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Table of Contents

Lead Story

Payments' place in the retail playbook - Part 1

Dale S. Laszig

News

Industry Update

Visa Checkout gains 12 million consumers worldwide

Walmart PINs hopes to Visa debit lawsuit

EPC study takes aim at Durbin supporters

Marketplace lenders form new association

PayPal releases app upgrade only for Apple, Android

Features

CNP Expo spotlights fraud, big data, virtual reality

Observations from Payment Facilitator Day

Banks jump on mobile wallets

Adam Atlas

Selling Prepaid

Virtual gifting: field of possibility

Views

Email-related fraud threats grow

Patti Murphy
ProScribes Inc.

Disruption a hot topic at Transact 16

Brandes Elitch
CrossCheck Inc.

Door-to-door sales, the good old-fashioned way

Steven Feldshuh
Merchants

Education

Street SmartsSM:
MLS rebranding, the discussion continues

John Tucker
1st Capital Loans LLC

It takes more than sales to sustain an ISO

Jeff Fortney
Clearent LLC

Work less and improve your bottom line

Aaron Nasseh
Finical Inc.

Help small merchants avoid MATCH

Sarah Zilenovski
ClearSale

Company Profile

MavensTech Inc

New Products

Comprehensive transaction transport security

TransKrypt Security Server
NewNet Communication Technologies LLC

Next-generation API for vast, underserved market

Digitzs
Digitzs Solutions Inc.

Inspiration

Applying job interview know-how to sales

Departments

Letter from the editors

Reader's Speak

Resource Guide

Datebook

Skyscraper Ad

The Green Sheet Online Edition

June 13, 2016  •  Issue 16:06:01

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Payments' place in the retail playbook - Part 1

By Dale S. Laszig

POS technology has evolved from payment enablement into complex tools that retailers are using to transform online and in-store shopping. Some solutions are being built in-house, by retail startups and innovators working outside the traditional payments industry footprint.

Next-generation retailers are redesigning showrooms, fitting rooms and mirrors, arguably the most iconic aspects of retail infrastructures. Many view the payment part of their solutions as a simple utility, like water, power or gas. Most are more focused on using technology to make the shopping experience faster, easier, more personalized and more secure.

The payments industry must leverage its own iconic infrastructure to remain relevant in the evolving retail sphere. This two-part series will highlight retail trends and explore ways to breathe new life into legacy payment systems. Some of the coolest payment hacks may be hiding in plain sight. The article is also a call to action for merchant level salespeople (MLSs) to find new uses for old things and help retailers understand the power and possibilities of their solutions.

The next-generation retail mindset

Some of the best retail innovations began with a simple premise of improving the shopping experience. The desire to delight customers propelled many retailers out of their stores and "into the wild" to closely observe shopping behavior and emerging retail trends. Key learnings from these adventures have informed many store and ecommerce designs.

"How do you deliver value to a generation that grew up with iPhones in their hands?" said Imran Rahman, Chief Operating Officer at Combatant Gentlemen Inc. The Irvine, Calif.-based clothier, established in 2012, caters to the 18- to 35-year-old male demographic. "Our customer is a broke, big city guy who is impatient and can see right through a brand if you're not [being] genuine."

Today's millennials, estimated by the U.S. Census Bureau to be 83.1 million strong, have been underserved by traditional clothiers, Rahman noted. Combatant Gentlemen offers high quality, affordably priced Italian wool suits and a full line of accessories in stores, online and via the company's mobile app.

"Many of our customers have just graduated from college, are getting married or are looking for jobs," said Coralyn Lee, Director of Communications and PR at Combatant Gentlemen. "We are millennials serving millennials; lifestyle is as much a part of our brand as shoes."

Rahman and other store executives routinely visit shopping malls to see what consumers and other innovators are doing in the space. The company uses technology to enhance its brand but cautions against putting technology first and fashion second. "You want to make the experience from entrance to purchase faster but not leave the customer with a thousand questions," he said.

Mirrors installed in fitting rooms are equipped with RFID hanger technology that displays accessories to coordinate with items shoppers are trying on. Customers can tap the mirrors to have items sent to fitting rooms or shipped directly to their homes. They can also use the mirrors' two-way camera technology to video chat with friends and family and get their thoughts on a potential purchase.

"The mirror serves as a data collection tool that helps with our algorithms," Rahman said. "Like Amazon and Netflix, the mirror will make recommendations based on 'people like you' and can be interactive as in, 'you're wearing this shirt; here are some accessories that a stylist can bring to you.'"

Unlike physical stores that are limited to available inventory, the mirrors can display everything in the store's extended catalog, from tie clips to belts to luggage. A centralized technology tower and application programming interface system use collaborative filtering to track customer preferences in a "non-creepy way" and send targeted messages about upcoming store events.

An iterative, trial and error process

"Out-of-box solutions cover 90 percent of the pain points that most retailers face," Rahman added. "We tend to outgrow those solutions as different sets of problems arise." The company's enterprise resource planning and customer relationship management platforms continue to evolve in what Rahman described as an iterative process. "You don't know how something will work until you try it," he said. "We have a lot of data needs and tend to look at things differently than other retailers. We try to target and segment customers without putting them in the usual buckets."

Rahman cited three trends that are transforming the shopping experience:

  1. Minimalist merchandising: Retail's new mantra, "less is more," is evidenced in the bold new look of many stores. Showrooms are spare because, in many cases, the inventory has moved from the showroom floor to the cloud. Convergence of in-store and online commerce technologies has simplified ordering and delivery. "Every time a landlord cancels a lease, it creates an empty vessel for a new store to redesign and rebuild in a dramatically different way," Rahman said.
  2. Checkout experience: Rahman and others believe that checkouts should happen at the height of interest, whether it's online, in the fitting room or any other part of the store. Connected fitting rooms make it easier to request assistance, video chat or order items online. Apple Inc. inspired many retailers to facilitate in-store mobile payments for a fast, enjoyable checkout experience.
  3. Mobile POS: Smartphone screens have limited real estate; to be on someone's home page requires constantly delivering value, Rahman noted. Mobile apps are loaded and deleted all the time. What value is the app driving? What else could it be doing to create value and make our lives easier? These are the questions that retailers need to ask; they can't just build an extension of their websites, he said.

Useful processing infrastructure

Through the years, the payments industry has consistently delivered novel solutions that ride traditional payment rails. The digital world presents even more opportunities to leverage existing infrastructure, with multiple sets of rails. Indeed, some payments analysts see limitless potential for unlocking every nook and cranny in the payments ecosystem.

Payments innovators have leveraged some of the most iconic aspects of the traditional processing infrastructure. Their experiments have followed a similar trajectory to Combatant Gentlemen's iterative process. They begin by field testing existing technologies and asking the hard questions: What value is it driving? What else could it be doing to create value and make our lives easier?

MLSs can also experiment to see how their solutions work in the real world. Merchants who fail to fully utilize a POS product or service may be leaving money on the table. Those who adapt solutions on the fly may reveal a new, marketable trend. Merchants who say, "No thanks; I got this," provide an opportunity for sales agents to challenge their assumptions.

For example, merchants may think they understand email marketing, checkout optimization or routing technology. But these and other broadly distributed merchant service offerings have been radically redesigned to deliver more capabilities and value. Certain merchants may not yet realize this.

Following are a few examples of how emerging digital technologies are transforming and redefining payments in the digital age.

Old school, new school customer service

"When I think of old-fashioned mail, I envision a drawer in my desk where I used to keep greeting cards," said John Deckard, MLS and owner of Sacramento-based Deckard and Associates. "Sometimes I'd run out of birthday or thank-you cards, and two weeks would go by before I'd send anything."

Deckard discovered SendOutCards LLC, a national mailing service based in Utah that helps him build relationships and stay connected as he grows his merchant portfolio. The service includes a contact manager with a built-in calendar that enables users to send or preschedule individual and group mailings. Users can also create poster-sized prints and stage campaigns throughout the year that are timed to go out seven days before a birthday or special event.

SendOutCards works the same way for one person or 10,000 people and features an extensive library of cards and card templates online and in its mobile app. Deckard said it can be a game-changer for business owners and consumers; he is also a distributor. "I bumped into someone in a store the other day, snapped a picture with my phone and uploaded it to the mobile app," he said. "A few days later, he received a card with his picture that said, "Great to see you; we should get together."

Deckard sees a world of difference between cumbersome, generic mailings and personalized, scalable new mailing services that build relationships. "I took a picture of our server and sent a card to the restaurant's manager that said, 'We had a great time and Stephanie was great,'" he said. "The next time we were there, we received V.I.P. treatment."

In the 1990s, holiday shoppers who bought gifts online were considered daring and unconventional. In 2015, Forrester Research Inc. put U.S. ecommerce sales at approximately $325 billion and projected volumes to climb to $414 billion in 2018. The growth of ecommerce and mobile commerce combined with high-profile data breaches has increased demand for simple, secure solutions designed to delight consumers and safeguard sensitive payment card data.

"In general, old school commerce was marked by a process-driven shopping cart experience with several distinct stages," said Scott Fitzgerald, Senior Vice President of Marketing at BlueSnap Inc., a global payment technology company with headquarters in Waltham, Mass. "Unlike the digital shopping experience, customers would shop online, then leave the shopping experience to enter the cart experience, then leave the cart experience to enter the checkout experience."

Distinct stages no longer exist in digital shopping; it's all one continuous, frictionless experience, Fitzgerald said. He credited Amazon.com Inc. for being the first retailer to keep selling in the shopping cart phase, noting, however, that even in Amazon's case, which is streamlined and says "other people have added these things," the customer is still in a checkout phase that is separate from the shopping experience itself.

Secure checkout

"Ecommerce shopping is outpacing the offline world," said Yitz Mendlowitz, Co-Founder at PAAY LLC, a New York-based ecommerce platform provider. "Consumers who order online will frequently get things faster than when they go to the store. Checkouts should be the easiest and most secure part of the shopping experience and take no more than 30 seconds."

PAAY's ecommerce platform uses two-factor authentication technologies developed by Visa Inc. and MasterCard Worldwide. Mendlowitz advocates an industry-wide shift from hardware to software payment technologies. He believes commerce between merchants and consumers should work the same way in the offline and online worlds.

"Consumers wouldn't give their credit cards to a random stranger and have no idea what is happening with their cards," he said. "And why should merchants pay a higher interchange rate for a card-not-present transaction that's happening inside their own fitting rooms?"

Mendlowitz added that retailers never want to touch credit card data. It's more efficient and secure for merchants to provide cardholders with all of the transaction details that cardholders can then share directly with payment processors, which also lowers chargeback risks. While some mobile wallet schemes are more efficient than others, the practice of tokenizing card numbers has made ecommerce and mobile commerce transactions as secure as in-store commerce, he noted.

"When I add a card to Apple Pay, they ping the card issuer to authenticate it and store the card data in the iPhone's secure element," he said. "Apple is laying the groundwork for other mobile wallets that want to use host card emulation and the phone's secure element to deliver a seamless mobile wallet experience."

Buttons, wallets, barcodes

In traditional shopping cart models, the payment phase tends to be distinct from the cart, when "the fun is over and you're into the pain of paying," noted BlueSnap's Fitzgerald. This creates a conversion problem, because the checkout experience, by definition, is not fun. Buy buttons that have been added to social media sites have helped resolve this issue in the same way that interactive mirrors in retail stores simplify purchasing.

If I'm looking at a shirt in a mirror or a Twitter feed, I can buy the shirt while I'm evaluating it, Fitzgerald stated. He expects mobile wallets that store credentials to be another key enabler that will help ecommerce scale by facilitating single-click purchases.

Big brands with deep pockets and impressive technology have introduced numerous secure mobile wallet schemes. "How on earth would a payment provider decide which company to partner with: Apple, Google, Samsung, Facebook, Visa, MasterCard or PayPal?" he said. "I wouldn't bet against any of them; they've all made their wallets easily applicable to the shopping experience."

Palo Alto, Calif.-based Mobeam Inc. is a global provider of mobile barcode beaming technology that enables smartphones to serve as true mobile wallets. "We're not changing the barcode; we're unlocking the full power of the barcode so it can improve the experience for retailers and manufacturers," said George Garrick, Mobeam President and Chief Executive Officer. "Those black-and-white stripes contain a lot of latent information that is not being used, such as coupons, credentials and gift cards."

Payment transactions measured in time are a small part of the shopping experience, Garrick noted. Choices made at checkout are driven by ads, gift cards and coupons leading up to the final act of payment, whether it's on a touchscreen mirror, mobile app, shopping cart or checkout lane.

"Barcodes have the potential to know that it's you and present targeted offers that are relevant to your experience," Garrick said. "When it comes time to shop, you have a library of things in your app that you can scroll through and bring to life and use in a practical way."

As he reflected on the changing ecommerce landscape, Fitzgerald said he expects to see even more mobile wallets in the near future. "We need to make buy buttons intelligent enough to understand the unique preferences of each individual shopper, and do it in a way that doesn't require the shopper's input, such as a digital I.D. associated with a browser or mobile phone," he said. "Being able to do that on behalf of our merchants would dramatically reduce friction."

Fitzgerald recommended putting aside arbitrary distinctions between card-present and card-not-present transactions. The goal is to help verify shoppers' identities, in store mirrors or online, through the connective tissue of communications technologies. Stop talking about store commerce, ecommerce and mobile commerce as if they're different, he said. It's just commerce.

Heavy metal to light, agile POS

"Old POS systems connote heavy metal, iron infrastructures and sedentary, lazy, expensive platforms that are daunting to implement; that's what old POS smells like," said Mitchell Cobrin, founder and Chief Catalyst at AnywhereCommerce. "New POS is all about cloud-based, light, flexible and agile systems that offer a degree of flexibility; the cost to migrate from one to another is not as daunting as it was in traditional times."

AnywhereCommerce, a global mobile commerce technology provider headquartered in Montreal, has a suite of hardware, software and gateway solutions designed to deliver an end-to-end mobile payments experience. These modular solutions, sold through the ISO channel, are backed by the company's aCommerce Management Platform, a cloud-based transaction and reporting engine.

The latest POS technologies can add a level of sophistication to businesses as basic as a dog-walking service or lemonade stand, Cobrin stated. People can run their businesses off cell phones, using data analytics and secure payment schemes to improve efficiencies. "Smaller businesses can be every bit as optimized as enterprise-scale companies," he said. "Creating an omnichannel experience that delivers brand continuity across stores, websites and mobile apps is a game that companies of all sizes can play."

Cobrin expects to see more innovation in retail store design, including portable processing devices that are "nomadic, nonwired, unfettered and untethered" that enable sales associates to freely roam stores and capture checkout at opportune times. He also expects warehouse clubs such as Costco Wholesale Corp. and similar retailers to continue to use traditional checkout lanes while improving the checkout process. "New POS is purpose-built and scalable and does more than just take money," he said. "Retailers, let us sweat the payments and deliver fast, light and intuitive POS."

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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