This month's Hotlist investigates the challenges and benefits of emerging payment methods.
Customers are increasingly turning to alternate payment methods for ease, convenience or security. With 88 per cent desiring a faster checkout process (DigitMark, 2017), brands that offer the right payment methods for their customers will have the potential to drive conversion and keep customers coming back.
The digital wallet dominates
Across the globe, the rise of the digital wallet is leading to increasingly cashless societies. Asia is undoubtedly leading the way, with apps like WeChat and Alipay facilitating purchase of everything from cars to street food. A recent Nielsen study found that half of respondents in China purchased a product or service using their mobile device in the past six months (Nielsen, 2019). The uptake of mobile payment is so significant, that both big box and luxury stores in the US and UK, from Walgreens to Harrods, are embracing WeChat and AliPay to attract Chinese shoppers.
For western shoppers, Apple Pay continues to lead the way, with recent expansion into Iceland and anticipated launch in Luxemburg, Hungary and the Netherlands. The dominance of the digital wallet is compounded by digital-first banks such as Monzo, which facilitate quick and easy peer to peer payments, increasingly removing the need for cash in daily life.
For retailers, the key advantage of mobile payment is facilitating an instant checkout-free experience. However, a mindset shift is still required before this will be fully embraced by customers. Nike found that while the New York flagship facilitates a scan, pay and leave service on the Nike app, this felt too much like shoplifting for customers. To normalise this payment method, Nike provides kiosks where shoppers can remove hangers and bag their own items. In the UK, Sainsbury’s recently opened its first cashless supermarket in London. The small format store is optimised for Food-to-Go, yet the key challenge for the retailer is engaging customers and helping them master the new app-enabled purchase process. During this early stage, the majority of customers are still just queueing up to use the help desk and pay via card or cash.
The emerging role of voice
Beyond the digital wallet, we will see voice technology playing an increasingly prominent role in payments as it allows for an instantaneous purchase experience with added hands-free convenience. Currently 22 per cent of voice interactions are commerce related and it is predicted that 50 per cent of searches will be made by voice by 2020 (Campaign, 2018).
The food sector is leading the way with voice payment. In the US, Amazon customers can purchase Whole Foods products via Amazon Echo devices, and Walmart has partnered with Google to enable orders for pickup or home delivery through Google Assistant. Alibaba is investing in on-the-go voice payments, developing apps for connected cars that will find restaurants, make reservations, queue in line and order food using voice. We are increasingly seeing voice payment offered in physical food locations too. In Brazil, McDonalds has partnered with toll payment provider Fleetcor, to enable voice payments at 350 drive-thru locations. This tech development will not only save McDonalds valuable service time per customer, it also removes the purchase hurdle for customers.
Voice has massive potential as a transaction tool, however the key challenge for brands will be building trust; 41 per cent of voice assistant users are concerned about trust, privacy and passive listening (Microsoft, 2019). At time,s visuals will be required to reassure customers, particularly when thinking about price. The bottom line is that brands will need to be transparent about how they use customer data and offer customers clear and easy methods to safeguard their privacy.
The Cryptocurrency opportunity
With trust a key concern, Cryptocurrencies appeal to customers seeking a decentralised, transparent payment system. This form of alternate payment is increasingly entering mainstream retail. Bitcoin was the first manifestation and remains the largest cryptocurrency today. Already accepted by companies from Microsoft to Expedia.com, both eBay and Starbucks are rumoured to start accepting cryptocurrency payments in the near future. Yelp has even introduced a new search tag to highlight the vendors that accept cryptocurrency payment.
An increasing number of mainstream corporations are creating their own cryptocurrencies. Nike recently filed a patent application for Cryptokicks, which could include crypto collectibles and an online marketplace. Samsung is touted to launch its own Ethereum based cryptocurrency, Samsung Coin.
When a Pennsylvania Subway owner made their Subway shop open for Bitcoin transactions, cryptocurrency enthusiasts travelled four hours to purchase a Subway cookie with Bitcoin. It’s the combination of novelty and brand love that presents the opportunity for brands. Review platform YEAY partners with blockchain tech provider WOM to reward people for sharing honest recommendation videos about lifestyle products, services and experiences they love. The key to customer investment will be offering exclusive items or access that can’t be got elsewhere. This initiative will drive brand loyalty as customers become part of the selling-buying process, establish a deeper personal relationship with the brand, and invest in it both emotionally and financially.
Cash still has a role to play
While cryptocurrencies aim to offer financial reassurance, cash is still associated with a strong sense of value and security in many countries. In Europe and Scandinavia, Sweden is heralded as the next cashless society, with cashless payments comprising 82 per cent of transactions (Computing, 2019). Nevertheless, Sweden’s Civil Contingencies Agency has advised citizens to store cash at home in case of emergency, such as a terrorist cyber-attack.
For many people access to cash is a necessity rather than a security measure. The right to cash payment in the US was recently enshrined in law, with legislation in Philadelphia and New Jersey has making it illegal for stores to be entirely cash free. This has required many retailers to change their policies, most notably Amazon Go. The Manhattan store now facilitates cash payment too, albeit relegated to the side of the store. In emerging economies, cash has an even bigger role to play. Google is now adding the option of cash payment on the Play store for users in emerging markets. Users will receive a code that lets them pay with cash at a nearby store. For those without access to credit, this opens up new product options, beyond ad-supported apps or free-to-play games.
When looking to future payment innovations, it is important for brands to ensure they don’t exclude certain segments of society. The ultimate aim is to find the most seamless option for customers with the least barriers to purchase, and the tools that remove barriers for some customers will create new barriers for others.
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