Retail Payments Strategy Best Practice

February 2019

Author: Brian Weakliam - CEO & Founder Bankhawk

Why has payments become so important for Retailers
Payments & Digital Strategy – Challenges for Retailers
The Three Key Pillars of Payments
Futureproof your Payment System
What's Happening in Payments Generally
Benefits of Mobile Payments
The importance of Payments Strategy
Four Ways to Drive Adoption of Mobile Payments
"Payments go right to the very heart of retailing. The payment is no longer the final stage in a customer transaction, a mere transfer of funds, the handing over of the money."

1. Why has payments become so important for Retailers

‘Payments’ used to simply be a way for customers to pay for purchases as a more convenient alternative to cash. Now in the new digital world ‘payments’ has become central to the purchase itself. Mobile and web payment apps are replacing cards, taking ownership of the customer relationship and influencing where and how the customers spends its money.

Traditional retailers must change the way they think about payments and see it as a big opportunity to drive growth. They must also align the way they think about payments with their digital strategy. The two are intertwined.

Rather than focussing on traditional points of sale retailers must shift the focus to blending instore and e-commerce channels. The approach must also be more customer-centric and based on what is important for customers (the buying experience) rather than ringing the till.

2. Payments & Digital Strategy – Challenges for Retailers

Developing a retail strategy will have its challenges. These challenges will often be technology or systems based. Often the store systems are quite separate from the online systems. Now the online system needs to be joined up to the store system.

It is important that retailers have the right tools to allow them to develop a multi-channel strategy, including the CRM system, payment acceptance, payment processing, the integration tools and the support system.

There are lots of payment acceptance methods when we look at multi-channel retailing: the traditional point of sale system, e-commerce and more recently m-commerce, but also mobile point of sale channels. It is important for retailers to look at integrating the channels into a single system.

Customers will expect a seamless experience or at least an illusion if that is not possible. Central processing is the heart of this. When we look at transactions coming from retail stores, e-commerce and m-commerce, they all have to be delivered into a central EFT system or a central gateway.

3. The Three Key Pillars of Payments

1. Reliability
Maintaining business operations at all times is essential.

2. Speed
In a retail environment there are a lot of queues. There are no queues online or on your mobile phone. Retailers should think about mobile point of sale and unattended channels as a means of dealing with additional customers.

3. Security
As an industry, retailers have plenty of security requirements – they must be able to convince a QSA (Qualified Security Assessor) that payments systems are robust. Card data is a dirty word. You don’t want to be storing the card data in your business. Think about encryption, tokenisation and outsourcing your system.

By centralising your data you will get access to a lot more reporting functionality. Think about how you can join together data to what you do you in your CRM system to generate new insights about your customers and develop and deliver a better customer experience.

4. Futureproof your payment system

Make sure that your system is scalable and supports new payment technologies.

We are seeing new payment schemes on the market. Paypal has been very successful online, we see them migrating to face-to-face payments. We are going to see internet giants, such as Google, compete with mobile network operators to bring new wallet services. We are also seeing the card schemes start to introduce new types of wallet services.

We need to think about added value support. Think about the type of mobile vouchering and other types of transactions that you might want to take as part as your multi-channel solution.

5. What's happening in payments generally (ACI Worldwide Report)
  1. Credit cards continue to dominate the payments market for retailers and merchants
  2. New and alternative payment tools now account for over 10% of global merchant transactions. Contactless cards help merchants embrace quick and convenient means of payment.
  3. 59% of merchants and retailers plan to increase their payment investments
  4. Payment investment is high in all sectors, with 65% of travel and lodging companies reporting an increase in investment levels
  5. Merchants and retailers expect Payment investment to improve customer experience, but more than 75% indicate that security and compliance are the greatest barriers to payments initiatives
  6. Although 52% of merchants and retailers say their card-not-present (CNP) losses are growing, 70% say they are satisfied with their CNP fraud prevention tools.

As commerce becomes increasingly digital, payments technology is critical to improving customer engagement and reducing costs – with 79% of global merchants and retailers noting that an Omni-channel approach is key to creating a seamless customer experience,” said Lynn Holland, VP of ACI Worldwide.

“Although there isn’t one path to payments modernization for merchants and retailers, the benefits of investing in new and alternative payments methods are increasing – in terms of both merchants’ bottom lines and overall improvement of customer experience,” added Matthew Heaslip, an analyst with Ovum.

“To stay competitive in this changing retail market, merchants and retailers must foster strong payment partnerships with companies that not only understand their market verticals, but can also help them both improve their Omni-channel capabilities and reach new customers.”

59 %
Merchants/Retailers Increasing Payment Investment
65 %
Travel/Lodgement Companies with Increases in Investment
70 %
Merchants/Retailers Satisfied with CNP Fraud Prevention
6. Benefits of Mobile Payments

Mobile payments are a great way for retailers to optimize operational efficiency and improve customer experience, all while keeping their costs low. Offering mobile payments provides significant advantages for retailers of any size.

  1. Improved Payment Security;
  2. Increased Checkout Speeds:
    Customers want fast and easy service. Typically, paying is the least favourite part of a customer’s experience. A lot of customers find that it is quicker to pay with a mobile device than a credit card. Customers who do not have to wait in a long line are more likely to visit that retailer again. The biggest advantage to faster checkout speeds are increased profits. If a retailer is able to accommodate more customers, then they can make more sales;
  3. Better Track Customer Trends and Inventory:
    With mobile payment services, these processes are automated and help to better serve customers. Not only can they capture payment information, but they can also use that information to create promotions, track inventory, and keep up with what their customers are buying the most of.
7. The importance of Payments Strategy

Technology is driving consumers to make purchases using many different types of point of sale (POS) experiences. Credit and debit cards need to work across all of these experiences, in a growing list of locations.

Card Issuers can meet this need by using channel-agnostic payment credentials that work in a fast, safe and convenient way across any channels the customer chooses to use.

Changing consumer behaviour

Consumers use multiple devices, and they want an intuitive and seamless user experience across all applications. Issuers need to focus on a mobile-first, user-centric design strategy in order to drive consumer preference for their payment products.

Payment credentials must work in a fast, safe and convenient way across any channel the customer uses. Convenience and checkout speed drive the convergence of payment channels. A digital payments strategy must take an integrated approach to the various POS channels available to consumers.

8. Four ways to drive adoption of mobile payments

Address security threats: Sixty-two percent of non-mobile wallet users cite “security” as the main barrier to making payments on their mobile devices. Make security efforts transparent to cardholders through effective messaging.

Make it convenient: Alternate payment methods that offer a frictionless online and mobile shopping experience provide a simpler and faster process at checkout than a traditional method of payment. Promote the ease of use and convenience benefits offered by digital payments.

Increase utility: Expand offerings outside of just a convenient payment experience by providing more value to cardholders. For example, partner with merchants to enhance wallet functionality to include storing loyalty cards or allow customers to pay with reward points.

Create offers and incentives: Offers and incentives encourage customers to register their card directly with merchants (e.g. Amazon and Uber) as well as mobile wallet providers (like Apple Pay). Co-brand cards have the advantage of using increased earning opportunities for cardholders by rewarding spend at certain merchants, which encourages consumers to choose that card over others.