André Stoorvogel, Director, Product Marketing – Payments, Rambus, takes a look at how digital wallets are not only going to shake things up for payments, but for retail in general
The retail landscape is evolving rapidly as emerging technologies and trends are changing expectations of the in-store experience.
As retailers look to find their place in this brave new world, many are now seeing payments as an opportunity.
With 92% of US retailers expecting to maintain or increase investment in payments over the next 12-18 months, we explore the five major reasons why digital wallets makes sense, according to Ovum.
- Minimize transaction fees
When processing debit and credit card transactions, retailers are subjected to ‘transaction fees’. These fees can be high, particularly for larger retailers, so working to reduce them makes commercial sense.
One potential strategy is to introduce a store-branded, closed-loop payment card.
To see any reductions in interchange costs, however, consumers actually have to use these store card. On top of this, retailers must factor in the costs of manufacturing and issuing of physical cards.
A store card within the digital wallet can reduce costs by making less transactions subject to fees. The retailer can also push in-app discounts when using the store card to encourage adoption, driving brand engagement, recognition and loyalty. Also, provisioning the card digitally removes the costs of manufacturing and issuing physical store cards.
- Enhance experience and engagement
Despite the rise of the ecommerce giants, 75% of all retail sales are still predicted to take place in-store by 2025, says the New York Times. The way these sales are conducted, however, will be profoundly different.
Part of the ongoing primacy of in-store is due to the rise of the ‘experience economy’, in which consumer purchasing behavior is driven by the quality of the overall purchasing experience rather than simply the good itself, according to The Guardian.
A digital wallet enables retailers to deliver a powerful and engaging in-store offer to tap into the demand for this experiential economy.
For example, retailers can simplify the complexity of managing value-added services by digitizing credit cards, gift cards, loyalty points and coupons into a single, secure platform. By securely converting and managing various digital values, consumers can then pay with credit, points and coupons in a single transaction, controlling the ‘payment mix’ according to their requirements.
In addition, digital wallets give retailers the opportunity to utilize emerging technologies such as augmented reality to further drive engagement, or leverage consumer data to provide smart recommendations.
In-store assisted checkout systems simply don’t work for modern consumers. 86% of consumers avoid stores with long queues, and 38% have abandoned a purchase due to excessive queuing time, according to research by MyCustomerand Essential Retail.
Digital wallets with a Virtual Point of Sale enable customers to check out via in-aisle payment, eliminating the need to queue. It also frees up staff to be redeployed elsewhere in store, increasing efficiency and customer satisfaction, while simultaneously reducing costs.
- Digitize physical cards and receipts
The plastic store and gift cards, cardboard coupons, paper receipts and print advertising generated by retailers have huge monetary and environmental costs.
Digital wallets directly reduce these costs and are more effective. Cards can be digitalized, tailored push notifications and in-app notifications can replace flyers, and digital receipts can be stored in-app.
For retailers, a mobile wallet is a vehicle to a considerably more efficient, cost-effective and sustainable future, while delivering increased consumer engagement, loyalty and insight.
- Improve security and mitigate risk
Recent years have challenged the retail sector with an increasing number of high-profile data breaches. With the average breach costing $4 million, many retailers are moving to bring payments in-house to avoid theft of customer payment credentials, transaction history and identity, says SecurityIntelligence.
Digital wallets, however, incorporate various technologies and techniques to enhance security and mitigate risk, reducing the likelihood and impact of breaches. For example, tokenization replaces traditional primary account numbers (PAN) with unique identifiers called payment tokens to protect transaction data and mitigate fraud.
Importantly, retailers can layer security to meet their requirements and maintain simplicity and convenience usability of payment, which remains imperative to customers.
Seizing the mobile opportunity
It is clear that digital wallets can deliver an enhanced experience, reduced operational costs, increased revenues, and improved payment security.
The challenge for retailers will be to accelerate time to market and provide a seamless and enhanced experience from the outset.
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