With over 100,000 merchants as customers, Barclaycard is the second largest processor of payments in Europe, where last year it helped authoriseapproximately 5 billion payment requests. No small feat by any stretch of the imagination. However, as one of the biggest infrastructure players in this space, Barclaycard has a unique insight into how retailers are dealing with the challenge of being faced with a plethora of different payment options – a challenge which is only exacerbated as the idea of omni-channel becomes more and more important to both sellers and consumers.
Mike Walters, product director of payment acceptance at Barclaycard, was discussing this at the Digital Services World Congress in London this week. And I have to admit that the picture he painted was quite daunting – this must truly be a bit of a nightmare for merchants and retailers. For example, he said:
“Consumers were used to crumpled notes in their pocket and credit cards, but are now increasingly becoming aware of contactless in other forms e.g. their mobile phone, wearables, etc.
“If those are the pushes coming from consumers, merchants have to find a way to accept them. What does a merchant do when someone comes into their shop? It's a really difficult one. A consumer might be walking from one experience which uses facial recognition and then walk to the next shop and expect the same thing.”
Consumers are faced with new opportunities
This opportunity of choice, a wide variety of new technologies being pushed in the direction of consumers, is impacting the entire value chain for retailers. Many retailers are able to still run their businesses very well using traditional payment methods – cash, cards – but this is going to become more challenging as they are forced to decide which technologies to invest in. NFC? Mobile Point-of-Sales systems? Wearables? Augmented reality? You can't do it all, so there's a problem in figuring out what is best for your business.
Barclaycard's own mobile payment solution, Pingit, has been pretty successful in the UK and has even been used by consumers to buy large-scale items, such as property and homes – highlighting that the level of security on these mobile solutions is good enough to ensure confidence from consumers for big buys. However, more and more of these offerings are emerging, alongside all the others already mentioned, making it increasingly difficult.
This is being worsened by the fact that consumers are not only looking for convenient options, but they are also being confronted with new location based promotional offers, social media adverts, personalised 3D printed goods made in store – they are being drawn in from all angles. Walker said:
“All of these things are moving at varying speeds.
“New payment types – there's an explosion of different ways of transmitting them. We have to find a way of helping our merchants. Merchants think this is tough, finding the ones that are going to scale is actually quite difficult.”
ROI is a problem
If I was a retailer I would find this whole thing very difficult. On the one hand I wouldn't want to end up being behind the curve, as many were with web and e-commerce, but on the other hand how do you know which solution to plough money into? Walker said that mobile is the most ubiquitous technology the world has ever seen and has the best opportunity to pull these factors together, which gives retailers a starting point at least. But even within mobile, there are plenty of opportunities and options. And there are many vested interests at play. Walker said:
“Value proposition, value proposition, value proposition. Consumers want their goods as fast as they can get it and pay as slickly as they can for it. For us (Barclaycard) that means that the customer experience of that value proposition has to be bang on the money, the merchant has to be able to make money out of it, the organisation that sits in the middle that is helping to scale this has to make money out of this as well.”
Not easy. But leaving banks and other tech providers out of the equation for the minute, can retailers actually put an ROI on these projects? Or is it just a case of you have to come up with something in order to not be seen to be left behind? I put the question to Walker and he admits it is a challenge.
“ROI is really challenging. It really is. There are some spaces where it is easier than others – e.g. if I didn't have this technology, what would be the impact on my sales? That is quite crude, but you don't know until you have done it. So you are dependent on other case studies.
“You also might not know which bit of the thing you have changed has driven the shift. So, if I'm a fast food retailer that moves to pre-ordering using a stored debit by current account payment type – how do I know whether it was the way they put my app together, or the way the payment worked, or the way that it was pre-order versus point of sale. That is really difficult.
“Therefore it explains why you see a large number of trials and pilots that are operating, to try and get that type of ROI. I think there's a lot of test and learn going on and then it's about sharing that across industries and sectors. But it's difficult.”
Matching the needs of the retailer and the consumer
On the plus side, Walker went on to say that the threshold for customers turning down a sale because of the payment type is pretty low. How many of us haven't bought something because it's card only as opposed to contactless payment? Not many I would have thought. However, if retailers can get this right, they can seize an opportunity that makes consumers ENJOY doing business with them. Walker reckons that the best way to do this is to try to best match the needs of the consumers with the priorities of the retailers (although admits that this is also tricky) and that the solution will be 'materially better' for the users – not just marginally better. I'll finish with some of these points as some food for thought if you're trying to decide on a direction for your mobile payments strategy.
Here are some consumer needs that should be considered:
- Ease of use – Walker said that consumers will trade almost anything for ease of use. If it's really simple and fast they may be prepared trade with an organisation they haven't traded with before.
- Security – They care about security, this hasn't changed and is a bit of a deal breaker. But with people buying houses with Pingit, it's hardly insurmountable is it?
- Convenience – Walker said that people can get 4G reception at the base camp of Everest, which is probably an extreme example of convenient connectivity. Nonetheless, convenience is very important to the consumer. They don't want to go out of their way.
- My way – why are you making me do it like this? Consumers constantly ask themselves this and if the answer isn't obvious, they may go elsewhere.
Merchant priorities -
- Customer experience – if you're demonstrably better it will play to the consumer needs.
- Risk – there is a risk component for the merchant that is higher than for the consumer e.g. are they going to ask for the money back? Who holds liability for delivery and fulfilment of payment? These questions will be important.
- Ubiquity – how big is ubiquitous for a merchant? Half a million customers? A million? A quarter of them? No-one knows the answer and it varies massively, but this needs to be decided.
- Growth – merchants will have a priority to grow something e.g. transactions, profits, customers, geographies. A retailer won't invest in a payment method that doesn't complement this growth strategy.
- Channel – trying to understand how the customer came to their purchasing decision is important for most retailers. Understanding the path from viewing an advert, to using a retailer's smartphone app, to browsing online, to in store browsing, to purchasing is incredibly difficult but valuable.
“You have got to match these priorities. The retailers that do this are the ones that stand a sporting chance of being successful.”