Frictionless Payments Evolve Post-Pandemic

From tethered to cordless, handheld to hands-free. As payment processing hardware continues to evolve, retailers are beginning to experiment with allowing customers to actually become their own point-of-sale systems.

Merchants and POS technology providers adapted quickly during the Covid-19 pandemic, implementing new touchless payment options for consumers who became nervous about touching contaminated cash or digital screens at the cash wrap. As vaccines ramp up and the United States enters what will hopefully become the final stage of the Covid-19 pandemic, retailers are looking at where they will go next. 

Will cash make a comeback? Will retailers return to their hardwired POS systems? Will demand continue for contactless payments, curbside pickup, and local delivery?

Industry experts like NMI Chief Strategy Officer Nick Starai believe the changes in digital payments and mobile transactions that took place over the past 12 months are just the beginning. Starai says there are a handful of innovations in payment technology that are in an experimentation phase and have the potential to revolutionize the way shoppers transact in-store. 

One of the most exciting of these advancements is the ability for consumers to become the POS system themselves. Starai cites Amazon One as an example of this. The biometric technology lets shoppers pay for items with a scan of their palm. Amazon has already announced plans to launch the payment system at Whole Foods stores around Seattle. Similarly, Amazon’s Just Walk Out technology allows shoppers to select products at a physical store and then leave the store without having to scan products at a cashier.

“The best type of payment for consumers is the one that you don’t even realize is taking place, and as merchants strive for frictionless payment experiences, these innovations are empowering them to reach the next level of contactless transitions,” Starai says.

Standard Cognition recently raised $150 million for its automated checkout technology, another clear indication of growth within the sector.

With recent data showing that 43% of consumers actively avoid shopping where contactless payments aren’t available, and nearly one-third of shoppers are uncomfortable using cash to complete a transaction, it makes sense that more retailers would be investing in contactless payment technology in 2021. Not only can contactless payment offerings be seen as a marketing tool, encouraging nervous shoppers to come back in-store, but they can also lead to increased operational efficiencies. Retailers don’t need to hire as many cashiers when more than half of their customers are completing transactions using their own mobile devices. That can free up workers to do tasks too complex for machines, such as customer service.

Starai believes consumer sentiment has shifted for good when it comes to touchless transactions, and that customers won’t be queueing up in line to interact with human cashiers or paying with cash even after the pandemic is through.

“Contactless payment options, like paying by contactless credit card, QR code, or mobile app, will continue to innovate and enhance customer experience moving forward,” he says.

Criteo’s Rory Mitchell cites contactless payments as one of a number of consumer habits that were introduced during the pandemic that will stick around and become expectations going forward. 

“Virtual showrooms, contactless payments, and buy online pick-up in-store are all options that consumers turned to throughout the pandemic,” Mitchell says. “Retailers and brands that were able to provide these options and bypass supply chain issues rose to the top, becoming the preferred choice for consumers and creating a whole new set of competitors for those who couldn’t keep up.”

Continued Acceleration 

“One area that has huge potential is tap on mobile payments,” Starai says. “In place of hardware, like dongles for swiping cards or card readers, tap on mobile turns any smartphone or mobile device into an NFC card-acceptance device.” 

Starai says tap-on mobile payments could be especially beneficial for small and mid-size businesses that can’t necessarily afford to buy new terminals or hardware. Merchants can accept these kinds of contactless payments almost immediately with any mobile device after they sign up for a merchant account and download an app.

In addition to allowing customers to become the POS system themselves, retailers are exploring ways to use QR codes for payments. Even the smallest merchants are investing more heavily in touchless payment apps.

Continued growth in the contactless payment space will depend on merchant adoption. Merchants who can anticipate how and when their customers will want to pay can expect to come out on top, but investing the resources necessary to navigate the world of mobile payments and transactions, with so many solutions currently available, is tough for merchants that are also dealing with concerns like inventory management, customer loyalty, and marketing personalization. Merchants that already have payment partners are increasingly asking those partners for guidance as they look at which processor connections, devices, third-party EMV, and contactless integrations will open up new revenue streams.

With payment solutions turning into a selling point, advertising companies are developing products that allow retailers to promote their latest payment capabilities. StitcherAds, for example, is launching a flexible payment promotions tool, so retailers can promote their own payment options across ad units on Facebook, Instagram, Pinterest, and Snapchat.

“In this challenging economic climate, shoppers are tightening their purse strings, and brands need to consider ways they can lower the barrier to purchase,” explains StitcherAds CEO Declan Kennedy.

Consumers Weigh In

The biggest barrier to merchant adoption of the latest frictionless payment technology might be consumers themselves. Despite their reluctance to handle cash, and the outsized demand for curbside pickup during the pandemic, not all consumers are ready to see the cash wrap change. 

Consumers tend to view mobile payments as more poorly protected compared to debit or credit cards, even though this isn’t necessarily the case. Pew Research found that avoidance of mobile payments correlates with people’s views of security, and consumers that rate mobile payments as “poorly protected” tend to avoid them more often than not. Regardless, more than half of U.S. adults still say they have conducted a transaction on a smartphone in the past year, and more than 80% of mobile payment users said they connected a bank account, credit card, or debit card to the mobile app they use most often.

“The biggest challenge merchants face is determining where customers’ expectations will be moving forward as they look at the investments they are making today in their payment stack,” Starai says.

Another major hurdle to widespread adoption is that contactless credit cards aren’t as common in the United States as they are abroad. More than half (51%) of consumers in the U.S. are using some form of contactless payment, but Starai says the industry still has a ways to go in encouraging hesitant consumers to jump onboard. 

“As contactless payment methods become more prevalent and adoption accelerates, merchants must ensure they can accept all forms of contactless payments,” he says, “whether that’s a card, smartphone, or even wearable device.”

Stephanie Miles is a senior editor at Street Fight.

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