Modern Retail: Guide to payments 2018 by Modern Retail

GUIDE TO PAYMENTS

2018

-Contactless payment trends -Cashless society -Till technology

-Digital transformation -Smart POS -Payment risks

GUIDE TO PAYMENTS 2018 CONTENTS How retailers must adapt to the trends in contactless payments

Merchants must seize the digital transformation opportunity

The move to cashless society: how retailers can keep up with the latest in payment technology

Save the hassle, save your profits: payment risks & how to mitigate them

Till tech: how innovative EPOS systems are transforming retail

CREDITS Editor: Rob Gamage - rob@modernretail.co.uk Advertising: Emma Mjekiqi - emma@modernretail.co.uk Advertising: Jamie Ezekiel - jamie@modernretail.co.uk Client Services: Beki Rodrigo - beki@modernretail.co.uk Modern Retail is published by Ricochet Media Services Ltd (Registered Company: 6043446). Unit 1b, Building 6, Croxley Green Business Park, Watford, WD18 8YH.

THANKS Many thanks to all those who provided editorial content or images for helping us put together what we hope is a useful and informative read! Please send any comments or suggestions to rob@modernretail.co.uk.

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INTEl!LIGENT ANALYJICS

HOW RETAILERS MUST ADAPT TO THE TRENDS IN CONTACTLESS PAYMENTS

Insights +50% of millennial shoppers prefer to have a 'one-click' option when making a purchase. +56% of consumers expect contactless payment methods to be available in the clothing, accessory and footwear industries. According to a study by Barclaycard, 25% of small retailers have lost customers because they failed to offer new payment technologies. The study also found that 30% of younger shoppers have cancelled a purchase after their preferred payment method was unavailable. Its estimated that small retailers are losing £1.6 billion in sales every year by failing to adapt to consumer demands. Consumer & Technological Market Trends Barclaycard’s study states that 50% of millennial shoppers prefer 'one-click' options, expecting fast and easy experiences when they are shopping online. Ecommerce retailers should look to take advantage of this technology where possible. Amazon was the first to bring this technology to the market. Currently, only some other credit cards processors like Stripe, Authorize.net, First Data, PayPal Pro, Skybank are using one-click technologies. Instore, Barclaycard found that 53% of consumers between the ages of 18-34 preferred contactless payment and that the payment method had risen by 104% between 2016-2017. Retailers who make contactless payment available can take advantage of mobile payment technology offered by Apple Pay, Android Pay and other mobile platforms. Most smartphones come with this technology automatically built-in. The user updates their credit card

information on their smartphone and uses the phone to make the payment. This technology will increasingly diversify to wearables, with fitness companies like Fitbit, and smart watches from Apple, Jawbone, and Android all providing, or working to provide, contactless payments. 56% of UK consumers expect contactless payment methods to be available in the clothing, accessory and footwear industry, with 62% of those surveyed aged between 18-24, and consumers prefer to opt for convenience rather than brand loyalty when it comes to shopping. When it comes to ecommerce, nearly half of those surveyed said they prefer quick online checkout and they feel that this would encourage them to switch retailers. Adaptation To help retailers adapt to the changing trends, educating the staff and customer is paramount. A prime example of this is Whole Foods, who through their education initiative increased contactless payments by 400%. SME retailers can keep themselves updated by looking out for key announcements in retail innovation. Test driving new technologies can help keep up with the competition and boost customer satisfaction by responding to consumer demand. Conclusion It is clear that most consumers prefer shopping where payments are processed faster. Retailers need to adapt to newer payment options by educating their customers and staff, and streamlining their services. Research for this article was provided by askwonder.com.

Author: Rob Gamage Rob Gamage is Managing Editor of Modern Retail. Combining many years of experience in publishing with a keen interest in small business and entrepreneurialism, Rob is passionate about sharing interesting and inspiring content with retailers to help them grow. You can subscribe to Modern Retail, for free, here.

Merchants must seize the digital transformation opportunity Consumer demand for frictionless experiences is driving positive change for retailers The world is advancing at a phenomenal rate and the developments in technology continue to open up an abundance of opportunities for businesses. Mobile phones have evolved to become smart phones. Televisions have evolved to become smart TVs. So why should the point-of-sale (POS) just take payments? It is time for smart POS. The way we shop, book tickets and pay in restaurants is changing – fast. Today’s businesses can use technologies to build differentiated service propositions that make the customer experience greater in order to encourage customer loyalty and generate additional revenues. The reinvention of the POS from solely being a place for checking-out, to being a service provision point, promises to re-shape customer interaction at the key moment – when they pay. Modern electronic points of sale (EPOS) systems are cloud-connected, tablet-based and often mobile. They enable retail and hospitality merchants to not only provide the latest payment options but to also handle a wide range of services, from inventory management to product information, in order to better serve their customers. This next generation POS supports – with the convergence between payment and POS – the latest payment options for consumers. Contactless and NFC payments can appeal to the influential Millennials and Generation Z, r ecently identified as the most prolific cashless spenders in the UK, whilst new payment methods such as Alipay or WeChat pay are enabling Chinese tourists to spend easily in their favourite UK shops and restaurants. Furthermore, a modern EPOS can provide a host of consumer conveniences beyond the act of payment. Merchants can offer services such as click-and-collect or home delivery to differentiate from the competition and delight the customer.

Consumer expectation is being driven by the ease of shopping online and merchants now have the opportunity to meet or even exceed that expectation in store thanks to the digitalisation of the POS. However, regardless of how convenient online shopping is, consumers still like to visualize, try-on and feel products before purchasing them. This will continue to drive footfall to bricks and mortar stores so retailers need to capitalise on this need. But why should this only benefit consumers? Increasingly, merchants have begun to expect the latest tablet technology to allow more space on the counter, have access to enhanced functionality whilst only paying for the software and applications they use. Automated business management solutions, previously only available for larger retailers, are now very much a reality for smaller retailers thanks to the convergence between payments and the POS. The next generation POS can empower small and medium-sized retail and hospitality merchants so that they can increase the efficiency of key service points and operations. For example, reconciliation and reporting becomes much quicker at the end of a day and thanks to its cloud-based nature, this information can be checked across devices, on the go. A smarter POS can also lead to an increase in sales by enabling live stock searches and providing the customer with a same day delivery option whereas before, if that item was not in stock, the customer would walk out the store and the sale would be lost.

Taking this one-step further, merchants will be able to seize new revenue streams thanks to the innovation of cloud-based solutions helping to digitally transform instore commerce. Having a marketplace of business apps available at the POS will enable retailers to offer additional services to consumers thanks to the full capabilities of a native open Android operating environment. Merchants can also visualise and understand their consumers better through smart data collection. Knowing things like, what the best-selling items are or what the busiest period of the day is, can help small and medium merchants factually manage stock and staff rotas in an inexpensive and more effective way. This data collection can also enable smarter Marketing, an expensive but vitally important outlay for small businesses. Thanks to the next generation POS, merchants can offer their customers tailored rewards and offers through the intelligent gathering of its consumers’ data. Keeping everything secure The opportunity to have business services and payments at the POS for merchants comes with the responsibility of being able to leverage the data in a responsible and secure way. It is all well and good having a variety of different applications running to heighten the instore experience for your customers

but TRUST is the key element between consumer and merchant.

Ingenico Group’s Axium Ecosystem is designed for merchants, paving the way for digital connected stores by offering the full capabilities of a native open Android operating environment, combined with the security and stability of its proven payment operating system. Retailers can seize the opportunity of a cloud-based EPOS delighting their customers whilst benefitting from additional revenue streams and more efficient business operations, safe in the knowledge that their customers’ sensitive data is being protected. Smart POS, anyone?

THE MOVE TO CASHLESS SOCIETY: HOW RETAILERS CAN KEEP UP WITH THE LATEST IN PAYMENT TECHNOLOGY

The UK retail landscape has changed so much over the last decade. More specifically, the digitalisation of retail has led to the introduction of various technologies to keep up with the demand of shoppers and consumer trends. These changes have affected every corner of your the retail business — how and where shoppers can purchase items, how fast they receive purchases, and the payment options for purchases. A common denominator over this time has been the speed at which these changes have occurred, meaning the customer, at the forefront of the changes, has become more impatient in their demands. As a result, shoppers are less susceptible to engage with brands that cannot adhere to what they look for in a service. The growth of eCommerce & mCommerce is digital commerce is poised to further influence retail over the next few years, it is essential retailers stay on top of the mobile trends that encourage shoppers to spend more and revisit their brand. Cashless society To achieve this, retailers should begin investing in technologies that enable their customers to pay for items however they like, and mobile payments seem to be the path that the industry is going down. Today, contactless and mobile payment options encompass price comparisons,

personalised promotions, as well as checkout options that make it easier for customers make quick and informed decisions of purchasing. This growth in mCommerce provides a vote of confidence to the infrastructure of both online and in-store payments, but also means retailers need to stay up to date and invest in developing seamless and secure payment options. Which is why payments are such a huge part of the digital transformation of 2018 and beyond. So what are the latest trends in payment technologies for retail? Customers are no longer responsible for authenticating payments As part of the drive to create a more consumer-centric shopping journey, customers will take less of an active role in the authentication of transactions, and payments will rely more on the systems that provide the technology. This means processing payments will become easier and faster as customers can depend more on state-of-the-art payment providers, with the added benefit of being able to spot fraudulent activity. But it’s important to bear in mind cyber-attacks and other threats to security involved with this investment of technology, and retailers should invest in systems that put security at the forefront of payments. Greater personalisation of loyalty programs More than ever, customers have the freedom to engage with as many brands as they like. To keep customers coming back, retailers should create ultra-customisable programs by leveraging a view of transactions that can integrate with data and information on customer preferences. By this, you can offer an even more bespoke experience for your customers. Scale up on biometric payment methods Coupled with the scale up on security, the ease of purchasing will be complemented with technologically-advanced ways to purchase items. Apple, for example, have successfully introduced Face ID to their instant payment infrastructure in addition to fingerprint identification. The key behind the success of such developments fall within retailers’ ability to find the balance between producing convenient ways to purchase and investing in secure methods of payment. Cryptocurrency In today’s market, it’s almost impossible to discuss payment trends without touching upon Bitcoin and other forms of cryptocurrency. Whilst this remains a realm untouched by many businesses, it’s hard to argue against the growing influence of the likes of Bitcoin. More and more business are exploring digital currency as we move towards a cashless society. Liverpool, for example, is one region that has developed its own digital currency, the Liverpool Local Pound (LLP), used by a number of independent retailers to boost the local industry. The effect? It encourages users to spend money with local suppliers, brands and people. Keeping an ear out

on local currencies behind developed in your area can pay great dividends when engaging with local shoppers. Convenience is, and will continue to be, at the forefront of the development of payment technology. And in an ever-changing retail market, consumers will keep coming back to the brands that make the transaction of goods as convenient as possible. Retailers should make full use of artificial intelligence and machine learning, as they attempt to achieve even more of this convenience. From known services such as Paysafe and Paypal, to mobile-operated systems such as Apple Pay and Android Pay, to a bank’s own mobile wallet, the possibilities for a cashless society to have their expectations fulfilled, are endless. With the increasingly blurred lines between the online and in-store, payments are still quite fragmented, but as with any timeline of any technological advancement, leading operating systems like ApplePay & Amazon Pay will soon become the staple of cashless commerce payments. With this in mind, any retailers who fail to implement such systems will risk losing out on sales. Dax Dasilva, Founder & CEO, Lightspeed Modern Retail Editorial Board Dax Dasilva is the founder and CEO of Lightspeed and a member of Modern Retail's Editorial Board. Founded in 2005, Lightspeed develops a cloud-based EPOS platform used by over 50,000 independent retailers, restaurants and eCommerce merchants worldwide to run better businesses and process over £12 billion in transactions annually. Visit: www.lightspeedhq.co.uk

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SAVE THE HASSLE, SAVE YOUR PROFITS: PAYMENT RISKS & HOW TO MITIGATE THEM

It may not come as a surprise that the subject of payment risks, threats and security features are not on the list of retailers’ “top 10 most exhilarating reads”. But whilst it doesn’t pique the same sense of entrepreneurial excitement as learning about marketing, sales or shop design it is, for those who value keeping all their profits, still an important topic. The Change In Payment Methods The retail payment landscape has begun shifting at an exponential rate, with customers increasingly looking at ways to pay electronically in preference over physical cash, especially with the expansion in methods of making non-cash payments. Alongside the rapid development of payment products, services, rules and technologies – the tools for perpetrating fraud and theft are also changing at alarming rates. Payment Risks Every payment method, whether paper or digital, involves risk. From a fraudulent risk of financial loss in the payment transaction which has materialised from deception; to the risk of an incomplete transaction because the payee does not have a legal claim on the payer; to operational risks of financial loss due to various types of human or technical errors that disrupt the clearing and settlement of a payment transaction; or even defective devices that hinder the completion of a transaction. If you have a retail or ecommerce store you’re probably aware that fraud exists. If you currently have low levels of fraud, it can imply that:

1. Risk is low 2. Current actions of reducing fraud are effective 3. Or weaknesses haven’t yet been identified High levels of fraud obviously demonstrate that payment risks are high and that action needs to be taken urgently. Retail Payment Systems It is reassuring to know that, despite these threats, many payment systems have security features built in to help keep potential fraud and operational risks at fairly low levels. The rising competition amongst payment system providers means retailers’ have benefited from the incentive for service providers to add security features to reduce these risks. Risk-reducing attributes of a secure payment system would largely fall under two main categories: Insurance: an agreement between the two parties as to who will bear the loss when it occurs, e.g a merchant receiving a credit card payment is insured against the chance that the cardholder will not be able to pay the balance Containment: is a comprehensive term for activities that tend to deter or stop a risk. In the case of fraud risk this could include, for example, swiping a credit card through a card reader to verify the validity of the card. There are also additional prevention tactics you can employ in store to further alleviate payment risks: Staff Training: training your staff to be more vigilant in looking out for potential thieves can save your business from theft or fraud. Some key ways to identify a likely thief are: Behaviour: Does the customer seem nervous or agitated? Actions such as nervous glances, showing unnatural or forced smiles, fidgeting or avoiding eye contact can indicate suspicious behaviour. Are they trying to distract you? They may be overly friendly: inventing elaborate stories to force conversation and avoid suspicion, or they may be rude, trying to make you feel embarrassed about making checks. Actions: Customers making bulk or hasty purchases. The fraudster will ultimately be looking to make money. They probably don’t want the goods, they just want to sell them. So if they show no interest in what they’re buying, haven’t tried on the clothes, or are buying a seemingly unnecessarily amount of one item, it is suspicious.

Is the customer buying small-value items while asking for maximum cash back? Card Details: Although with chip and pin you don’t need to check the card, if you feel the customer is suspicious you can still perform checks. Look to see if the title on the card matches the gender of the person presenting it. Is the card number the same as the one printed on the receipt? Keep your passwords and login details secure: you should keep passwords for online payment systems privy to minimal staff. Having too many staff members aware of your login details makes it harder to identify a potential culprit if something seems awry. Stay vigilant with non Chip and Pin cards: almost all UK cards are Chip and PIN , so extra attentiveness should be taken when accepting cards that don’t have this feature. It’s important to know that not all overseas card issuers have yet upgraded their cards to Chip and PIN. If a card requires a signature, check the one the buyer writes matches the one on the back of the card. How to respond: your staff should be trained on how to proceed if the card or customer fail any security checks – if something doesn’t seem quite right, retain the card, if safe to do so, and call the bank’s authorisation centre asking for a Code 10 authorisation. The bank will ask if the customer is still there and will tailor their questions around this. Then you’ll be asked questions to check the cards credibility, and if it’s a false alarm the banks won’t mind – better to be safe than sorry! Having your staff properly trained, conducting regular checks and using an up-to-date payment system will help to alleviate payment risks, or at the very least make it much more difficult for fraud or theft to be committed against your business.

Charlotte Lynch Charlotte Lynch looks after marketing and operations for Modern Retail and is keen to help retailers grow. By conducting interviews and sharing informative content, Charlotte hopes Modern Retail can inform and engage retailers in the UK.

TILL TECH: HOW INNOVATIVE EPOS SYSTEMS ARE TRANSFORMING RETAIL

iZettle, www.izettle.com/

How can high street shops protect themselves from the threat of online retail? One way retailers are fighting back is by using online retail’s own weapons against it, adopting the tools and technology that make internet shopping so attractive. Innovative electronic point of sale technology (EPOS) is empowering high street retailers to gather data, personalise customer experiences and make shopping flexible and easy, blurring the lines between bricks-and-mortar stores and internet shopping and using the payment moment in the customer journey to build relationships and increase profits. We take a look at some of the innovations in EPOS making this multichannel mash-up a reality: Mobile EPOS technology The rapid advance of smartphone technology over recent years means that for an independent retailer to have access to a powerful EPOS system, all they need is a phone or a tablet. Payment providers like iZettle and Square allow sellers to accept credit and debit card payments using their phone, offering services like pocket card reader attachments and bookkeeping tools. This kind of technology can be an extremely low-cost EPOS solution for a small business, but one that still offers the kind of connectivity customers are coming to expect. This till technology can also be used in a variety of out-of-store retail locations such as stalls, concessions or pop-up shops, making it super flexible. Mobile EPOS is also being used by larger retailers to make checkout and customer interaction more fluid. Retailers such as Nordstrom are giving staff touchscreen tablets that allow them to take payments anywhere on the shop floor, at the same time as accessing inventory and making orders for out-of-stock items.

Pay with your face? There are numerous variations on using smartphone technology to pay for goods and services at the till. This new till technology was trialled by Mastercard in 2015 and is set to hit the UK soon, customers can authorise a payment by simply looking at their Smartphone, which recognises their face. The idea behind ‘selfie pay’ is to combat identity fraud (face theft is, as yet, unknown) and make it quick and simple to make payments.

Building customer relationships at the payment moment One advantage that online retail has previously had over bricks-and-mortar store interactions is that ecommerce sites can gather information on a customer that is hard to get in a high street store. Not only what someone buys, but what items they’ve viewed, how many times they’ve visited, what they’ve searched for and much more can give a retailer a detailed picture of a customer, and online platforms and communications allow them to keep in touch with customers more easily after a sale has been made. But the latest EPOS till technology is bringing this kind of data to the high street, with systems that include Customer Relationship Management (CRM) functionality to record customer preferences and behaviour and capture contact details for targeted marketing. Systems like cloud-based iPad platform Shopkeep or leading EPOS provider Lightspeed offer CRM functionality that allows retailers to easily gather and enter customer information and analyse data. Cloud-based EPOS till technology Choosing a cloud-based EPOS system can be a major cost saving for an independent retailer, giving access to powerful computing power and software without the need for expensive in-store hardware. In the past, a POS system was a major investment for a retailer, and since the days of the mechanical till, if the technology went out of date a retailer would often be forced to stick with it, unable to afford the cost of updating to a new system. Cloud-based systems sidestep this obsoletion issue, because updates to cloud software are easy, cheap and instant for users. In-store hardware is often minimal, usually just the accessories needed to take payments. Platforms like Shopkeep offer free system upgrades to customers and allow businesses to access POS systems, analytics and reporting as well as cost-effective POS hardware for stores.

Endless aisle The concept of customers being able to shop online while they’re in a high street store is rapidly gaining traction. The thinking goes that customers are increasingly expecting to be able to shop how and when they like, without differentiating between sales channels. They might browse a physical store and then order from a smartphone app, or from a laptop or tablet when they get home. Rather than losing sales to rival online retailers, some businesses are encouraging this omnichannel approach, empowering customers to combine high street and online shopping. Endless aisle terminals of various kinds allow customers to order items that are out of stock or not available, immediately expanding a store’s range into their deep inventory and retaining a sale that might otherwise have been lost. Demandware are providing this till technology for Crocs, a footwear brand that markets itself on its huge range of colours and styles. Store customers can easily order combinations from a much larger range than it would be possible to display in the store itself. *** So where next for EPOS technology? The next few years are likely to see the emergence of retail showrooms, where customers can interact with products and order from a much larger available stock through in-store terminals or smartphones, and EPOS systems that go far beyond the point of sale, interacting with customers as they enter and navigate stores. EPOS systems are set to bring the best of online functionality to the high street, and soon.

Emily Cleaver Emily Cleaver is a blogger and content creator who writes on retail, business trends and creativity. You can find her at http://www.wordboutique.co.uk.

GUIDE TO PAYMENTS

2018