year has just been educating our customer base. We don’t want to see them negatively impacted by a fraud risk,” said Dax Dasilva, CEO of Lightspeed, a company providing cloud-based systems that integrate in-store and online sales into one omnichannel solution while helping companies embrace EMV and other payment innovations.
Now that merchants are more responsible for fraud that happens in their stores, he said, “it's our responsibility to teach them about these tools, like EMV, that can secure them and secure their businesses. So that’s a really big, important part of us preparing our customers for the new realities.”
To discuss the revolutions that have driven payments from simple transactions to full-service customer experiences, PYMNTS spoke with Dasilva about the challenges that retailers have faced – and continue to deal with – as their businesses evolve.
The four recent payments revolutions
According to Dasilva, the past decade-plus has brought three major payments revolutions, each of which shook the retail industry. These changes have forced merchants to constantly be ready to adapt to and embrace new developments quickly if they hope to maximize their potential profits.
And it all started with Apple, he said.
“I would say around 2010, 2011, 2012, with Apple having mobile payments acceptance in stores, checking out on mobile devices, that's where we saw transactions become much more personal,” Dasilva said of in-store retail experiences. “That was one of the revolutions that happened in retail over the past few years, where you say ‘how do I, as an independent retailer, make my experience memorable? How do I get people off the couch and into my store? How do I keep them coming back?’”
As Dasilva pointed out, it’s not as if those Apple products that seemingly everyone wanted were not also available online or through other channels. Apple was able to make their retail stores so popular, Dasilva said, by making a visit to their store a unique experience for their customers. The company filled the stores with helpful employees, and enabled those employees to help customers from anywhere in the store, transforming the customer experience.
The second revolution, Dasilva said, was replicating that Apple Store-type experience, which enabled employees to help customers find what they were looking for and pay for their purchases from anywhere in the store using iPads and other mobile devices, among countless retail SMBs. Lightspeed itself, he said, actually worked with Apple to bring its own solution to all its SMB clients – “every small business that sold inventory,” he said.
Next up was the emergence of the cloud, an innovation Dasilva called revolutionary, because it enabled merchants to “bring all their data into one place.” That made it easier for retailers to see what customers did and purchased, both online and in-store, allowing them to build deeper connections with consumers. With the cloud, retailers with more than one store could now easily have one database, Dasilva said.
Utilizing the cloud for POS, he said, “You can really start to build a relationship with a customer, because you can see all the ways you’ve interacted with the customer, and everything they bought. And, you can use that data to find out what they’re going to like and market to them.”
According to Dasilva, the fourth and most recent revolution retailers have encountered is the rise of omnichannel. Now, he said, “it’s not an option to just be online or just be in store. You must have a blended model.”
He continued, “All of the great eCommerce brands are opening stores, and the retail stores that are experiencing the renaissance are the ones that are innovating with this new online presence.”
Revolution du jour: Omnichannel
So far, integrating online and offline transactions and information has been a challenge for the kinds of small, independent retailers that Dasilva and his team work with.
“A lot of the venture capital based retailers, whether they start online or are a blended model, they have large teams of developers to build innovative omnichannel business models,” Dasilva said. “But, not everybody has that kind of budget, especially retail stores. They don't have a dev team, so they're going to need the same tools to be great online, to be great in-store, to be great on social media. To have the right products ordered, for the right customers, at the right moment, on the right sales channels. So, it's a high bar for specialty retail.”
Dasilva said his company works with independent retailers, including high ticket retailers and specialty stores like Funkear electronics and Brink Cycleworks, to help those merchants provide secure and convenient payments that are consistent whether they’re conducted in-store or online. And for those kinds of businesses, EMV is a crucial tool.
“EMV is actually quite important for those (high ticket businesses) because there’s a lot to lose on each transaction if there’s fraud,” Dasilva explained, drawing a distinction between a store like Walmart, which sells a slew of low-priced items, and high-end, specialty stores.
Security is even more crucial when it comes to online purchases, Dasilva said, because customers physically present a card in-store. As a result, there are more security measures that can be taken offline, such as chip and PIN or chip and signature authentication.
“Online, there are all sorts of measures that are taken, obviously, but when you’re presenting a card physically in a store, that rate of fraud is just lower,” he said.
The next revolution …
So, what’s the next revolution for full-service payments? Dasilva said he expects payments to become more mobile, allowing retailers to complete purchases from anywhere in their brick-and-mortar locations in order to provide a better experience for their customers — and he expects EMV to be a big part of that.
“I think it's in our merchants’ interest to want to create those memorable experiences in-store,” Dasilva said. “Sometimes that's being behind a counter and ringing up a sale and that's a great experience. But, sometimes you can really blow the customer away by having a conversation on the showroom floor with an iPad with a payment acceptance device,” he said, then added that EMV poses a challenge to that seamlessness.
“Pre-EMV we had a lot of card swipes that would attach to iPads or mobile devices and, like at the Apple Store, you could do a checkout process from anywhere on the showroom floor,” he explained. “So, that's taken a little bit of a step back with EMV,” which means that “retailers that want to create a personal relationship in the store, they don't have some of the same tools with EMV.”
While mobility is key, Dasilva said retailers will still need to balance the need for speed and convenience with security, even when conducting transactions in-store.
Take the recent Target breach, which Dasilva said served as a “wake-up call” for merchants who thought in-store payments were safe.
“When you see a really devastating example like the Target breach, you realize the potential for in-store payments to be compromised if people are not using best practices,” including EMV, Dasilva said.
No matter what comes next, retailers will need to be able to adjust to new innovations, fraud risks and security needs quickly – and Dasilva said that those small, independent omnichannel merchants will be best equipped to drive the industry forward.
“These are the business that are nimble enough, that are open to new tools. I think they’re going to outpace the big lumbering big box and chain stores,” he said. “I think the independent retailers of today are going to be some of the innovative larger chains of tomorrow.”
Be on the lookout for further retail revolutions – coming to stores near (and far from) you.
To download the May edition of the Payments as a Service Tracker™, click the button below.
About the Tracker
The PYMNTS.com Payments as a Service Tracker™, in collaboration with Cayan, is designed to give an overview of the trends and activities of merchant platforms that not only enable payment processing of new and old technologies, but also integrate with other features to improve the merchant’s experience, including customer engagement, security, omnichannel retail experience, analytics, inventory management, software and hardware management, and more.