Digital-First Banking Tracker® Series Report

What Self-Service Retail Is Teaching Banks About Self-Service Banking

August 2023

Customer expectations for the retail experience are evolving fast, with self-service and digital payments taking top priority. Merchants must quickly leverage new technologies like artificial intelligence (AI) and analytics to meet customers where they are.

PYMNTS

Customer habits evolved quickly over the past several years as eCommerce grew in popularity. Now consumers want their in-person retail experiences to be as fast and seamless as their online ones. Many retailers have found that self-service options are crucial for meeting these expectations.
Few technologies have made a bigger splash in recent times than AI, with the technology poised to replace countless occupations in the years ahead. The retail sector is embracing this transformation, with stores developing strategies to harness AI in various back-end and customer-facing applications.
Retailers are facing greater competition than ever, not just from other retailers but also from massive eCommerce conglomerates. Just to keep up requires a complete transformation of their existing businesses, which can be a daunting challenge.


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    The retail experience underwent an irreversible transformation following the store closures and stay-at-home orders during the early months of the pandemic. The global shift to eCommerce brought with it heightened customer demands for speed, convenience and payments flexibility, and consumers maintained these requirements as they returned to shopping in physical stores.

    Meeting these new demands is a tall order for many retailers, who must undertake complete back-end system renovations to incorporate the latest digital technology. Many are finding that partnering with third-party providers is the key to success, rather than fruitlessly wasting scarce resources.

    Self-Service Is Quickly Becoming the New Normal

    Customer habits evolved quickly over the past several years as eCommerce grew in popularity. Now consumers want their in-person retail experiences to be as fast and seamless as their online ones. Many retailers have found that self-service options are crucial for meeting these expectations.

    84%

    of consumers in the United States
    enjoy self-service kiosks, with 66%
    preferring them to staffed checkouts.

    Customers largely prefer self-service options, but some have reservations.

    A recent study finds that 84% of Americans enjoy using self-service kiosks, and 66% said they prefer them to staffed checkouts. The preference for self-service is consistent across most generations, with 84% of Generation Z, 76% of millennial and 57% of Generation X consumers favoring this option. Only baby boomers are in the minority, with just 46% choosing self-service over staffed checkout.

    Holdouts have several reasons for doing so: Sixty-seven percent say the technology has made it harder for individuals to share a meaningful connection, while 75% attribute a decline in social skills to technology-based interactions.

    Customers find lines in retail stores to be a major pain point.

    One contributing factor to the rise in self-checkout options is their ability to accelerate transactions and reduce lines. A recent study finds that 82% of consumers will actively avoid a business with a line of any length.

    Experts estimate that Americans spend roughly 37 billion hours in line per year, with retail stores being the primary location where they wait. Customers therefore view the self-service kiosk as a merciful break from the tedium.

    Retailers Deploy AI to Improve Customer Experience

    Few technologies have made a bigger splash in recent times than AI, with the technology poised to replace countless occupations in the years ahead. The retail sector is embracing this transformation, with stores developing strategies to harness AI in various back-end and customer-facing applications.

    $113B

    could be saved by the grocery industry
    by deploying AI in both consumer-facing
    and back-end applications.

    Use of AI in grocery stores is expected to grow by 400% by 2025.

    According to a recent report, AI is predicted to generate more than $113 billion in efficiency gains and new revenue across the grocery industry. More than $58 billion of this value will come from inventory management savings alone, as grocers reduce waste by employing smarter ordering practices. AI will also drive advancements in pricing and product assortment.

    Meanwhile, on the front end, AI could eliminate 18% of store associate positions, 53% of shopper queries and 73% of assorted in-store tasks like checkout and shelf-stocking. At present, just 13% of grocers leverage AI in more than one store area, but this number could multiply fast as AI proves its worth.

    Retailers must upgrade internal systems to accommodate AI.

    Most retailers need to upgrade their back-end systems before they can begin to harness AI, with 83% of respondents in a recent survey saying they can benefit from AI only after modernizing their infrastructure. This is far easier said than done, however, with just 48% of respondents saying their existing infrastructure is even capable of undergoing modernization. Most businesses will need to replace their systems entirely, as well as overcome roadblocks such as resource limitations, organizational resistance and poor communication among stakeholders.

    Retailers Are Transforming In-Store Experiences to Meet Customer Demands

    Retailers are facing greater competition than ever — not just from other retailers, but also from massive eCommerce conglomerates. Just keeping up requires a complete transformation of their existing businesses, which can be a daunting challenge.

    51%

    of U.S. and U.K. retailers plan to outsource
    payments innovation to third parties.

    Point-based loyalty programs in retail fall short of expectations.

    Many retailers are experimenting with loyalty programs to reward repeat purchases, but some experts warn that point-based loyalty programs are the wrong way to go. On average, customers belong to more than four loyalty programs, but only about two-thirds of these customers redeem their points every three months, indicating that these programs are relatively ineffective at motivating return visits. Data instead suggests that customer service initiatives could be a better use of resources, with 48% of those who switched brands citing the need for better customer service as their main motive.

    Most retail stores choose to outsource payments innovation rather than handle it in-house.

    Payments innovation is crucial for enabling fast and seamless shopping experiences, but it can be a costly and time-consuming endeavor, especially for smaller stores. As a result, merchants are looking to outsource their payments overhauls. A recent PYMNTS survey finds that 51% of retailers in the United States and 63% in the United Kingdom plan to outsource all aspects of payment method innovations. Most retailers prioritized user experience features, data tracking and fraud prevention when choosing new payment methods.

    Retailers Must Work Cooperatively with FinTechs and Other Third Parties to Satisfy Customer Expectations

    The surging popularity of eCommerce means customers have more options than ever when it comes to retail, making them more inclined to change brands. Recent studies have found that 55% of consumers abandoned a brand entirely because of a poor in-store experience, knowing they easily can find another seller to satisfy their needs. This means that retailers must excel in customer experiences and payments, no matter the cost.

    Retailers found that the following technologies held the most promise for customer retention:

    • Mobile apps, with 78% of retailers saying they improved customer loyalty
    • Ability to shop in-store and order for delivery (76%)
    • Barcode and QR code scanner access (74%)

    Implementing these technologies can be both time-consuming and expensive, especially for smaller retailers with limited resources. Fortunately, there are a host of third-party retail service providers equipped with the necessary expertise and technology to do the work at a fraction of the time and cost of developing new tools in-house. Partnering with these experts should be top priority for any business wanting to pull ahead in an increasingly competitive environment.

    Doug Brown

    Similar to banks and credit unions, retailers need to continue progressing to a truly omnichannel approach. Regardless of the channel that customers choose to interact with, they need to offer the ability to shop, bank, etc. across multiple channels. This gives the customers the ability to shop when, where, and how they want. The retailers that are able to offer the most seamless experience, regardless of channel will rise to the top.
    Personalization is going to be the key to success for virtually all businesses going forward. Regardless of the channel, customers want white glove service. In order to be successful and meet these expectations, it’s paramount that financial institutions, retailers, etc. are partnering with leading technology partners in their vertical and as important, utilizing the vast amounts of data that they have at their fingertips.”

    Doug Brown
    President

    About

    NCR Corporation is a leader in banking and commerce solutions, powering incredible experiences that make life easier. With its software, hardware and portfolio of services, NCR enables transactions across financial, retail, hospitality, travel, telecom and technology industries. NCR is headquartered in Atlanta, Georgia, with 34,000 employees and does business in 180 countries. NCR is a trademark of NCR Corporation in the United States and other countries.

    Ingo

    PYMNTS Intelligence is a leading global data and analytics platform that uses proprietary data and methods to provide actionable insights on what’s now and what’s next in payments, commerce and the digital economy. Its team of data scientists include leading economists, econometricians, survey experts, financial analysts and marketing scientists with deep experience in the application of data to the issues that define the future of the digital transformation of the global economy. This multi-lingual team has conducted original data collection and analysis in more than three dozen global markets for some of the world’s leading publicly traded and privately held firms.


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