Is There Pain in Payments?

Is There Pain in Payments? 

Is There Pain in Payment?  Yes, but not where you think…The pain in payments is really  more about pain in the shopping experience.  Saving me the “pain” of a few seconds and a paper receipt at checkout is really just focusing on the last part of a deteriorating experience.  As most stores look for ways to trim costs and boost add-on sales they have steadily eroded the shopping experience.  Instead of more personal help, service and speed, they try to pull more dollars from your wallet with less effort.  A few companies understand the new model and you know it because their stores or establishments are simple, well staffed, and while there may be a line due to the popularity of the product, the line “moves” since the store model is fluid.  Those companies also tend to understand the attachment of a brand to a consumer and the emotional journey involved, almost less so than the product itself – think Apple, Chipotle, Trader Joes, Starbucks etc. But back to the initial statement… is there pain in the current payments system (aside from the excessive fees – which is going to be disrupted as well)?  Is using your credit card really that difficult?  Do you NEED to use your phone to pay for a soda or your new shirt?  Let’s take a quick look at different payments, why I think your phone as a simple payment mechanism is vastly overrated and why the real issue is customer service and the shopping experience.

Cash vs. Credit/Debit

Ok, this is not really a competition any more.  While cash is still the preferred method for some individuals, and certainly has its perks for certain transactions, it is by and large the dinosaur of transaction methods.  Credit/Debit has taken over for obvious reasons when we view it through the lens of change.  Plastic cards eliminate the potential pain of running out of money, of change, of receipt aggregation and they help in the consumer satisfaction realm as card companies can withhold payment or ease the return exchange.  In addition, many card companies run loyalty programs.  Cash does get discounts now given the fee structure for cards – but I look at this more as an opportunity to disrupt the credit card space then for cash to increase relevance.  There is already pressure building on the fee and network structure of credit cards.

Plastic vs. Phones

Now it gets interesting, the long discussed potential for conversion of payments from your credit card to your phone.  I am going to try and walk through this one step at a time as I feel its very important to draw distinctions here on what is currently being offered vs. what is possible in the future.  Today, my credit card swipe takes ~10 seconds.  Wallet out, swipe (victory ring), press credit, then yes, and no signature for most transactions less than ~$30.  Upon leaving, I receive a printed receipt to accompany my electronic credit card statement.  I have the option to submit an email at checkout for electronic receipts but this is currently too irregular to deal with.  There is also the “tap and go” method for cards eliminating the need for swipe and press, saving a few seconds.  The initial idea of phone or mobile payments is to turn you phone into a tap and go device using near field communication (NFC) technology.  It will likely require some form of app or authentication, but will also provide a detailed electronic receipt (vs credit card totals).  This could also be bolstered by ads for coupons etc, but really the current idea boils down to just paying with a phone instead of a card, which may end up being a slower process.  As it stands now, there is virtually no “pain” in the credit card transaction save for the printed receipt and security concerns… only one of which is “solved” by NFC.  The real pain and opportunity in retail is much bigger and rests in the broken shopping experience.

The Return of Customer Service and Loyalty…

Consider the sci-fi idea of facial recognition at a store front – or some other form of contactless authentication – payments, coupons, recommendations, size and color preferences, location of friends, recent purchases or likes by friends, etc can all be delivered to you during your visit.  On the back end, consider the concept of simply bagging merchandise and exiting, your complete receipt sent to your phone, no scanning or waiting.  At this point we may be crossing lines of personal comfort and data… but we are also changing the model in a definitive way.  Having me use my rewards card and cash,  or credit or even my phone are all very similar mechanisms and actions amd achieve little in the way of engendering true loyalty.  Having the store recognize me on entry to make my experience DURING my stay better and actually simplifying and speeding up the checkout process, that’s interesting…the pain of adoption while not high for normal shopping days, would be quite high in weekends and holidays, morning routines or frequently visited chains – the return of customer service and loyalty.

Winners: Apple, eBay (PayPal), Master Card, Visa, and American Express all could make changes

Losers: NCR and other point of sale devices; VeriFone and other parts of the payment network; Visa, Mastercard and Amex need to be careful

Disrupters: Square, Dowalla, TransferWise, Level Up