Standing out in a seamless future
If truly seamless payments promise to be barely noticeable in our day-to-day lives, customer experience may be the only way financial services can differentiate themselves.
Amazon Go, the checkout-less grocery store launched by the tech giant in January 2018, could be about to go mainstream. After a much-hyped US trial in Seattle, the company has rolled out the concept in Chicago, New York and San Francisco, taking the total number of trading and planned stores to 18.
None of them have queues, because none of them have checkouts. You simply use the Amazon Go app to enter, take the products you want and go. Amazon can automatically detect when products are taken from the shelves and keep track of them in a virtual shopping cart. When a customer leaves the store, the company sends them a receipt and charges the items to their Amazon account.
But if the seamless payments technology behind Amazon Go becomes the norm rather than a novelty, it will mean fewer opportunities for payments companies to interact visibly with customers. So how will they differentiate themselves in a world where people are barely even aware that a payment is being processed? And what role will customer experience play?
Choice at the checkout
Digital wallets and mobile payment platforms, such as Google Pay and Apple Pay, have shaken up the payments landscape over the past few years and many consumers now reach for their phone rather than their card when they want to pay. Meanwhile, the likes of Uber and Amazon have pushed invisible and one-click payment experiences firmly into the mainstream.
“The average consumer now expects a slick and seamless payments transaction on everyday low-value items,” says Simon Kent, global head of financial services at A.T. Kearney. Nevertheless, expectations around seamless payments still exist on a spectrum. “Surprisingly, consumers have different expectations for larger-value items, where they expect slightly more friction to ensure their details and financial data are handled safely and securely.”
Wearables like smartwatches and wrist bands are also increasingly defining customer experiences at the checkout, and voice payments are on the rise too. “There’s a real move to make payments more instant,” says Mr Kent. “It’s already the norm in the UK, but is likely to be adopted globally in the near future.”
Myles Dawson, UK managing director of Adyen, a global payments company, believes expectations will rise when it comes to international payments and experiences. “Tourism is increasingly important, especially as the number of global travellers grows. With this comes the expectation that the payment methods used at home should be supported abroad,” he says.
“Merchants across the globe will be expected to accept a growing number of international payment methods, for example Chinese payment methods like UnionPay, Alipay and WeChat Pay or iDEAL and SEPA for the Benelux regions.”
It’s still too early to tell whether financial products such as Apple’s Card or Facebook’s Libra cryptocurrency will be a success, but social media is likely to transition from a marketing channel for brands to a sales channel in the future. “For example, if I see a post of something that I like on Instagram, I should be able to click a buy button and checkout in one click without leaving Instagram,” says Mr Dawson. “Having the payments infrastructure in place is a crucial part of making that possible.”
Securing the future
A world of seamless payments, while appealing to consumers, could also be appealing to criminals. “Real-time or automated payments, and zero friction, are a tempting target for fraudsters, so it’s vital the industry stays a step ahead,” says Gregor Dobbie, chief executive of Vocalink, a Mastercard company. “Alongside this, as consumers rely more and more on always-on electronic payments, maintaining our existing high levels of resilience and service is incredibly important.”
Every breach of a customer’s data or takeover of their ewallet account will put a dent in their trust of new payment services. “We will likely see the rise in the use of biometric security technology spurred on by regulatory upheavals like strong customer authentication, which will require consumers to double-authenticate payments over £30,” says Iain McDougall, UK and Ireland country manager at Stripe, which offers online payment processing for internet businesses.
The new era of open banking will also unleash more innovative payment services. For instance, we could see more payment systems that use artificial intelligence (AI) to make choices on our behalf. “This could mean, for example, automatically paying bills in the order which best suits the customer’s finances,” says Mr Dobbie. What’s more, AI and the increased data available in a world of seamless payments could speed the shift from mass mailing or email loyalty campaigns to genuinely personalised offers. “The challenge is how you give the most relevant offer while also respecting people’s data privacy, undoubtedly a hot topic at the moment,” he adds.
New ways to pay
As more vehicles are connected to the internet, in-vehicle payment systems and frictionless forms of toll-charging, parking and fuelling could become the norm. So-called “programmatic commerce”, whereby consumers allow purchase decisions to be made on their behalf by connected devices, could also have an impact on customer experience expectations, though Mr Dobbie says stories of your fridge buying milk for you are “possibly a little oversold”.
Although they might not be ready to embrace appliances that do the shopping, consumers seem more willing to try new financing options at the point of sale. “Instalment payment options present a clear benefit to consumers who want to take advantage of the offer of credit, but are not convinced by the potentially high cost and less structured repayment plans of credit cards,” says Claire Gates, chief executive of Paysafe Pay Later. “This is not only useful for those that need to spread the cost of a purchase, but also addresses the growing demographic of millennials who either do not have a credit card or value the utility of instalment payment for certain purchases.”
A range of options, such as 0 per cent interest, means customers can pay for items in a way that suits them, says Michael Bevan, chief executive of consumer finance specialist Duologi. “Applications can also be processed in the same time that it takes to authorise a debit card payment, in around four seconds,” he says.
That’s a big change from the long, drawn-out experiences associated with old-style in-store credit, though it remains to be seen how these new financing options will tie in with the kind of seamless payments experiences promised by Amazon Go. However, it’s already clear that to succeed in future, payment providers will need to ensure they offer customers something that’s fast becoming the norm: the freedom to pay anywhere, with anything, anytime you like.
This article was originally published in Raconteur's 'Future of Payments' special report in The Times