The Future of Payments is Red Hot
Omni-channel retailing and customer centricity have been sweeping their way through the customer-facing side of the retail industry for at least the last five years. But one area that has languished in the portfolio of customer-facing interactions impacted by this wave of transformation is payments. However, I think we can safely say, no longer. The future of payments has arrived. We just don't know what it will look like yet. The reason why I'm so currently astounded by this idea is because Brian and I have been contemplating payments as a retail capability ripe for change since at least 2008. In 2009, we attempted a survey, but no retailers would take it. In fact, we ended up turning the research into an interview-style prospective view instead of a benchmark because while we could get technology providers galore to speak to us about everything that's wrong in the payments space, we could only get about a handful of retailers to talk to us at all, and most of what they said consisted of things like, "If it ain't broke, don't fix it." Or, "I just spent $XX (pick your number) on PCI compliance. The last thing I'm going to do is open up Pandora's box by trying to change something." Fast forward three years, and on the opening day of our inaugural payments survey (since the one from 2009 never came to fruition) we are already halfway to a quorum. How things have changed! And how perspectives have changed. Keep in mind these are early numbers and likely to evolve, but I'm thrilled to see that the number one priority for retailers when it comes to payments is creating a high-quality customer experience. And survey respondents strongly believe that the payments process is a critical piece of the overall customer experience - it's not just about speed. It's about taking payments the way that customers want to make them, it's about recognizing payments as another "moment of truth" in the retail relationship. It's about making it easier for customers to do business with them. The irony is that most retailers appear to have arrived at this conclusion after being dragged there kicking and screaming by their customers. It's a really interesting perspective, when you think about it, because how many of your friends and relatives do you know of who have said, "That retailer doesn't take PayPal. I'm not doing business with them"? It's not like customers are banging down retailers' doors demanding new forms of payment. But there are examples out there that demonstrate there might be an enormous amount of latent demand for something more convenient when it comes to payments. The Starbucks card is a great example - particularly its migration to mobile. I confess, whenever I'm paying for something at Starbucks, half my pleasure in the experience is using my phone to pay. It's so easy! It's so simple! It's so easy to keep track of! And the number of small retailers that have adopted Square is equally as impressive. It seems bizarre and yet so right when the garland lady at the renaissance faire whips out her iPad to take my credit card. It certainly helps along my bad habit of never carrying cash. However, don't get too excited. There are still a lot of barriers in the way - the kind that no amount of customer demand can easily solve. One of the biggest ones is existing retailer infrastructure around payments - especially when it comes to marrying the digital world to the store world. The retailers who have so far taken our survey have said that combining and managing both the high-risk world of card-not-present transactions alongside a payment infrastructure that perhaps knew Reagan as president is starting to get in the way, especially as payment provides - both traditional and upstarts - take aim at the store, where the majority of transactions still happen (yes, even today). So don't mind me over here, excited that the iron is finally hot enough to strike - retailers are at a point where PCI costs (not to be confused with compliance) are not a barrier, where interest in providing a high quality customer experience extends to payments, and where innovation is finally starting to show up around the edges of a long-time staid and centralized payments industry - showing up, and putting down real roots. And stay tuned for our final report on the topic, due out in March.
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