What The Rise Of Frictionless Payments Means For RetailersScott Pipia
Retail businesses were already seeing a shift in consumer preference for shopping online and on mobile devices. Now, with the COVID-19 outbreak, consumers are opting to shop and pay online for their everyday products – everything from groceries to fitness equipment to furniture – to minimize time exposed to people outside their household. This preference for online and mobile shopping is only going to increase. As a survey conducted by Mastercard in 2020 shows, contactless, friction-free methods of payment are here to stay, with 74% of contactless payment users stating that they would continue to use contactless payment methods after the pandemic ends.
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As customers look to their favorite brands to provide easy shopping experiences, retailers need to work with payment processing providers to find the solution that enables them to perform above the competition. In this paper, we’ll explore the in-store and e-commerce payment challenges retailers face and how frictionless payment solutions can help them evolve alongside changing consumer behaviors.
What Are Frictionless Payments?
As technology develops and becomes more widespread and accessible, consumers are demanding more from their favorite retailers, including easier payment options. Frictionless payments remove barriers to buying in offline and online applications. They improve buyer experience, saving them time from waiting and from having to complete dozens of steps during the checkout process. Merchants are also drawn to the benefits of frictionless payments, including the increased revenue from fewer abandoned shopping carts and more positive customer experiences. The methods of frictionless payments include mobile wallets, contactless cards, in-app payments, one-click payments, and auto-renewal subscriptions.
The Beginning Of Frictionless Payments
Where did the demand for frictionless payments come from? As payment methods evolved from cash to checks and credit and debit cards, consumers reaped the benefits of not having to carry around or count out large amounts of money. From the merchant’s perspective, there were still some complications, including adapting to credit card authentications, POS terminals, and security solutions against fraud. Consumers and merchants alike began to demand easier digital payment methods.
The idea of frictionless payments developed as tech companies started inventing solutions for easier payments in online and offline applications. RFID-powered contactless credit cards and mobile wallets with biometric authentication were eventually developed in order to address the demand for secure but fast payments. Some businesses are already testing invisible payments, which takes checkout processes out of the equation altogether. For companies looking to be competitive, they should implement strategies that reduce payment friction and increase convenience.
Payment Challenges The Retail Industry Faces
Retailers are facing a number of payment challenges, even with all of today’s advancements in technology. We’ve briefly highlighted some of the most important of these challenges.
Changing In-Store Shopping Experiences
With the outbreak of COVID-19, consumers have consciously been trying to follow health guidelines, including maintaining social distancing practices, avoiding touching surfaces, refusing to handle physical payments from others, and sanitizing their hands. Now, in order for retail businesses to stay relevant, they need to come to the customer – whether that’s with contactless payments, curbside pickups, or delivery services. Once we can all return to a “normal” way of life and the pandemic is no longer at the forefront of everyone’s minds, consumers will still demand these friction-reducing options for the simple fact that they’re more convenient. Merchants will need to consider investing in wireless payment terminals, self-service kiosks, and appointment-only scheduling software to meet consumers’ desires for safe, fast in-store shopping experiences.
With increased implementations of technology payment methods comes more security challenges. Retailers are facing network security risks and regulatory compliance issues when upgrading their technology. Many small businesses, chain retailers, and restaurants are utilizing scalable, easy-to-deploy network solutions that do not provide the necessary security measures. As soon as a system is deployed, retailers are vulnerable to attacks. In order to protect consumers’ information and prevent fraud issues, retailers need to partner with third-party security service providers who can actively monitor threats. Retailers also need to take regulatory compliance into account when they adopt new tech solutions to ensure they align with any standards.
Demands For Omnichannel Payments
For several years now, consumers have gradually been transitioning to shopping for everything from clothes to groceries online. The spread of the COVID-19 virus accelerated this change in behavior, and the merchants that were able to thrive during the pandemic were those that had omnichannel payment solutions. They offered contactless payments, such as mobile ordering, mobile wallets, click-to-pay, and Buy Online, Pick Up in Store.
This demand for omnichannel payment methods is not about to come to an end. Already, retail businesses are needing to consider how they can accept any type of payment, including cryptocurrencies and other digital currencies. They need processing systems that future-proof their businesses. Providing omnichannel payment solutions can help consumers engage with their favorite businesses in more convenient ways.
Benefits Of Frictionless Payments For The Consumer
With so much demanding their attention, consumers want their shopping, especially their checkouts, to be seamless and quick. A hassle-free payment method is appealing for several reasons, including the following:
It Creates More Time
Between work, their kids’ schooling and activities, housework, socializing with friends, hobbies, and self-care practices, the average consumer has a lot to juggle in just the few short hours of daylight. Simply by providing frictionless payment solutions, retailers can save their customers time. Instead of having to wait in long lines or fill out payment forms every time they purchase something, customers can order ahead of time, use self-service kiosks, and save credit card payment details for future purchases. However, they can create a little extra free time, consumers will happily choose that option.
It Lowers Stress
It’s no surprise that consumers aren’t always happy to pay for something, even when it’s a product they really want. They worked hard for their money, and they’re conscientious of how they spend it. Frictionless payment methods can make the purchasing stage of the shopping experience less stressful and painful for the consumer. Since the payments are less visible (as opposed to cash or checks), the consumer will feel less like they’re giving up their money. And, it will not feel as much like a hassle to do so since all they need to do is click a button (in the case of e-commerce platforms) or hold their phone over a sensor (in the case of mobile wallet payments).
It Offers More Flexibility
With several different options for making payments, customers have the freedom to pay how they wish. When retailers offer a variety of frictionless payment options, customers have more flexibility. If they forget their credit card at home, they can use their mobile wallet to pay for their groceries. If they prefer to shop online then pick up their items at the curbside, they can do so with Buy Online, Pick Up in Store solutions. Contactless cards and subscription billing provide even more flexibility. By offering these payment solutions that are free of friction, retailers cater to customers’ individual preferences.
Benefits Of Frictionless Payments For The Retailer
Consumers are demanding frictionless shopping experiences, and retail businesses are open to choosing solutions that aid in these positive experiences. A frictionless payment solution for retailers offers several benefits, including:
More Efficient Checkouts
It takes time for employees to accept payment from the customers and wait for the customer to enter their PIN or the employee to count out the cash. Payment methods such as Apple Pay can speed up the process, creating less waiting time and reducing costs. Additionally, self-checkout lanes provide even more opportunities for frictionless payments. And, any time efficiency is increased, productivity goes up, and costs go down.
Increased Customer Satisfaction
Providing positive experiences for customers is always the goal for retailers. By offering frictionless checkouts in offline and online applications, retailers have the opportunity to perform better than their competitors. When customers can seamlessly pay how they want after having a good shopping experience, they’re much more likely to stay loyal to that business that provided an efficient and fast solution to their needs.
More Consumers Back in Stores
With the outbreak of the coronavirus, people became more cautious about how they did their shopping. With more consumers shopping online, retailers need to consider how they can encourage their customers back in their stores. Touchless payment options could be the solution they need to make in-store shopping safe. A study showed that 65 million customers would prefer to switch to a grocery store that offered touch-free payment methods. Contactless credit cards, digital wallets, and Buy Online, Pickup in Store (BOPIS) options are just a few payment solutions retailers could adopt to show their commitment to customer safety.
Fewer Abandoned Carts
Nothing is more frustrating for a customer shopping online than a clunky website or having to fill out form after form when they’re trying to checkout. A friction-free online shopping experience encourages customers to complete the checkout process and not to abandon their shopping carts without purchasing anything.
Increased Customer Loyalty
Establishing customer loyalty can increase the bottom line for retail businesses. Offering subscription services eliminates much of the friction involved in online checkout processes and improves customer loyalty. Retailers now have a steady stream of income while their customers enjoy a seamless checkout.
7 Ways To Remove Friction From Retail Stores
As technology continues to advance, consumers all have their ideal way of paying for products and services. And, unfortunately, for retailers, these payment methods could vary from one customer to the next. On the positive side, this means merchants have the opportunity to integrate new technology into their processes that removes friction, making customers – and the staff – happier. Here are seven frictionless payment solutions for retailers:
This solution provides frictionless experiences for customers online and in-store. When making an online purchase, they can order and pay through the app. At the store, they can open the app then hold their phones over the scanner during checkout. If they enroll in a subscription plan or auto-renewal program, they can have their cards automatically reloaded for an even more frictionless experience.
Smartphone providers are developing mobile wallets that use near-field communication (NFC) to make payments. Apple Pay, Google Pay, and Samsung Pay enable consumers to quickly pay in-store without having to hassle with a wallet, credit card, or cash. Mobile wallets store credit and debit card information and coupons and track loyalty programs. For retailers, these digital wallets are an advantage because they can reduce fraud, they decrease payment time, and they lower processing fees.
Click To Pay
Created by American Express, Visa, Mastercard, and Discover, Click to Pay simplifies the online checkout process. Consumers simply have to fill out a form with their credit card information one time, then they can use the “Click to Pay” option during checkout. This payment solution saves the customer time and protects their credit card information from fraud since the information isn’t stored in the merchant’s computer system. Retailers also benefit from offering Click to Pay options because they have less responsibility for fraud issues, and it encourages customer loyalty from a speedier checkout.
Contactless Payment Cards
Similar to mobile wallets, contactless payment cards utilize near-field communication (NFC) technology to make payments simply by waving or tapping a card over a payment terminal. These cards reduce the need for passing cards, cash, and checks between people and offer advanced security and more convenience.
Buy Online, Pick Up In Store
This payment solution enabled retail stores and small businesses to remain open during the height of the global pandemic. Merchants used their e-commerce sites to allow customers to order online and pick up their items in-store. BOPIS allows customers to get their items quickly without having to pay for high shipping costs. It also limits their time in-store, which is a great concern for consumers while they’re trying to limit their exposure to people outside of their households.
Buy Now, Pay Later
Buy now, pay later (BNPL) apps allow consumers to pay for purchases over a set number of weekly, bi-weekly, or monthly installments. Oftentimes these apps offer a period of interest-free installments. Many online retailers accept BNPL payments from apps such as PayPal Credit, Klarna, Affirm, and Afterpay.
Just as consumers can receive answers from their smart devices after asking them questions, they can also use voice-activated technology to shop online. Amazon’s Alexa enables customers to place orders using voice ordering. This technology could see more usage in applications, such as restaurant ordering, for even more contactless shopping.
The Future Of Frictionless Payment Options
Frictionless payment methods are the future of pain-free checkout processes. They will continue to offer benefits to retailers and customers alike. With continual improvements, they could provide a world with no checkout lines, but this also means an increased demand for more security.
No Checkout Lines
The future holds the possibility of shopping without standing in checkout lines. Customers can simply select items from a shelf then walk out the door. Sensors and cameras will pick up on which items were taken and will charge the customer’s account. Amazon is already testing out this form of shopping with their Amazon Go stores. No checkout lines could allow customers to shop with minimal contact with others. It will also offer increased efficiency for the consumer, improved productivity for the staff, and increased sales for the retailer.
Increased Demand For Security
As frictionless payments advance, consumers will demand more security. According to a PwC 2017 survey, 87% of consumers stated that they would not do business with a company that they felt wasn’t handling their data well. As retail businesses implement friction-free payment technology into their processes, they’ll need to consider the security measures that should accompany this technology. They need to go beyond offering the bare minimum set by regulatory compliance. Instead, they should establish internal security standards, develop secure code, and partner with payment providers.
How To Adapt To Changing Times With Payment Technology
In order to stay top of mind with consumers and increase their bottom line, retailers need to integrate updated technology into their payment processes. Merchants can work with reliable software developers or ISV and an easy-to-use API. Cardknox has a fast API that can be used in a number of applications, and our digital payment solutions can help retail businesses adapt to increased demands for fast, safe, and reliable checkout processes – both online and offline.
Establishing EMV payment processing in-store can be a complicated, expensive ordeal. Cardknox supports omnichannel payments with an EMV-ready payment gateway that can easily integrate into a wide range of POS systems and payment terminals. These solutions include:
- Traditional: This POS gateway enables retailers to quickly implement EMV payment solutions using Cardknox’s SDK.
- Browser-Based POS (BBPOS): This gateway allows merchants to seamlessly upgrade their browser-based solutions to accept EMV payments.
- Plug-and-Play EMV Integration: This gateway has been designed to enable legacy POS systems to accept EMV cards without much hassle. This solution mimics a magnetic stripe flow for easy purchases.
With just a few lines of code, developers can integrate Cardknox’s API payment, unlocking flexibility and convenience for retailers. Developers can help retailers integrate Cardknox solutions, including in-store API payment integration, mobile integration, and e-commerce integration. The in-store API integration from Cardknox supports EMV chip cards, ACH, gift cards, EBT food stamps, EBT cash benefits, and EBT eWIC. The mobile integration uses SDK on iOS and Android to support card-not-present and card-present mobile transactions. With the e-commerce integration solution, retailers can enjoy an API that allows them to choose support for recurring payments, card updater, fraud decisions, tokenization, shopping cart plugins, gateway emulators, and hosted payment forms.
Setting up an automated payment system has several benefits for the retailer. It can ensure on-time payments in the correct amount, and it lowers invoicing costs, reduces the number of late or missed payments, and reduces customer error. Cardknox offers recurring billing modules that are simple to set up and that support various payment methods. Automating the payment processing is especially important for retailers that offer subscription services, such as gyms.
Support For Payment Methods
In addition to POS, API, and recurring billing integrations, Cardknox also offers solutions for SNAP EBT Online, mobile wallets, and other e-commerce payments for friction-free shopping.
- Snap EBT Online: Our payment gateway enables consumers to securely pay online using a PIN connected to their EBT card. With the number of consumers choosing to shop online increasing, retailers will find that SNAP EBT could future-proof their businesses while being more accommodating to their customers.
- Mobile Wallets: According to Statista, by 2023, there will be 1.31 billion consumers worldwide who use proximity mobile payments. The coronavirus outbreak proliferated the popularity of mobile payments, making the implementation of contactless payment technology a must. Cardknox offers merchants support for mobile wallets to ensure security and ease-of-use.
- E-Commerce Payments: Retail businesses with an online presence need flexible solutions that offer fraud protection, support for subscription payments, capabilities for accepting multiple types of payment, plugins for shopping carts, and support for secure payment forms. Cardknox has a robust e-commerce payment gateway that can create a custom payment flow. If a retail e-commerce business already has an existing payment gateway, Cardknox offers a gateway emulation. All that is required is a simple change of the gateway URL to the Cardknox endpoint. With a variety of e-commerce solutions, Cardknox can offer retailers payment flexibility.
Frictionless Payment Solutions For Retailers From Cardknox
The way consumers prefer to shop is evolving, and retail businesses must adapt to keep up. By choosing from Cardknox’s solutions, merchants can ensure a frictionless payment process for their consumers and their staff. Retailers will reap these benefits when they integrate Cardknox technology into their processes:
- Quicker processing times
- Lower processing costs
- Faster funding
Just as the world advanced from using cash exclusively to using debit and credit cards, we see a shift to mobile payments and digital currencies. Visa alone reported that 31 million Americans used Visa contactless cards or digital wallets in March of 2020, a 150% increase from March 2019. To future-proof their businesses, retailers should make it a priority to implement frictionless payment solutions. Customers will be happier and more loyal to the stores that offer flexibility, convenience, and security. Partner with Cardknox today. We’ll help you find the payment solution that will break down barriers in the checkout process.
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