Analysis: Will new payment technologies really make life easier for customers?
Electronic payment technology is hitting the headlines and the desks of legislators in a big way. Originally perceived as a bonus for customers, to free up lines, hands and wallets – a darker narrative is emerging. Could new payment systems be perceived as a form of discrimination? Will some sections of society become unwanted by newer, tech-savvy retailers?
While the legislators and social commentators fight it out, retailers are left to sort out the practical questions that emerge around implementing new technology. At first glance, electronic payment seems like a great idea – embracing “cashless” options means employing less cashiers, which can help free up capital at a time when profitability is under pressure. But eagerness to embrace this new technology must be tempered with a careful analysis of the risks. Before diving head-first, consider asking these questions:
Does the value warrant the investment?
It is tempting to look at the rise of Apple Pay and Google Pay and believe that the future is all about ‘pay by app.’ However, the practicality of it all is much more complex. Do these new payment systems really add value for all your customers, or are they adding annoyance or even social exclusion? While some customers love playing with apps, retailers will need to invest in some serious customer segmentation research to work out what percentage of their target audience and existing customer base truly want to pay in this way.
There will also inevitably be a point of over-saturation. How much value does another payment method really provide? Are there still options for “old school” payment for those without smartphones or decent WiFi connections? For retailers with a broad geographic spread, the picture is even more complicated. Just as inventory is tailored for individual audiences, payment technology will likely need similar treatment.
Retailers in metropolitan areas servicing higher net worth customers might find rapid acceptance of a new electronic payment system. Consider the strategic location of Amazon Go stores, for instance. However, in areas with a higher percentage of blue-collar workers, the need to download an app onto a smartphone may be an unwelcome and unnecessary complication.
The best option often isn’t a single solution. Take Transport for London, the operator of London’s transportation system, as a great example of a democratic payment service set up to cater to a cross-section of society. Its entry points accept near-field payments from travelers’ mobile devices and contactless payment cards.
Transport for London also has its own contactless card, the Oyster Card, that can be loaded up online or at a ticket machine. Customers also have the option to buy paper tickets at a manned ticket booth or ticket machine. The customer chooses the payment method that suits them best. How many retailers would have the money to invest in such a wide variety of payment methods?
How will staff be affected?
Anticipating how new payment technology will impact the role of in-store staff is crucial. Retailers must make a conscious decision to either reduce or specialize customer service roles. Either way, remaining staff need training on how to work the new system. Smart planning needs to consider how to get staff on-board with the change and the type of training that help ensure its success.
To ensure the retailer’s investment pays off long-term, in-store staff must be completely comfortable with the new technology and the benefit it provides to customers. If making a payment will now involve downloading and using a specific app, staff must be confident demonstrating how this works on a variety of different smartphones. They will also need to deal with frustrated customers who encounter problems getting the new technology to work. This is a completely different skill set from that of traditional cashiers. Further, retailers must be prepared for potential backlash from staff if the change leads to job reductions.
How will it impact the brand experience?
Finally, and perhaps most importantly, consider how the new payment technology fits into the customer experience strategy. Think carefully about the core brand values and how new payment technology aligns with those brand values and customer expectations. This is also where the store-specific apps come into play – retailers with their own apps, such as Target and Kohl’s, need to consider how to integrate their bespoke payments with traditional payment methods and other third-party payment apps. Do you offer customer inducements to download the store-specific app? Does the core customer base really want this type of technology? It is vital not to alienate customers.
For Dollar Tree, a budget retailer offering cost-effective, no-frills service, this new technology could be a departure from brand values and unnecessarily complicate a simple shopping experience. For a cutting-edge technology brand like Apple, having the latest technology deployed in-store is almost expected.
Invest in getting it right
If you decide it’s worth the investment to move forward with new payment technology, keep the main objective front and center. Is the move about reducing costs, or is it about improving the customer experience with your brand? Keep the strategy – and your success – grounded around that objective.
While long-term savings might be achievable, short-term costs will likely escalate quickly with training, new resource needs and implementing the technology itself. Plan for problems and ensure customer-facing staff are capable of addressing issues that arise.
Consider a small-scale test pilot of the technology, like the one Dollar General rolled out in ten stores, to ensure the bumps are smoothed out before a nationwide program starts. Build in time to honestly assess the success of the trial – did it add needless complication to the customer experience or negatively impact transactions? While excitement may be brimming around the latest shiny, new technology, it doesn’t mean it’s right for every business or in the best interest of your customers.
Andy Morris is VP and head of the global retail practice at Egremont Group, a management consultancy with offices in Chicago and London. Lizzie McKinnell is a senior consultant.
While the legislators and social commentators fight it out, retailers are left to sort out the practical questions that emerge around implementing new technology. At first glance, electronic payment seems like a great idea – embracing “cashless” options means employing less cashiers, which can help free up capital at a time when profitability is under pressure. But eagerness to embrace this new technology must be tempered with a careful analysis of the risks. Before diving head-first, consider asking these questions:
Does the value warrant the investment?
It is tempting to look at the rise of Apple Pay and Google Pay and believe that the future is all about ‘pay by app.’ However, the practicality of it all is much more complex. Do these new payment systems really add value for all your customers, or are they adding annoyance or even social exclusion? While some customers love playing with apps, retailers will need to invest in some serious customer segmentation research to work out what percentage of their target audience and existing customer base truly want to pay in this way.
There will also inevitably be a point of over-saturation. How much value does another payment method really provide? Are there still options for “old school” payment for those without smartphones or decent WiFi connections? For retailers with a broad geographic spread, the picture is even more complicated. Just as inventory is tailored for individual audiences, payment technology will likely need similar treatment.
Retailers in metropolitan areas servicing higher net worth customers might find rapid acceptance of a new electronic payment system. Consider the strategic location of Amazon Go stores, for instance. However, in areas with a higher percentage of blue-collar workers, the need to download an app onto a smartphone may be an unwelcome and unnecessary complication.
The best option often isn’t a single solution. Take Transport for London, the operator of London’s transportation system, as a great example of a democratic payment service set up to cater to a cross-section of society. Its entry points accept near-field payments from travelers’ mobile devices and contactless payment cards.
Transport for London also has its own contactless card, the Oyster Card, that can be loaded up online or at a ticket machine. Customers also have the option to buy paper tickets at a manned ticket booth or ticket machine. The customer chooses the payment method that suits them best. How many retailers would have the money to invest in such a wide variety of payment methods?
How will staff be affected?
Anticipating how new payment technology will impact the role of in-store staff is crucial. Retailers must make a conscious decision to either reduce or specialize customer service roles. Either way, remaining staff need training on how to work the new system. Smart planning needs to consider how to get staff on-board with the change and the type of training that help ensure its success.
To ensure the retailer’s investment pays off long-term, in-store staff must be completely comfortable with the new technology and the benefit it provides to customers. If making a payment will now involve downloading and using a specific app, staff must be confident demonstrating how this works on a variety of different smartphones. They will also need to deal with frustrated customers who encounter problems getting the new technology to work. This is a completely different skill set from that of traditional cashiers. Further, retailers must be prepared for potential backlash from staff if the change leads to job reductions.
How will it impact the brand experience?
Finally, and perhaps most importantly, consider how the new payment technology fits into the customer experience strategy. Think carefully about the core brand values and how new payment technology aligns with those brand values and customer expectations. This is also where the store-specific apps come into play – retailers with their own apps, such as Target and Kohl’s, need to consider how to integrate their bespoke payments with traditional payment methods and other third-party payment apps. Do you offer customer inducements to download the store-specific app? Does the core customer base really want this type of technology? It is vital not to alienate customers.
For Dollar Tree, a budget retailer offering cost-effective, no-frills service, this new technology could be a departure from brand values and unnecessarily complicate a simple shopping experience. For a cutting-edge technology brand like Apple, having the latest technology deployed in-store is almost expected.
Invest in getting it right
If you decide it’s worth the investment to move forward with new payment technology, keep the main objective front and center. Is the move about reducing costs, or is it about improving the customer experience with your brand? Keep the strategy – and your success – grounded around that objective.
While long-term savings might be achievable, short-term costs will likely escalate quickly with training, new resource needs and implementing the technology itself. Plan for problems and ensure customer-facing staff are capable of addressing issues that arise.
Consider a small-scale test pilot of the technology, like the one Dollar General rolled out in ten stores, to ensure the bumps are smoothed out before a nationwide program starts. Build in time to honestly assess the success of the trial – did it add needless complication to the customer experience or negatively impact transactions? While excitement may be brimming around the latest shiny, new technology, it doesn’t mean it’s right for every business or in the best interest of your customers.
Andy Morris is VP and head of the global retail practice at Egremont Group, a management consultancy with offices in Chicago and London. Lizzie McKinnell is a senior consultant.