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The virtuous circle of payments innovation

09 April 2018  |  11429 views  |  4 Nick Kerrigan, Barclaycard

Nick Kerigan, managing director of future payments at Barclaycard, explores what really drives innovation in the payment industry.

In the ‘old world’, consumers had little choice and therefore minimal expectations when they came to pay for something. A shop accepted cash, therefore a customer made sure that they had cash in their wallet and used it to pay for their goods.

The need to pay for something didn’t change. But technology changed what was possible. Consumers could use cards and more recently buy online, or make a purchase with their mobile phones. This gave customers increased choice and different experiences, and it transformed their expectations.

Rather than being a passive recipient of a new technology, consumers now expect and demand improved experiences, even as the underlying need remains the same. What’s more, expectations are not bound to a certain company or industry; if they have a great customer experience that is fast, easy and convenient, they’ll increasingly expect it from all other brands.

For retailers, failing to create these experiences could frustrate customers, potentially risking revenue: Barclaycard research shows the high-street loses £11.6 billion by not addressing top in-store frustrations, including long queues to pay. 1

This has stimulated smart retailers and payment providers to create new technology to improve the customer experience. This, in turn, evolves consumer demand for further innovation. This is the virtuous circle of payments innovation.

Against this backdrop, it is interesting to reflect on the changes that have already taken place - and look to what may come in the future - as new technology enables more creative solutions to meet the original need for payment.

What’s happening already: The evolution from physical to digital to omni-channel
From cash to cheque to Chip and PIN card payments, over the past 50 years we’ve seen many changes in how consumers are able to make a purchase. As technology developed further, the way to meet this need became even quicker and more seamless. The introduction of contactless payments for example - which saves seven seconds per transaction compared to Chip and PIN - played a key role in shortening queuing times in-store. This has in part fed into an evolved consumer expectation for shorter queuing times - as we see above, what was once accepted is now a top customer frustration.

With the advent and evolution of eCommerce, the payment challenges - and indeed, the whole shopping experience - now revolve around retailers having a joined-up view of their customer. If a customer buys online, for example, why shouldn’t they be able to return the product in-store? If they have narrowed down a few product choices in-store, why couldn’t they navigate to their final selections straight away when signing into their online account?

Customers see brands, not channels, and they want a joined-up and consistent experience. New technology is helping retailers to address these expectations so they can provide a truly omni-channel experience.

Emerging trends - the ‘invisible’ payment experience
As brands grapple with creating a joined-up view of one customer, another trend has emerged: invisible payments. This is again driven by the need for increasingly time-poor consumers to pay quickly and easily, and solved for by new technology which has brought payment into the digital space.

Invisible payments, where consumers store their payment credentials once for repeat purchases, have made consumers’ lives easier for several years in specific industries - just think of how Uber has revolutionised the taxi experience, effectively removing the need for passengers to physically engage in a payment transaction. As might be expected, this has evolved expectations and challenged payment providers to come up with new technologies that can incorporate this convenience into other industries.

As a result, we now see this ‘just walk out’ model expanding into new areas such as supermarkets and restaurants, unlocking greater convenience for shoppers and diners. For example, last year, Barclaycard tapped into the potential of invisible payments with the successful trial of Grab+Go. Grab+Go technology transforms a smartphone into a ‘pocket checkout’, allowing users to simply scan the items they want to buy as they pick them, complete their purchase with a single click, and walk out of a store.

Last month, we trialled another invisible payments innovation, Dine & Dash, with the high street restaurant chain Prezzo. The Dine & Dash technology uses a mobile app to automatically take payment from customers for their meal, enabling diners to simply walk out after eating and bypass the traditional bill-paying process. In both cases, consumers receive a digital receipt upon walking out so they can track their spending immediately.

Such developments mean the payment process doesn’t intrude on the customer experience at all. Instead, restaurants and shops can focus on customer service and delivery of an exceptional product, while consumers can focus on their meal or their shopping list - safe in the knowledge that payment has been taken behind the scenes, and recorded with a real-time receipt.

The future - a truly seamless experience
Recent improvements in technology have challenged assumptions about what is required in each customer journey. Contactless travel payments, for example, challenged the assumption that a physical ticket was necessary to use public transit systems. The ongoing interrogation of everyday assumptions will drive shape how new technologies such as the Internet of Things (IoT) are deployed to improve the customer experience.

Beyond requiring consumers to set preferences at the outset, connected devices - the linchpin of the IoT - can do many things for them automatically. For example, a connected meter can sense when its owner is a certain distance from home and adjust the heat accordingly, providing the optimum temperature when he or she walks through the door. This framework has already seeped into the payments landscape, for instance, with a smart fridge paired with payment credentials that can automatically purchase items on the grocery list.

The virtuous circle lives on
Potential customers still have questions about emerging technologies like the IoT. How much control or autonomy should a technology have? Who is responsible if a mistake is made?

While many of these are yet to be answered, there is little doubt that this is the direction of travel. And, as with all innovations, this will in turn transform expectation and fuel new and different demands.

So long as brands, payment providers and other innovators keep the original customer need in mind, we will continue to see creative ways to harness emerging technology to create better, faster and improved solutions. The virtuous circle will continue.

Comments: (4)

Scott Florio
Scott Florio - SWIFT - Rye, New York 09 April, 2018, 18:47

Interesting article with insightful thoughts.

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Michael Kyritsis
Michael Kyritsis - ACI - London 10 April, 2018, 07:27

Hi Nick, "Barclaycard research shows the high-street loses £11.6 billion by not addressing top in-store frustrations, including long queues to pay.".   Can you share some more details about this research? I think it's credible that £11.6 bn has moved from bricks-and-mortar to online shopping, but where would you rank "long queues to pay" compared to other factors such as -difficulty to find parking, -items out of stock in the shop, -sales clerks who aren't knowlegeable about the products... ? 

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Craig Lawrance
Craig Lawrance - Starkspur Ltd - Chalfonts 10 April, 2018, 10:13

Invisible payments, an interesting term to encapsulate a frictionless experience of payment, relies on the consumer's trust of the organisation with which they are sharing their card details.  The experience at restaurant Babusa is similar to the one you describe at Prezzo, while allowing the bill/receipt/payments all through their own App.  All very seamless while the customer maintains control.

How comfortable are customers with merchants "remembering" their card details? I do that if I have no choice, but I'm fairly choosy how far and wide that card number goes. Given the rising number of data breaches taking place across the world, there may well be a greater role for Virtual card numbers (or tokens) to help improve the level of the bank experience.  Challenging fraudulent transactions on a bank-issued static card account remains a painful and time-consuming experience.

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Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 10 April, 2018, 16:10

@Craig Lawrance:

"Challenging fraudulent transactions on a bank-issued static card account remains a painful and time-consuming experience."

Uh oh, I thought not only challenging a fraudulent credit card charge but even getting it reversed was a matter of a simple phone call anywhere outside India.

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