Taking a look at merchants today
Omnichannel shopping, expanding payment options, and increased security concerns are creating a significant amount of operational complexity for merchants. The Strategy& Consumer Payments Survey, conducted with the Electronic Transactions Association, results indicate that merchants are well aware of this issue. When asked to identify the most critical industry trends, they focused on shifts in the digital technology space. The shift to mobile technology was significant (cited among the top three trends by 50 per cent of respondents), but the merchants also identified a more notable change that comes with digital: a shift to a consumer shopping experience with embedded payment, cited in the top three by 67 per cent. Another significant trend was the security of payment and personal data in transit across wireless technology, in point-of-sale devices, and in back-end databases.
Retailers are also split when it comes to identifying the best strategy for digital payments and mobile wallets. Their mobile wallet strategies vary widely. Some 38 per cent of merchants responding to the survey either have joined or plan to join an open-branded wallet program, such as those offered by Apple, Google, and Samsung. Another 19 per cent have joined or plan to join an industry mobile wallet program, such as Youtap, and 12 per cent are considering internally branded solutions, such as those deployed by Starbucks and Subway.
Notably, 25 per cent currently have no strategy regarding mobile wallets. One area of clear consensus among merchants is the value-added services they would like to see from payment providers: meaningful insight into customer behaviour and the ability to use that data to increase customer engagement and loyalty. When merchants were asked what value-added services they’d most like to see from payment service providers in this regard, the top three responses were all related to data — analysis and insights of payment data, benchmarking services comparing payment data, and aggregation and reporting of payment data.
A critical finding is that the key trends identified by payment provider respondents differed from those defined by retailers. Indeed, on some issues, the two groups concur. For example, they both recognised the shift from static, one-way customer engagement to tailored, two-way communication as a critical trend. There were considerable differences in areas such as valuing personal privacy and protecting against cybercrime, cited among the top three trends by a more significant percentage of providers than merchants. The most significant difference, however, came in perceptions of the consumer experience. When asked about the shift from a consumer payment experience to a consumer shopping experience, only 48 per cent of payment providers found it essential, compared with 67 per cent of the merchant respondents.
Payment providers need to focus on the areas of misalignment to improve their relationships with merchants. Though many payment providers are still focused primarily on facilitating payments (including security), consumers and merchants consider those aspects to be fundamental, and merchants want more data-driven, value-added services. To meet this demand, payment providers need to partner more proactively with merchants in improving the entire customer experience — both before and after the payment transaction. Simply put, merchants need to understand more than what happens at the point of purchase. They need to use data to piece together an end-to-end view of the shopping experience. Payment providers like Youtap can leverage their data in this way and help merchants develop a holistic view of their customers.
Merchants need to understand more than what happens at the point of purchase
For instance, in leveraging pre-purchase data, payment providers can help merchants determine how effective their marketing campaigns are, by identifying direct attribution of digital and traditional marketing efforts that drove actual, incremental sales. For example, did consumers respond to a text advertisement because they were in the neighbourhood, or had the consumer already been exploring the retailer's website? When it comes to data derived from the payment transaction itself, payment providers can help merchants in several areas, including payment and rewards systems, security and fraud monitoring, simplified checkout, and real-time settlement options. And with post-purchase usage data, payment providers can help merchants track participation in loyalty programs, as well as aggregate consumer information to analyse behavioural and demographic data.
From a security perspective, the ability to track fraud data is also essential. With this kind of insight from all three phases of the shopping experience, merchants can create a more detailed view of their customer base. At that point, they can use the ensuing data to increase service, efficiency, and engagement, through a virtuous circle that helps them become smarter and more efficient. Some of these factors are fundamental, while others will allow merchants to differentiate themselves from the competition. The ultimate goal: to create the best customer experience possible, increase customer loyalty, and avoid commoditization.
Four recommendations: How merchants and payment providers can move forward
With an awareness of both the challenges and the potential payoffs highlighted in the survey results, we believe that the next step for merchants and payment providers alike should be to focus on four priorities:
Improve customer engagement and loyalty. Merchants and their payment providers must view payments as an opportunity to engage with customers, not just an area of cost or additional complexity. Payments are no longer a discrete act, but preferably one part of a process that begins with marketing and continues with personalised efforts to cement customer loyalty after a purchase.
Develop a more in-depth and broader understanding of customer data. Capturing, synthesising, and packaging data will be essential to improving customer loyalty. Merchants and payment providers can use this data on both an individual and an aggregate level, to develop more detailed insights into specific consumers and larger demographic groups.
Integrate data among channels more effectively. Merchants and payment providers must build systems that can easily share data, both internally among departments and externally among partners. By developing systems with flexible architectures, merchants can improve their ability to integrate data from different sources.
Ensure high levels of security. Merchants and payment providers will have to work together on data security, given its status as a top concern among customers. That means ensuring they’re ready to accommodate new security mandates, such as deploying end-to-end encryption to protect consumer data and financial information. The stakes are too high — retailers that don’t get security right will lose customers. These recommendations are connected. To be truly successful, and to create a foundation for success long into the future, merchants and payment providers need to collaborate on all four and build the right foundation to capitalise on the booming growth in digital payments. The digital payment journey may be arduous, but the payoff, regarding enhanced customer engagement and loyalty, will be worth it.