How Payment Technology is Reshaping the Grocery and Supermarket Industry
Groceries and supermarkets are pivotal to modern food distribution. Even so, the grocery industry needs to evolve to compete among the more technologically savvy players on the market. With big-box stores offering online shopping, grocery stores have also had to meet this challenge. And, of course, the world has changed from a mere six months ago—many consumers are no longer comfortable going to shop in person in a grocery or supermarket. As a result, sellers who have online buying options and buy online, pickup in-store solutions saw massive growth in recent months.
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Finding a payment processing solution can be challenging for a supermarket, especially one that hasn’t moved from a traditional model. Software developers and independent software vendors (ISVs) can help a business move into the twenty-first century, given the right tools. However, these professionals are only as good as the tools they have access to, and a grocery or supermarket needs to make the best choice when it comes to their current payment processing service. This paper will explore the challenges that vendors in the supermarket industry typically face and explore how they can overcome them with payment technology.
A Shift to Online Buying
Statistically, it’s undeniable how many grocery shoppers are now buying online. Supermarket News mentions that online grocery sales in the U.S. may surge by 40% this year, buoyed by the shelter-in-place and lockdown orders that have rolled across the country. Online purchases have the benefit of helping to keep individuals safe. Even people who have to quarantine because they’re sick can still access the bare necessities through delivery. The past six months show that more than half of buyers are now opting for an online purchasing method to do their groceries.
It’s not just a temporary thing, either. The Washington Post examines the phenomenon and concludes that the change in buying habits isn’t likely to switch back to its pre-COVID situation even after the virus’s deadly march has been halted. Consumers have shifted away from browsing endless shelves and have opted for the most practical way to get groceries. However, it’s important to note that even those who are going to grocery stores in-person are changing how they see payments—yet another factor that is changing the grocery landscape.
Payments in Today’s Grocery Stores
Entering a grocery store in a pandemic with such a contagious disease as COVID-19 means coming into contact with other people. Even payment methods such as swiping a card or passing cash to someone could potentially lead to the disease’s spread. That’s why customers are increasingly turning to new shopping platforms and methods to order groceries safely. In fact, Mastercard found that more than half of grocery store shoppers opted for contactless payments if they had the option since it was safer and exposed them to germs much less than the transfer of money or a card. The onus is on supermarkets and grocers to provide the infrastructure to enable contactless payments.
How Supermarkets Accept Digital Payments
A brick-and-mortar grocery store is likely to provide clients with several options to pay their bills. Typically, groceries and supermarkets offer terminals that allow customers to check out quickly and efficiently. Point-of-sale (POS) systems are a simple yet effective solution for customers who want a fast interface to transfer funds for their purchases electronically. Users with store-specific processing accounts can even have their purchases tied into rewards programs, all from a simple checkout counter. Self-checkout kiosks are even more useful in this setting since the customer doesn’t have to interact with another person.
Online payments are slightly different. While the customer can still use their credit and debit card for payments, they may need to be routed through a payment gateway. Businesses can get software developers to tie their online payments system to the payment gateway, limiting where the client has to go to complete payments. Master processing accounts can even be linked between POS kiosks and online payment systems, allowing customers to access their rewards for points from their online purchases. A unified payment solution is an ideal way to do this since it reduces redundancy and ensures that the store only has to deal with one single processing dashboard.
Standard Payment Methods That Supermarkets Support
Most grocery stores support multiple payment methods. Some of the most common include:
- Debit and Credit Cards: These come in several varieties, including magstripe, EMV, and contactless cards.
In the current environment, more and more consumers are opting for contactless cards as they are a safer option. Contactless cards utilize near field communication (NFC) technology, which transmits payment data securely over radio waves, eliminating the need for human touch. - Cash: While cash isn’t going away any time soon, cash payments have declined drastically in 2020. The BBC mentions that the pandemic has seen a reduction of withdrawals from ATMs in the UK by a whopping 60%.
- Checks: This paper-based payment method is not so popular at grocery stores anymore, and some groceries no longer accept them because of issues with bounced checks.
- Mobile Wallets: Mobile applications like Apple Pay and Google Pay have been slow to take off in the U.S., but in recent months they’ve finally begun to gain traction for their contactless nature and robust security. Like contactless cards, mobile wallets use NFC technology.
- Government Benefits: The United States Department of Agriculture (USDA) manages several financial assistance programs, such as the Supplemental Nutrition Assistance Program (SNAP) and the Women, Infants, and Children (WIC) program. SNAP and WIC link to vouchers and EBT (electronic benefits transfer) cards, the latter of which is similar to a credit or debit card.
- FSA/HSA cards: Also similar to credit and debit cards, FSA and HSA cards are linked to tax-beneficial accounts so that consumers can save on medical costs. They are accepted by a smaller volume of merchants than credit and debit cards, unfortunately.
These payment methods carry with them infrastructural requirements and other challenges that groceries and supermarkets need to deal with to offer a unified payment service to their consumers.
Industry Challenges With Accepting Payment Methods
Accepting payments is a significant consideration for businesses. Without a secure and reliable payment processing solution, a company will start losing its customers’ trust. Additionally, the choice offered may impact whether consumers decide to shop at a location or not. Among the most common issues that groceries and supermarkets encounter in accepting payments are:
Clunky Countertop Setups
Ease of use should be a significant consideration for grocery stores. And, ease of use is typically tied to the countertop setup. Many grocery merchants don’t typically update their cashier setups for a few years, and by that time, the hardware and software may both be heavily outdated. Additionally, merchants may decide to use multiple payment terminals in order to accept a variety of payment methods, which takes up space and creates a chaotic environment.
Older systems were designed to be modular, allowing for plug-and-play support for multiple handsets, individual scanner components, and printers that could be programmed any way the buyer saw fit. Instead of simplifying the job, it made these countertop setups more complicated and harder to manage. As more payment methods became available, more terminals were just added on, leading to peripheral sprawl.
In the past, each different type of payment method required its own terminal for operation. However, payment processing solutions have moved away from this ancient method of thinking. With the right payment processing solution coupled with a skilled ISV or software development department, a grocery store has the ability to accept all leading payment methods from a single terminal.
Europay, Mastercard, and Visa (EMV) Compliance
In 2015, EMV introduced its liability shift to encourage merchants to upgrade to EMV’s secure technology. The reason for this push was that, unlike magstripe cards that contain static payment information, EMV chip cards generate unique single-use transaction codes—which means that card data cannot be easily intercepted or counterfeited.
In order to accept EMV payments in-store, merchants need to upgrade their in-store software and hardware—a process that has been traditionally quite time-consuming and expensive. Once the merchant upgrades their store, they are able to benefit from the liability shift in that they aren’t held responsible for the costs of a fraudulent EMV transaction.
Since 2015, EMV technology has evolved rapidly, and it’s no longer quite as difficult or expensive as it used to be. While most U.S. merchants today have upgraded to EMV, there are many on the market who would benefit from the latest generation of EMV solutions.
Limited Support for Payment Methods
Merchants need to cover as many payment methods as possible in order to avoid losing out on consumers. As more payment methods enter the market, supermarket owners find themselves in the unenviable position of wanting to accept every new type of payment that enters their store.
Adding support for new payment methods often requires hardware and software upgrades, which holds many grocery stores back from making any changes. EBT cards are a good example of emerging technology that requires specialized terminals or integrations to deal with payments. Mobile wallets are another good example, but the path to mobile wallets is often quite simple for merchants who have already upgraded to EMV, as contactless payments utilize EMV technology.
Merchants need to upgrade their systems to ensure that they support the broadest range of payment options. This variety helps them stay competitive and ensures that they don’t lose business to other grocery stores that cater to these clients’ needs. In fact, an August 2020 survey by Visa revealed that 63% of consumers would switch to a new retailer specifically because it offered contactless payment options.
Time-Consuming Account Reconciliations
Transaction data is generated after every single purchase, and at the end of the day, the grocery store “settles” their assets and initiates funding by submitting this data to the bank. If a grocery store does not have an integrated system that automatically enters transaction records into the POS system, they would need to settle each terminal manually—which can create quite the hassle for accounting departments.
Manual data entry is heavily labor-intensive, usually requiring dedicated personnel to perform this task. Even so, it may introduce errors in the data entry process and could lead to erroneous results in the company’s reports—leading to problems in tax compliance. Additionally, these transcription jobs can be excessively timeconsuming, meaning that they are typically one or two days behind the current day in terms of recorded transactions.
Slow Checkout Times
In a grocery store, having long lines at checkout is terrible from the customer’s perspective. Although long lines can’t be entirely avoided, slow checkout times can be optimized to keep lines shorter.
Even with modern payment methods, multiple terminals can slow down the checkout process to a crawl. While faster connection through 4G LTE and 5G wireless networks is supposed to reconcile the issue, sometimes it comes back to the firmware that terminals operate. The process could often be made much more efficient by using a better payment processing terminal or switching to a different processor.
High Processing Costs
Generally, credit cards charge a processing fee of between 2% and 2.5% on each transaction. For grocery owners, where each sale has little markup to keep the prices competitive, this cost impact can be significant. Larger merchants may not be negatively affected by this particular cost, but smaller companies could take a huge hit. This issue, in turn, affects the merchant’s ability to afford new stock. With a lower profit margin, the merchant has to sacrifice earnings to restock their shelves. However, restocking depends on how long payment processing services take to fund the merchant’s account.
Funding for many payment processing solutions is less than ideal. Merchants that operate in the retail sector, like supermarkets and groceries, tend to need a fast turnover for merchant accounts since goods don’t keep indefinitely. When stock leaves the merchant’s shelves, they need to have access to money to replenish the supply. A grocery or supermarket that has unpredictable stock is one that customers will frequent less often. By utilizing a payment processing solution that consistently delivers speedy settlement of accounts, merchants can deal with restocking their shelves with less hassle.
How to Solve These Challenges
We’ve already seen that there are simple solutions to many of these problems—and the solutions largely stem from the merchant’s decision to work with a reliable software developer or ISV—coupled with an easy-to-use API that developers can integrate with existing hardware and software. Cardknox is an industry leader in digital payment processing technology with a fast, extensible API that’s easy to integrate. Cardknox offers several ways to deal with the challenges that vendors face regarding their digital payments, such as:
EMV-Ready POS Integrations
Enabling EMV processing in-store can be complicated, especially depending on the type of POS system that’s being used by the merchant. Additionally, supermarkets may need to purchase a new terminal to support EMV payments. With Cardknox, though, it’s much easier: Cardknox’s EMV-ready payment gateway can be seamlessly integrated with a wide range of POS systems and payment terminals so that merchants don’t need to make extensive changes to their existing setup (or pay exorbitant costs). Plus, Cardknox offers the fastest integrations for POS systems of all types: browser-based, cloud-based, or even legacy systems. The options that Cardknox offers for POS integrations include:
- Traditional: Cardknox’s robust SDK makes it a breeze to integrate with traditional POS systems. Grocery stores will be able to enjoy streamlined account reconciliations, increased security, and other benefits unique to the Cardknox payment gateway.
- Browser-Based POS (BBPOS): Our BBPOS solution enables merchants who use POS systems that operate in browsers to accept EMV and other leading payments.
- Plug-and-Play EMV Integration: Designed for legacy POS systems, our plug-and-play solution mimics the magnetic stripe payment flow so that businesses can accept EMV cards without having to make extensive changes to their setup.
Support For Many Payment Methods
Merchants in the supermarket and grocery sector need to ensure that they can meet their clients’ needs by accepting multiple payment options—both in-store and online. In keeping with our aim of simplifying checkout, our payment gateway supports the broadest range of payment methods: credit and debit cards (magstripe, EMV, and contactless), mobile wallets, FSA/HSA cards, checks/ACH, EBT cards, and more. With one integration, grocers can accept all these leading payment methods from one terminal (or one website).
WIC EBT
Cardknox’s WIC EBT integration is a particularly cutting-edge payment processing solution. WIC EBT payments are a new technology that’s rapidly replacing the outdated WIC voucher system. To accept WIC EBT payments, many brick-and-mortar merchants have chosen to add a dedicated EBT payment terminal in-store—however, not only does this mean that there are multiple payment terminals filling up the counter, but it also makes account reconciliations more complicated. With Cardknox’s WIC EBT payment integration, grocers are able to accept WIC EBT cards along with other payments right from one terminal, rather than needing to have multiple terminals. This, in turn, simplifies account reconciliations while enabling the customer to split their transaction among multiple payment methods.
Loyalty Programs and Gift Cards
Loyalty programs and gift cards are also supported by Cardknox, both of which are increasingly valued by grocery shoppers. Progressive Grocer mentions a Nielsen study that revealed that up to 34% of buyers decided on a particular grocery because of its loyalty and rewards program. By extending the loyalty program to any payment system (including online) using Cardknox, grocers can offer even more value to their consumers.
SNAP EBT Online
When it comes to e-commerce grocery stores, Cardknox supports many of the same leading payment methods mentioned already: credit and debit cards, gift cards, Apple Pay, and more. Plus, we’re one of very few payment gateways to support SNAP EBT online payment processing. SNAP EBT online payment processing arrived on the scene in 2019 when the United States Department of Agriculture (USDA) launched its Online Ordering Pilot for SNAP. As a certified provider of SNAP EBT processing, Cardknox offers an e-commerce integration that has an online PIN entry functionality so that consumers can pay online with their EBT card. As online grocery ordering surges in popularity, and as the number of EBT cardholders reaches its highest number in years due to the pandemic, being able to accept EBT cards online will help grocers to have a competitive edge.
Omnichannel and E-Commerce Solutions
Omnichannel Integrations
Customers are embracing not only online ordering but also curbside pickup and other buy online, pick up in-store (BOPIS) options. These efficient shopping experiences enable customers to fill their order from the convenience of their home while saving on delivery fees. By merging the online and offline shopping experience, BOPIS methods employ an “omnichannel” approach to grocery ordering. Cardknox’s support for a wide range of POS systems, terminals, and e-commerce platforms makes it easy for grocers to create this omnichannel experience.
Authorize Now, Capture Later
Online grocers and their customers have unique needs. Fortunately, Cardknox’s easy integrations with leading e-commerce platforms equip online grocers with all the tools they need to bring their customers a superior experience. Aside from supporting a wide range of payment methods, Cardknox offers several other key functionalities that are ideal for online grocers. One such solution is our support for authorize now, capture later. With this feature in place, the transaction amount is authorized once the customer places their order to confirm that there are adequate funds available. Then, when the grocery order is fulfilled and rung up, the exact amount can be captured by the merchant to initiate the transfer of funds. This feature is ideal for online grocers who are unable to calculate a precise amount at the time of order—for example, because produce hasn’t been weighed yet.
Tokenization
Another important e-commerce feature that Cardknox offers is its tokenization technology. Cardknox tokenization replaces sensitive payment data with a secure token, which not only keeps online merchants and their customers safe from fraud and data breaches, but it also allows merchants to save card data on file securely.
Quick Processing Time
Cardknox’s industry expertise, relationships with multiple processing banks, and support for a wide range of terminals all help ensure that transaction processing times are fast. Customers no longer have to wait interminable hours in line to finalize their purchases. Plus, Cardknox can be integrated with multiple on-site terminals so that grocery stores can offer multiple checkout lanes or even check out customers away from the counter. This capability brings even more value at a time when customers and merchants alike aim to keep their distance from one another.
Low Processing Costs and Fast Funding
IQM Technology
To bring supermarkets the best payment processing rates, Cardknox harnesses its years of expertise and proprietary technology. Specifically, our Interchange Qualification Monitoring (IQM) technology routes each and every transaction to generate the lowest cost.
Cash Discount Programs
For merchants who are looking to unload the burden of credit card fees altogether, Cardknox supports cash discount programs. With a cash discount program in place, merchants can charge a fee to customers who pay with a card rather than with cash. Cash discount programs are subject to local and federal laws, so it’s important for merchants to do their research before implementing such a program.
Fast Funding and Late Batch-Out Times
As discussed earlier, having a fast and reliable cash flow is essential for grocery stores. Fortunately, Cardknox offers fast funding options, like next-day funding, for Amex and other credit cards. And, for stores that are open late into the night, we offer late batch-out times so that payments can hit the merchant’s account as soon as possible, without having to wait for the next payment cycle.
Cardknox – The Leading Solution for Modern Grocery Store Payments
Retail payment technology has moved leaps and bounds in the last decade. Yet this year, in particular, much of this progress seems to be coming to fruition as customers turn to new shopping channels and payment methods at increasing speed.
Payment technology will continue to evolve as long as there are innovators to push the process. The best way to deal with the rapid evolution of grocery store payment technology is to partner with a forward-thinking company that’s dedicated to meeting financial innovation head-on. Get on board with Cardknox today. Contact us to find out how we can help you design a solution that fits your business like a glove.
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