Five Innovations to Watch in Retail Payments

Paying with a mobile phone

Today’s tech-savvy consumer isn’t settling for the long line at the cash register. According to Drapers 2017 Multichannel Trends Report, retailers are elevating their payment options for shoppers. From closed-loop cards to digital wallets, here are the innovations expected to drive retail payments in upcoming years.

Closed-loop cards and mobile apps

With closed-loop payments, consumers can load money into an account connected to a retailer’s app or loyalty card, which can be exclusively used to pay for goods when they shop at that retailer. This advanced payment method allows retailers to tap into consumers’ personal style needs and send them promotions based on their past purchases. Closed-loop payments also capture data for retailers, so they can have a better view on popular items and consumer purchasing habits.

Real-time payments

Typical payment systems, especially those associated with bank accounts, are often not updated and take a long time to process payments. To ramp things up for consumers, some groups, including the European Union Second Payment Services Directive, are working to establish a more integrated global payment system. The directive, which is set to launch in the UK next year, will allow data to be more readily available out of someone’s bank account. Customers would be able to electronically transfer funds directly from their bank account to a merchant’s account instantly, which means retailers can experience lower transaction fees and minimize fraud.

Pay later

As technology advances in the retail space, consumers are gaining more control of the purchasing journey. Pay later services, including Klarna’s Pay After Delivery and PayPal Pay After Delivery, are now available to consumers that don’t have funds to pay upfront.

Klarna, for example, enables consumers to digitally order goods and provide payment 14 to 30 days later. Unlike other payment services, Klarna collects money from the shopper and pays merchants right away. Using Klarna is also a very seamless process and only requires little information from consumers—name, email and delivery address.

“It’s important for retailers to stay informed, as the market is moving faster than ever and margins are getting squeezed,” Klarna general manager Luke Griffiths said. “New payment technology can easily become an important differentiator–boosting brand equity, increasing sales and driving repeat purchases.”

Invisible payments

The standard checkout process, whether it’s with a register or a self-checkout machine, could soon be completely passé. Companies, including Visa, are aiming to create an entirely invisible payment process for consumers. Visa is currently collaborating with tech start-ups that specialize in behavioral biometrics. This technology can identify consumers by the way they touch a keypad or hold a smartphone. When visiting a store, biometrics identify consumers without their knowledge, while sensors monitor the products consumers pick up on their trips. This technology is currently being piloted at the Seattle-based Amazon Go store.

“What customers want–and we’re capable of doing–is to put payments in the background of the commerce experience. Emerging technology is about taking that friction out of payments and making them disappear,” Visa SVP of innovation and strategic partnerships Bill Gajda said. “We’re going to see a huge change in the next 18 to 36 months as these technologies become commercial and scalable.”

Digital wallets

Technology consulting firms, like Capgemini, expect that digital wallets will more likely to be used as mobile payments become an increasingly popular checkout option. Using near-field technology to connect consumers’ bank accounts to free apps, digital wallets offer a convenient payment solution to slow computers and checkout lines. Digital wallets are also secure and typically protected by biometric identification qualities, such as fingerprinting and facial recognition.

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