There are now so many payment methods – contactless mobile, card and watch payments, swipes and taps on a mobile screen – it is difficult for retailers to predict where payments are going next. We haven’t yet reached peak payments; there’s going to be more fragmentation before the sector settles down and consolidates.
So how can retailers make the right investments when it comes to payment technology?
Clearly what we’re seeing is mobiles making business models more efficient.
Domino’s has increased loyalty from its customers by delivering a good service on mobile. Waitrose is going cashless, Swipe has launched in France and Sweden is down to 20 per cent cash payments in-store. In Domino’s case, many have pointed out that careless thumb positioning could see multiple orders for a Hawaiian speeding to your door. But the fact remains that it is still the pizza delivery brand of choice over disruptors such as Deliveroo and UberEats. And part of staying on top is the willingness to take risks.
Domino’s has made retailers and payments technologists start to explore the possible. Take petrol stations for example. They could obviate the need to leave your vehicle and stand in a tedious queue. Number plate recognition systems used today to identify drivers who speed could instead recognise a plate linking the pump to the car owner’s bank account. In the time it takes to squirt in 50 litres of unleaded, a mobile verification could be requested, the account debited, and the driver could be on their way.
This would also give the petrol station the ability to collect more than just money for fuel. It would also provide data. It would allow them to penetrate further with their loyalty schemes, ancillary services, and push customers to lower-cost self-service behaviours which allow petrol stations - very low margin businesses - to become more efficient.
Where to invest?
So, should retailers be focusing their payments provision solely on mobile? The card network isn’t extinct yet. Banks are as keen as ever to promote plastic to their customers, even if it is virtual and contained in a mobile wallet. Cards remain the key practical mechanism for banks to maintain a relationship with customers, extending their ability to engage with them.
But in which payments should retailers invest? First, they have to give customers options, just not all the options. Work out which payment experience the majority desires, and where trendsetters are headed. In many cases, this means mobile. In central London, 53 per cent of millennials’ transactions on iOS are via Apple Pay. Customers in cities of less than 100,000 people, however, are making fewer than 1 per cent of their transactions with Apple Pay.
There’s slow adoption among older or less technologically savvy groups. With the evolution of payments so rapid, this is understandable. But that doesn’t mean it’s not going to speed up. Paying online is still an irksome activity. And if customers are losing patience, businesses should look to exploit this.
Above all it’s about designing an experience that is friction-free.
Retailers should follow Domino’s lead and build their own native app experience with frictionless payments embedded for loyal customers who make frequent purchases. This group may not be huge yet – perhaps only five or 10 per cent use them at the moment – but they will drive a huge amount of the subsequent adoption. It’s time to make that relationship pay.