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In this blog, we look at how retailers can build strategies to drive value from contactless payments and why it’s not just another way to pay.
Retailers have been asked to invest money and countertop space in new technologies on an increasingly regular basis in recent years. Integration between cash registers, credit card acceptance devices, PIN pads, and loyalty systems has been a headache but most of us can agree that it’s been a worthwhile one. Payment fraud is lower, transactions are faster and more convenient, and the cost and risk of cash handling has been reduced. But real estate on the retail counter is valuable and limited. It’s no longer a tabula rasa for electronic devices; it is already indelibly cluttered with payment terminals, mobile top up devices, lottery machines and cash registers. And now, the spectre of more work and more cost in the shape of contactless payments is darkening the retailer’s doorway. The questions many are asking are who does it help? What is it for? How do I integrate it into my existing systems? How do I generate income from it?
There’s no doubt that upgrading your payments acceptance infrastructure can be expensive in terms of capital cost, business disruption, resource allocation and staff training. This partly explains why many first-generation contactless card and NFC payment initiatives struggled to get out of the pilot phase. Despite these questions, contactless is making steady progress spurred on by the might of the payments industry.
According to Berg Insight 2.5 million NFC enabled PoS devices were shipped in 2011 and they forecast that 43.4 million PoS devices worldwide will be NFC-enabled by 2017. In the face of seemingly inevitable change, retailers now need to work out the best strategy for the integration of contactless technology into their businesses.
There are at least three important commercial incentives for retailers to upgrade their infrastructure to support acceptance of contactless payments at the checkout. Firstly, by responding to changing consumer habits and expectations through the adoption of contactless, retailers can retain a competitive edge. The acceptance of payments from contactless cards and NFC-enabled devices can improve your consumer experience and potentially reduce your costs by increasing the efficiency of your total checkout process. In retail, seconds count towards revenue throughput and customer satisfaction.
Secondly, contactless payments can drive sales uplift. Consumers with contactless cards spent 30% more than those without according to a recent MasterCard study. This can be from factors such as increased convenience and even novelty value which can increase the frequency of purchase and pave the way for increased loyalty.
Thirdly, and perhaps most importantly, contactless cards and NFC-enabled devices establish a new connection between retailers and their customers, one that can be exploited as an invaluable channel for loyalty and promotions as well as for new service offerings. We explore this in more detail later in this post.
As an added incentive, the implementation of contactless is becoming a more pressing issue for retailers now that the Card Schemes are bundling contactless payments with the deployment of EMV Chip (using a dual interface specification), and offering additional incentives to eliminate expensive PCI audit and compliance.
The rollout of contactless payment services like Paytag from Barclaycard (or the Zapa Tag we profiled last year) mean retailers can now provide alternative queue-busting contactless payment methods for any phone to enhance the consumer experience and improve transaction throughput.
The adoption of Contactless and NFC payments, in particular via EMV Chip and Contactless, now presents a very different commercial proposition compared to when it first hit the market. If planned for correctly there are many benefits that can be realised for all parties in the payments value chain.
Contactless cards and terminals offer much more than just a new payment method. These technologies allow consumers and merchants to interact in valuable new ways. Retailers can provide a more personalised shopping experience for customers. Alongside tailored mobile apps, contactless can be combined with complementary technologies to offer a path directly into the consumer’s pocket to influence purchasing decisions. Drawing on data gathered from spending habits, targeted offers can be pushed to the consumer’s mobile phone. The consumer can be directed to your nearest outlet to avail of the offer and, with the convenience of NFC, they can use the same phone to purchase your product at the self-service checkout or point of sale. This drives “smart” revenue opportunities to your outlet reducing the cost of customer engagement and providing a more convenient experience for your consumer.
Consider the growth in our couponing culture spearheaded by Groupon and Living Social. Consumers have demonstrated an appetite for receiving focused “deal promotions”. NFC technology allows consumers to redeem loyalty offers they scan at QR codes or NFC tag enabled posters or magazines, and to receive loyalty points or virtual currency at the point of sale. Contactless payments can give the consumer the choice of participating in lifestyle offers at a time and place most suitable and relevant to them, in a more convenient way. In the future, for instance, if you combine Geo-fencing technology, where services are triggered using the location of your mobile, with NFC payment technology, there are a multitude of further possibilities for the retailer. These include pre-loading of customer data, automatic start up of the retailer’s mobile app or auto-filling of favourites in your basket as you enter the retailer’s premises.
So, while contactless is valuable in its own right as a payment method, it is the added value as an enabling component that makes its adoption really compelling in a retail strategy. If adopting contactless payments, retailers need a strategy that utilizes it to generate an uplift in purchases, increased consumer loyalty, more targeted mobile marketing, and cost savings from queue-busting. With the right strategy in place, you can drive real value from contactless payments. In fact, the potential reward is far greater than just providing a more convenient way to pay.
The DSP is the largest issuer of payments in Ireland. A key business objective is the reconciliation of some 80+ million transactions each year through 29 banks accounts and 4 cash accounts with An Post