Retailers remain slow to embrace emerging payments tech
Although technology continues to enhance the customer experience, retailers are still guarded when it comes to embracing upgraded payment options. In fact, 54 percent of retailers are withholding their investments on new payments technology due to security concerns. This is despite the fact that staying with current payment pathways presents ample security risks as recent high profile breaches have shown, according to a Global Payments Insight Study from ACI Worldwide and research firm Ovum.
The study also found that:
- 93 percent of retailers believe consumers want a broader choice of payment tools;
- 75 percent of retailers see payments as a clear part of their business strategy;
- And 50 percent of retailers cite customer experience as their main ROI on any increase to their payments investment.
RCE: What are some of the reasons why 54 percent of retailers are holding back their payments investment due to security concerns?
Grillo: New payment technologies become lightning rods for fraudsters looking to exploit security gaps or holes — in other words, technology which has had shorter times in the market and may still have vulnerabilities not yet discovered. The retailers are no different than many other industries when it comes to new technologies. While there will always be a group of early adopters, many will take a “wait and see” approach until technology has been more extensively used and validated in the market place. Smaller merchants might fall into the early adopter categories due to the fact that they aren’t encumbered by legacy systems and/or wide-scale implementations.
RCE: How does a retailer’s payment system failing to evolve increase the inefficiencies and risk in payment systems?
Grillo: It’s a bit of a catch-22. The longer legacy systems stay in place, the more outdated they can become. The one thing the high-profile breaches (for example, Target) have taught us is that older systems are vulnerable to attacks. This points back to the theme of the paper that “the status quo is not an option.” Newer payment security technologies like point-to-point encryption, tokenization and network segmentation should be invoked to help minimize risk of customer and account data being stolen or compromised. Retailers should talk to their payment vendors to understand these technologies and work through plans to adopt.
RCE: According to the study, 93 percent of retailers believe consumers want a broader choice of payment tools. How was this figure obtained, why is it so high and what can be done to meet that large of a consensus?
Grillo: The respondents were asked if they agreed or disagreed to a series of statements of which the “consumers want a broader choice of payment tools” was one. I’m not surprised by that percentage (the 93 percent includes those who “agreed” and “strongly agreed”). In my opinion, never before have consumers had more input and impact on how retailers serve them. They are in the driver’s seat when it comes to adopting new technologies and demanding more options.
RCE: According to your study, 75 percent of retailers see payments as a clear part of their business strategy. Can you explain this finding in greater detail, and why isn’t it 100 percent?
Grillo: Payments have traditionally been seen as a means to an end for collecting money for goods or services sold. As channels have evolved, retailers have realized they need new ways to accept payments. In some cases, they may use disparate or siloed systems to support everything from in-store, online, mobile, kiosk, etc. Over time, this adds complexity and cost to maintain and in many cases limits capabilities in select channels (for example, the ability to offer coupons or discounts online but not in-store). Like other retail value chain and fulfillment systems, retailers now see payment systems as a critical component to their overall multi-channel or omni-channel strategy. The idea of having a single or unified system which can offer up secure payment services in any channel in addition to leveraging shared data is extremely appealing to most retailers. Also, retailers now identify with the idea that the consumer payment experience can have just as much influence on customer satisfaction as the availability and delivery of goods.
RCE: The study found that 56 percent of retailers are being proactive on the payments front. What actions are merchants increasing their investment in payments taking?
Grillo: Most merchants are evaluating solutions which can deliver ROI for the customer experience. Accordingly, they are looking at mobile capabilities, security and fraud prevention capabilities. With in-store capabilities, they are evaluating mobile POS capabilities and self-service kiosk options in addition to payment security solutions. In the world of e-commerce, they are evaluating and shoring up fraud detection and prevention solutions – this is getting more visibility in the U.S. particularly with the EMV deadline knocking on our doors this October.
RCE: With 50 percent of retailers cited in your study as saying that customer experience is their main ROI on any increase to their payments investment, how are they tracking ROI and what customer experience tactics do they think work best?
Grillo: ROI could be measured in a few ways. For example, adding a new mobile payment option at checkout could be measured by consumer adoption and then subsequently by channel satisfaction and continued loyalty. Most retailers would want to think about how the investment is going to deliver a positive experience for the customer. For example, does it provide their customer with better, faster access to the merchant’s goods or services? Or does it enable the merchant to gain more insight into the consumer’s buying habits or patterns to facilitate creating new loyalty programs, discounts or packaged goods/services for the customer?
ACI and Ovum surveyed 1,119 executive across 15 industry sub verticals in 25 key global markets: 44 percent from the Americas, 31 percent from EMEA, and 24 percent from Asia Pacific. A survey overview and a corresponding infographic is available from ACI.