When it comes to your customers, you’re borderline obsessed with them. You yearn to provide them with the best customer experience out there when they are shopping in your store or online. You look to recognize patterns in their shopping habits, hoping to put the pieces of the puzzle as to what you can do to keep them coming back again and again. Every part of the purchase journey must be evaluated, how customers pay is no exception.
On the topic of payments, there is a lot of noise in the retail space. The real challenge lies in sifting through the various payment innovations and determining, which are novel and which have the potential to be valuable for both retailers and their customers.
We sat down with First Annapolis Consulting’s John Grund during our most recent webinar to chat about what are the latest trends in payments and what retailers should know moving forward.
Here are a few key takeaways:
Technology is revolutionizing Retail Credit
John Grund: We are at a unique point where technology is in a position to influence the consumer shopping experience as well as the lending experience. Today’s consumers are now able to shop using mobile devices or swipe a card at a food truck because of payment technology innovations.
What retailers are struggling to see is that payment technology extends beyond the hardware and into actual purchase financing. Two thirds of the U.S economy is driven by consumer expenditures and a large point of that requires financing. We are at a point where folks are doubling down on credit and payments. The need for credit and loyalty programs has never been higher.
Financing and retail credit as we know it is changing from every angle from how customers use it to make purchase, to how as a retailer you’ll work with the banks to make financing options available. As a result you’ll see more frenemies: alliances between some of the lenders and these technology players, which is traditionally something that would not have happened before.
Millennials Care More About Experience Flexibility than Payment Flexibility
John: Many retailers today have a fundamental challenge of how to bring millennials into their stores. While the answer to this has skewed towards providing installment loans, the fact of the matter is that Millennials want a digital experience first and foremost. This includes being able to apply for financing online, being able to control their payments, and budgeting all in one convenient channel.
When it comes to applying for credit the look and feel of the process is equally as important as they look for brighter and cleaner interfaces, more transparent disclosures, and straightforward options. When it comes to this age group, retailers should invest less in working to only provide installment loans and instead look for different ways of engaging them at retail level and the banking level. At the end of the day millennials want to know what’s in it for them.
The Right Mobile Investments Can Enrich Customer Experience
John: Mobile payments are extremely buzzy right now. However, it’s not to be overlooked because of that. It’s how you define mobile pay that is particularly relevant.
Very few customers would pick a retailer just because they can pay with mobile there. Mobile can enrich the customer experience as it relates to having financing applications, rewards more available and being able to redeem, fraud alerts, and calculator to facilitate a big-ticket purchase more readily available.
It’s the mobile functionality at this stage of evolution that is more powerful than the joy paying with a device. The time will come when it’s more ubiquitous, but right now it’s all about what can you do to enrich the experience and differentiate yourself as a retailer.
There Will Always Be A Demand for Payments and Loyalty Programs
The big question is why retail credit now? Just as retailers will always have big ticket merchandise, the U.S consumer base will always have a large segment of the population looking for credit. There will always be the customer with a limited credit history looking for payment flexibility just as there will always be the customer who’s A/C goes out on a 90-degree day and needs emergency financing.
Retail credit is as apple pie as it gets and it’s fundamental to every customer. As much as there are headwinds in today’s world at the retail level, there’s no denying that there has been a place for consumer credit since the beginning of time and there will be a place for it moving forward. The pace for adoption and innovation has never been as relevant as it is now.
You Can Have Too Many Payment Options
Your point of sale should never be the Nascar of payments. This confuses the consumer your sales associates, and on a website it takes up too much space within your checkout.
The truth is with any payment option, they take time from your team and the service provider to operate and maintain. Not every retailer needs the same payments and product options. In the big-ticket space, specific payment products can serve meaningful purposes. When deciding on a payment option you should ask yourself if it supports a micro niche or a meaningful niche.
For example, you wouldn’t want to invest in a financing vehicle that is accepted online but not in-store. That’s a micro niche, and that’s not how you make your payment offerings efficient. The right technology has the power to direct the traffic to the right product at the right time and allow retailers to optimize their payments program for omnichannel. That’s a meaningful niche.
Payment Changes Don’t Happen Overnight
While having a payment program that keeps up with customer preferences is key, making a program change isn’t that simple for retailers. There are typically two catalysts that result in a retailer changing their payment program. The first being something fundamental with the program, and catalyst two being that somebody has a better solution that unlocks more value to you and the customers.
You should look for a payment program that is large scale and has multi touch points for every segment of your customers. Your payments program isn’t something you change regularly, because a lot of time and effort goes into making this switch from vetting a new bank, technology platform and the bandwidth to implement it. The process requires a lot of diligence and a lot of time in the decision-making stage. It’s easy to gravitate towards what’s trending in payments and cut this process down. But when it comes to choosing this the easy way isn’t necessarily the best way for you.
What’s Here for the Long Haul?
This is a future opportunity. Currently there are too many challenges. Perhaps this more suited for back office payments and supplier relationships where big transaction efficiencies can occur.
While the radar is green now, it’s short term to probably medium term for full-scale adoption. It needs to be there because you won’t be able to wake up 10 years from now and do it and get all the learnings. It’s medium term in terms of adoption and scaling and being a true differentiator for the average retailer
This is shorter term but serving niche purposes. We aren’t denying that the Fintech community has some traction and attention. Some of their solutions are pretty nifty in the online channel, however few of these solutions transfer to in-store checkout.
With these alternative credit solutions there are different points in evolution. Because of that, there has to be an evaluation of whether you want to have a strong in-store credit experience or online. Currently they have enough money behind them and traction to be on the radar and for retailers to take notice.
This is a near term opportunity because it’s not for everyone it has to fit the profile of the retailer, their merchandise mix and customer demographic. Lease-to-own has been around for a while, because there has and always will be unbanked and subprime customers. There is enough going on here to be on the radar screen.
Co-branded or bank card
Think of co-branded cards as electricity. It should be on when it’s used and turned off when it isn’t. However right now the percent of sales that are made with these products are way too important for retailers and consumers. Any talk of their demise is the near future is way too premature.
Short term. It may not be applicable for everybody, but anything that teases the customer shopping experience gets two thumbs up.
Technology platforms are the here and now of fintech. We are evolving and you see that a lot in the marketplace specifically the direct to consumer space. The key is to make this magic happen on behalf of the retailers.
There is a flood of new solutions but the average retailer cannot digest that and pilot it that easy. There is an opportunity to step in for technology platforms that can clear through the clutter, much like services like Magento and Shopify have done in the commerce space. Making the checkout process easy for the consumer and retailer is the name of the game.
Missed the webinar? You can watch it on-demand here.