By Dale S. Laszig
DSL Direct LLC
The omnichannel shopping experience may be seamless to merchants and consumers, but the tailors behind the technology will always care about the seams. Like skilled couturiers who hide every stitch in a beautiful gown, software developers, integrators, engineers and data scientists strive to make payments invisible to users and transparent to service providers.
Digital technologies enable merchants to accept payments from multiple sources and connect in personal ways with customers. Merchants can log in from anywhere, view real-time transactions and send targeted offers to customers. Customers can click on an offer at home, view the online shopping cart on a commuter bus and check out at the office. Now that omnichannel commerce is here to stay, why does it matter if transactions are mobile, online or in-store? Isn't it all just commerce?
Onsite and online transactions, like rompers and evening gowns, are designed to meet different requirements. Thus, there are several ways for merchants to leverage transaction origins and attributes.
Smartphones provide a secure mobile payments ecosystem made of mobile network operators, trusted service managers and secure elements. Secure elements encrypt and tokenize credentials and cryptographic data, rendering the data useless to thieves and hackers. Hardware and cloud-based secure elements provide unique identifiers for users, who make them more secure by activating and personalizing their devices. Apple uses hardware secure elements in Apple Pay; Google and Microsoft use cloud-based, host card emulation in Android and Windows mobile wallets.
Apple, Google, PayPal, Square and other mobile POS service providers are developing geolocation solutions to improve the user experience, using beacon and Bluetooth technologies to detect nearby consumers and send targeted offers or directions to their smartphones. Here are some examples:
Personalization, a driving force in all payment schemes, uses advanced analytics and geolocation to send relevant offers to consumers. Retailers are exploring the potential to create individualized pricing for users, based on their credit profiles, shopping histories and the devices they carry.
Supermarkets worldwide are experimenting with dynamic pricing models. "E-pricing," as it is sometimes called, enables merchants to create pricing on the fly. Some airlines have already implemented this practice. A consumer watchdog group found incongruities in some airline websites, which were displaying higher airfares to people who used iPhones and tablets to search their sites, compared with others who shopped on laptops and home computers.
Australian journalist Olivia Lambert reported that supermarket chains in the United Kingdom plan to implement "Uber-style" pricing over the next five years, which would enable store managers to raise prices as much as 90 percent during holidays and peak traffic times.
"Digital e-pricing is already common across Europe and America, and retail company Coop Norden in Denmark has found it has saved costs and increased efficiency," Lambert wrote in an article for Australia's news.com.au website. "University of Melbourne consumer psychologist Brent Coker predicts Aussie supermarkets would implement the electronic pricing about 12 months after the UK, describing it as the way of the future for grocery retailers here."
Lambert stated that when digital screens, which can be remotely changed at whim, eventually replace paper tickets, consumers may adjust their behavior accordingly by shopping on Monday afternoons instead of weekends to avoid peak pricing.
Transactions that originate online or by phone are classified as card not present (CNP), a higher risk category that is priced at higher interchange rates. CNP transactions have higher chargeback ratios than card-present transactions for several reasons. Issuing banks may reject a transaction that is not linked to a valid authorization, which may occur when a transaction is paid in installments. Consumers may not recognize a merchant's name on a billing statement or claim they did not initiate a transaction. Proving that a transaction originated on a user's device can help merchants win inquiries and disputes.
As mobile payment adoption grows, consumers around the world are embedding their favorite payment methods into mobile wallets on connected devices. U.S. merchants who limit their focus to Visa, Mastercard, American Express Co. and Discover Financial Services products, may lose revenue and sales when they do not accept other leading credit and debit card brands. China UnionPay, the world's third largest payment network after Visa and Mastercard, is accepted in 100 countries in addition to China. Bancontact/Mister Cash is a leading debit card issuer in Belgium, and Brazilian prepaid card Elo has a base of more than 50 million consumers.
Studies have shown that customers who don't find their top-of-wallet payment methods at checkout have a higher risk of abandoning shopping carts. Cross-border service providers can help merchants avoid lost sales, eliminate foreign transaction fees, reduce costs of accepting alternative payments and add new payment types when needed.
"Retailers who use native currencies and payment methods are impressed by how differently consumers transact in other parts of the world," said Dmitry Savchenko, Chief Executive Officer and founder of Payzoff, a global payment gateway and software-as-a-service platform. "Supporting these various payment methods can help business owners improve margins and rapidly scale."
Like designers who fashion impeccable garments from thousands of threads, skilled payment specialists assess transactional data in a multitude of ways. The hidden seams in every transaction show where it originated, as well as whether it fits the consumer's behavior and the merchant's environment. It's those little threads, the ones we never see, that create a seamless commerce experience .
Dale S. Laszig, Senior Staff Writer at The Green Sheet and Managing Director at DSL Direct LLC, is a payments industry journalist and content provider. She can be reached at email@example.com and on Twitter at @DSLdirect.
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