Mobile wallets and use of mobile apps are expected to grow in 2021 as customers set expectations with retailers.
“One of our recent customer surveys indicated that there is still a large gap in checkout expectations across consumer age brackets,” said Perry Kramer, managing partner at consulting firm Retail Consulting Partners. Of customers ages 18-37, 65% said a mobile app or wallet for checkout would influence the store they shopped at, while only 33% for those ages 37 and older agreed.
Kramer noted retailers today are investing in new payment technologies that support contactless payments. “Specific to the c-store space, we have seen a slower investment in the development of mobile wallets and mobile apps that support payments,” he said. “This can often result in a disjointed experience if the c-store has a franchise like a Dunkin’ Donuts in it that has a powerful mobile wallet that speeds checkout, and then that same customer has to stand in line at the c-store register under the same four walls and have a slower legacy experience.”
The rise of frictionless checkout is expected to be significant across retail channels. Convenience stores have higher-than-average in-store percentage of cash sales, Kramer noted, which makes it more challenging to achieve a return on investment on improvements made to the payment experience in a reasonable time. “We are seeing retailers that have any type of order-ahead services or loyalty rewards being the earlier adopter of mobile wallets and mobile apps that support payments.”
The international marketing statistics portal, Statista, has projected that frictionless payments processed $3.9 trillion globally last year alone, while a number analysts expect the technology to grow to $8 trillion by 2024.
So what exactly are frictionless payments? This increasingly popular payment method uses smartphone apps, mobile wallets, and contactless cards to replace a traditional checkout experience, thus expediting the time it takes for consumers to complete a purchase.
There are four preeminent forms of frictionless payments:
1) Mobile applications, used most notably by ride sharing companies and Amazon in its “Just Walk Out” technology, sync with your credit card or checking account and process payments automatically.
2) Mobile Wallets digitally store your credit card, debit card, and rewards card information on your mobile device, allowing you to make purchases without having the physical card present.
3) Contactless Cards allow you to wave your credit or debit card near a payment terminal to pay without swiping or using a chip card reader.
4) NFC (near field communications) is a contactless payment method that allows a smartphone to communicate with a payment reader when they are close to each other. The most recognized form of NFC is Apple Pay.
Eliminating customer friction is paramount for organizations to stay competitive in the modern business environment. Frictionless benefits for retailers and consumers includes:
* Reduced waiting time at the cashier and allows a faster checkout for both physical and online shopping (e.g. avoid having to enter your credit card data for each transaction or input online discount codes). The easier it is to pay, the more customers are going to spend (as there is less thought and consideration given to purchases).
* Allows a more detailed analysis of customer’s spending allowing c-stores to upsell and market to specific customers.
* Reduces customer stress. There is no need to remember PIN code, no need to think about loyalty card or coupons, etc., making the troublesome checkout process less visible and painful.
* Reduces shopping cart abandonment, especially for online shopping. According to SaleCycle, up to 75% of customers abandon their online shopping carts without making a purchase.
* The Covid-19 crisis also showed the need for contactless end-to-end processes, such as scanning products, payments, coupons. This streamlined process not only reduces the workload for the personnel in c-stores, but also ensures a fully contactless experience, which helps with the hygiene prescriptions.
Retailers can use this new real-time data derived from frictionless systems to form closer bonds with their customers and to provide exactly what they want, perhaps before they know they want it. “Only ‘check-in’ enables personalization during the shopping experience with a first viewer advantage, just as Google, Amazon and Facebook know their customers and use the data to curate highly personal user experiences at scale, reaping monopoly rents from advertisers for doing so,” said Richard Crone, CEO of Crone Consulting LLC, an independent advisory providing market insight and self-service strategy for retailers. “Doing nothing is not a strategy.”