Payment options expand: What solutions are right for your customers?
Consumers are getting used to making cashless payments as a result of the pandemic. It's a change that bodes well for unattended retail — a sector that has invested heavily in cashless technology in recent years.
But because consumers and the locations they patronize have varying needs, retailers need to tailor payment solutions based on specific needs. Today's consumers can use debit cards, credit cards, contactless tap-and-pay, stored value accounts, mobile wallets or cryptocurrency, but the option(s) they choose will vary based on their individual characteristics and the venue they are patronizing.
A panel at the National Automatic Merchandising Association show at the Ernest N. Morial Convention Center in New Orleans last week explored the opportunities and complexities of the current payment landscape in a session titled, "The New Landscape of Payment Acceptance."
Ravi Venkatesan, CTO, Cantaloupe Systems Inc., moderator, introduced the session asking what shifts have occurred in payments and how the industry can respond to them.
Payment infrastructure expands
Panelist Jeff Beach, vice president, merchant sales solutions at Visa, offered a positive assessment, noting that the payment infrastructure has expanded despite the pandemic, driven by rising consumer response pre-pandemic. Shortly before the pandemic, cashless payments were increasing fast in the unattended market as well as all markets.
The pandemic brought a bit hit to transactions, he said, but "the industry continued to roll out new terminals… as soon as the corporations call (workers) back, as soon as traffic returns to normal, everything is set up to take us back to where we were at the end of 2019."
"From Visa's perspective, debit is the engine that is going to continue to drive to displace cash," Beach said. He cited the following:
What drives contactless?
The recent growth in contactless marks a significant gain over 10 years ago when the payments industry first promoted it, he said. Customers did not adopt it since mobile phones were not equipped for it.
That has since changed with Apple Pay and Google Pay and major retailers have promoted it.
"People don't want to touch the surfaces as much as they did before," Beach said.
The transportation industry is in a position to augment contactless usage, he said, as consumers who become used to using it at transit stations will be more likely to use it at retail.
The New York MTA deployed tap-and-pay for all subways and buses, he said, giving riders a faster and easier way to pay for fares.
"It keeps track of how many times you ride no mater how many times you ride in a day," he said.
Communications technology associated with cashless is also helping augment its use, he said, since real-time information allows Visa to react to changes faster than would have previously been possible.
What solution is best?
With all of these options, how does an operator decide which one to offer?
Panelist Mike Coffey, chief strategy and innovation officer at Canteen Vending Services Inc., pointed out that a convenience services provider must tailor the payment solution to the customer, meaning there is no single solution the company can offer.
Clients that offer stored value payment accounts to their employees, for example, are likely to find offering a "payroll deduct" payment option for on-site foodservice as the most cost effective option, Coffey said.
"They have systems in place already and a lot of thoughts around how they want their business," he said.
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"The biggest change for us from a pandemic perspective is enabled 'scan-and-go'… you're ordering ahead for you meal, you're picking up from your drop spot, you're going to a locker system, (and) it's all done through mobile to enable you to pay (for) a process without interacting with staff," Coffey said. "Part of that is contactless, part of that is getting closer to the workforce."
In addition, scan-and-go is frictionless and not expensive to offer compared to some of the other automated retail technologies being introduced, he said.
"Scan-and-go to me is a very cost effective way to give a consumer a great experience with really low friction," he said. And it also gives the consumer the option to pay using different options.
"You give them the option to choose how they want to pay," he said.
While much attention has been given to Amazon Go, Coffey said the experience is not frictionless and the investment isn't cheap.
"You start putting cameras in the ceiling and using advanced analytics and AI to track that… it's really expensive," he said.
Digital wallets, crypto bring more choices
Digital wallets are also giving locations more opportunities to not only process transactions faster, but to engage more with customers and employees, said panelist Nicolas Cabrera, chief product officer, Bakkt LLC, a digital wallet for managing digital assets, including cryptocurrency.
"Merchants can really use that moment of payment more than taking transactions," Cabrera said.
Starbucks has recognized the benefits of offering digital payments, Cabrera said, including the option of paying with cryptocurrency, which has become popular with many younger consumers.
While not everyone is going to pay with bitcoin or another cryptocurrency, the crypto market continues to grow rapidly, he said.
One goal for Cabrera's company is to unlock digital assets for use at the point of purchase. He said Bakkt has enabled cryptocurrency payments in vending machines, managing all of the currency conversion and settlement.
To this point, Beach pointed out that Visa has supported crypto payments through some of its card programs. In the last six months Visa has seen over $1 billion in crypto payments.
"It's there…it's already happening," Beach said. "Crypto is becoming much more common, becoming much more usable."
Don't forget loyalty rewards
Loyalty rewards are another digital asset that can be harnessed.
"If you want to pay with your points because you are sitting on millions of points…that maybe doesn't give you a lot of returns or value…now you can use your points as a way to pay," Cabrera said. "That's the concept of points targeted to different customer segments."
As for paying with cash, while its use has declined, it is not dead, the panelists agreed.
"I don't think cash is going away," said Coffey, noting that some customer segments are still 60%-70% cash users.
In addition, from a regulatory standpoint, some states are requiring cash acceptance for the unbanked, Coffey said. "The unbanked is a big issue for our clients," he said.
As unattended point-of-sale adds more payment capabilities, Coffey said it is important that the operators message these capabilities more clearly, since customers generally are not aware that these newer options exist.