Until recently, paying for and receiving your purchase happened at the same time. The risks for buyer and vendor were shared equally. In less than two decades’ time, technology has upended traditional payments completely. The Internet, has shifted the risk to either buyer (advance payments) or vendor (payment on delivery). New retail and payment applications fit seamlessly into people’s lives and match the way consumers purchase goods and services. This is essential, for onlife consumers insist that payment blends perfectly within the customer journey.
Off you go, tapping a payment point with your card or smartphone; no need to enter a pin number. In Europe, we can expect to see direct payments, where a smartphone is simply swiped past a payment point, to increase fivefold by 2021, to roughly 16 percent of all mobile payments. China, however, is way ahead of everybody. Roughly 86 percent of Chinese people use contactless payment, compared to 43 percent globally.
The tech behind contactless: chips, codes, aliases
Retailers are becoming more attuned to consumer wishes for simpler payment methods. In years to come, traditional checkout systems (Point of Sale or POS terminals) will gradually be adapted into or replaced by mobile systems (MPOS terminals). These new cash registers have wireless software operated from an onsite PC or directly from the cloud. As a result, new checkout systems are cheaper, more flexible and easier to update. Using various combinations of facial recognition, QR-codes and radio-frequency identification, checkouts are being eliminated while data analytics is being boosted. In China, QR codes are used to process tens of millions of transactions every day, both in physical stores and online. QR codes, which previously failed to catch on in the West, are now slowly but steadily catching on as a result of the current Southeast Asian success of the technology. Retailers are perfectly happy to have customers take home their purchases without actually paying for them — after all, they have the personal data of that customer already. An alias is a nickname or code name for someone. Aliases are used mostly for payments between consumers, and they’ve become a regular occurrence on social media. They can be matched to a cell phone, Facebook address, email or Twitter account.
The onlife consumer still wants to feel that these new money transactions resemble cash payments. Their account should instantly be debited for that sum of money, and they insist upon instant confirmation from the vendor upon receiving the payment. The best of both worlds. For (web) stores the world over, though, the reality is not quite so idyllic. They tend to receive a notification from the bank saying the amount will be transferred (later). Financial institutions have started to develop infrastructure for instant payments which do just that: transfer money the very instant it is paid. This matters to retailers: they will have instant access to their actual turnover and revenue so they can meet their own financial obligations. On the other hand, it can also act as an accelerant for other payment innovations. The sharing economy, in particular, could benefit immensely.
As we work towards a cashless world, we should remember that not everyone can keep up. The Guardian reporter Adam Forrest, has described this as a real threat of excluding people from society. Certain vulnerable people – the handicapped, elderly, underage, or those with financial problems – could be hurt by this trend. For them, being able to pay without “the need to think about it” poses a real danger. Ordering items (too) easily and getting themselves into financial trouble can happen, unless they are protected. Of course, parents, guardians and voluntary caregivers are responsible, but retailers are stepping up to the plate as well. By using digital recognition tools and automatic credit checks, they are successfully preventing problems. The Splurge Alert app, for example, uses geolocation and can warn a user and a pre-arranged buddy against overspending if they enter the danger zone.
Providing good advice, implementing thresholds for contactless payments, and requiring age checks, are all useful. “Smart money” is another option: this money can only be spent on certain, predetermined items. Next week, I will look at who is going to win the War of the Wallets.
This is blog 37, based on my book ‘The end of online shopping. The future of retail in an always connected world’, published by Business Contact (Dutch/Flemish editions), Nubiz (English edition for UK and US, and Danish editions), WSCP Singapore (English edition for SE Asia), Post & Telecom Publishers Beijing (Chinese edition), Hoepli (Italian edition). The book will be published in Korean in December 2018 and is being translated in German, to be published in spring 2019. Additional translations are in preparation for 2019.