Delivering engaging customer experiences and real revenue through payments
As merchants look to dazzle their customers with amazing experiences both online and in-store, they are also recognizing that payments is a key component of ensuring that the act of paying is more of an afterthought. A customer sees something she wants and with very little action, she just gets it.
For the last 25 years, we have made a clean division between transactions that occur online and those that involve a physical card because there was clearly a difference in the risk of accepting a card online versus in-person. We’re now at a place where customers expect the same level of service regardless of the place where a merchant engages them for payment. With new innovations in driving merchant acceptance, the payments industry is getting to the point where it really shouldn’t matter to issuers, merchants and acquirers where those transactions are taking place. We are taking signals from as many data sources as possible to know the customer and his associated payment credentials to allow him to get those goods or services at the moment he expresses interest to buy.
Over the next few years, we will stop talking about e-commerce, in-store, mobile, omni-channel and unified commerce, and it will all simply become commerce. A few major trends that are contributing to this shift are network tokens, wallets, contextual commerce and alternative lending solutions.
Network tokens are tokenized credentials coming directly from the card brands. The idea is that they are both more secure and up-to-date than a normal card number. The benefit to a customer is that he can give Spotify his card number once and never have to update it whether the card expires or gets lost. For recurring merchants like Spotify, that’s a key to removing involuntary churn. For other online merchants like Nike.com, it means that a customer can come back 2–10 years later and use the same card she had saved on-file without re-entering it. Since network tokens are also more secure, this also means that issuers should start trusting online transactions as much as in-person transactions, resulting in authorization rates closer to 100% when someone has enough credit or funds on their card.
Digital wallet is a bit of loaded term, but typically it refers to the X-Pays of the world (Apple Pay, Google Pay, etc.) as well as WeChat Pay, Alipay and even Paypal. As the card brands roll out SRC (Secure Remote Commerce), we will likely bundle this into wallets as well. The benefit to a customer of a digital wallet is a trusted frictionless experience, and the merchant benefits by getting the sale. The reason that WeChat and Alipay have risen so quickly in China and Chinese tourists abroad is that people know and trust the system and can use this method to pay online and offline without ever entering a 16 digit number. The same applies for Apple Pay and Google Pay for the web. A consumer opens an email from Coach on their iPhone with an item that he wants to buy. He doesn’t have a Coach app and has never registered a card number with Coach, but he can use Apple Pay to fill in his card details, address information and buy what he wants with just a double click on the side of his phone.
Contextual commerce refers to buying things you see and want outside of the typical buying experience. This could be getting the dress from FarFetch you see on your favorite actress on Netflix to buying an old table from your friend’s friend on Facebook to ordering a coffee right from Google maps as you search for the nearest Starbucks. In the examples above, Netflix, Facebook and Google all have your payment credentials on file, so it makes sense that they too can help reduce friction and making shopping as simple as see, want and get. To do this, the payments ecosystem will need to keep pushing the boundaries of what models will look like to support these experiences.
Finally, millennials and digital savvy consumers continue pushing for non-credit card alternatives for buying stuff. Alternative lending solutions like Klarna, Affirm and AfterPay are a few of these solutions, and region specific solutions are abundant. By taking credit worthiness signals from non-traditional sources, these payment methods allow a consumer to get what he wants right at the point of purchase, by taking a calculated risk on receiving that payment over time. At the same time, merchants are able to make a sale to a consumer that would have otherwise been lost. Given the success of some of these solutions, we should expect to see more solutions that can take larger calculated risks based on data that is currently not being consumed by financial institutions today.
As consumers demand engaging and effortless shopping experiences, the payments ecosystem will need to find and deliver methods for merchant acceptance that makes payments invisible and allows merchants to capture more sales through tech forward solutions which better assess financial risk and remove the barrier between wanting to buy and just getting it.
