The Retailer Winter 2018/19

PSDII will make ease of payment the next battleground for innovative retailers

Philipp Gutzwiller Managing Director, Head of Retail Large Corporates Coverage LLOYDS BANK COMMERCIAL BANKING

NEW EU REGULATIONS ARE SET TO ACCELERATE THE ALREADY RAPID INNOVATION IN PAYMENTS AND MAKE OFFERING THE EASIEST CHECKOUT EXPERIENCE THE NEXT KEY BATTLEGROUND BETWEEN RETAILERS. HERE, PHILIPP GUTZWILLER, HEAD OF RETAIL AT LLOYDS BANK COMMERCIAL BANKING, EXPLORES HOW RETAILERS CAN TAKE ADVANTAGE OF THE LATEST INNOVATIONS TO ATTRACT AND RETAIN NEW SHOPPERS AND BOOST SPENDING. How shoppers make payments has changed dramatically in recent years – from the introduction of chip-and-pin to contactless cards and the advent of mobile wallets such as Apple Pay and Android Pay. Even online, where cashless payments are the norm, checkout experiences have evolved rapidly to become as easy and as convenient as possible for customers who increasingly expect nothing less. Now, the introduction of new European payments regulations are set to catalyse these innovations and drive even more rapid change to the process of checking out. Shoppers in the UK increasingly see the final transaction – repeatedly keying in credit card numbers and other verification details – as cumbersome and are willing to trust retailers with their finances to make their next purchase more quickly and easily, whether online or in-store. Unlike elsewhere, UK shoppers are generally willing to trust their favourite retailers and online platforms with their data. The UK is ranked third in the world for its adoption of mobile wallets, and is the out-and-out European leader for the total value of cashless payments it makes. As such, British retailers can expect consumers to remain among the most receptive for innovations in payments – and therefore lead demands for continued improvements in the customer experience. Keeping up with these demands is challenging. Deciding where best to invest efforts and resources is difficult – especially amid strong headwinds and fears around backing the wrong technology. This year is set to see the start of a process in which PSDII will combine with two other areas of innovation to transform the way retailers engage customers, boost loyalty and generate new sales.

Harnessing data to boost security The use of data has already transformed retail – particularly online and omnichannel – allowing businesses to target customers with more tailored offers and products that help increase basket size. But the insights that businesses have been developing in recent years is now having a significant impact on payments, helping retailers increase security while simultaneously reducing the friction involved at the checkout. Card providers have long since used customer insights to tackle fraud by recognising unusual spending and alerting retailers – and customers – when there is a problem. As pressure increases to abandon single-factor authentication for purchases, retailers too are using their own data to do exactly the same. Most retailers still require customers to type in their CVC code as a second level of authentication for each purchase. But retailers such as Amazon are now using sophisticated checks based on their own deep insights into customer behaviour patterns to replace the CVC code and create a truly one-click option for buying. Making mobile an even bigger part of your checkout – in-store and online Mobile is rapidly becoming the channel of choice for many retailers, first at the expense of desktop but also as part of their in-store experience as well. For online retailing, the added difficulties in checking out on a small screen make consumers even less tolerant of clumsy payment processes, and even more likely to choose who they shop with, at least in part, based on whose checkout is the swiftest and most convenient. But in stores, the impact of mobile will be even greater. First, mobile wallets like Apple Pay and Android Pay became ubiquitous as their speed and security were attractive for retailers and shoppers alike. Now, Sainsbury’s is going one further by allowing customers in its Clapham North Station Local branch to scan their products as they shop using its SmartShop app, then pay and leave the store without having to queue for a checkout at all. Even in the US, a relatively late adopter in payment terms, Amazon plans to create up to 3,000 entirely cashierless AmazonGo stores in the next few years. Here, shoppers use a smartphone to enter, choose goods from the shelves, and walk out without stopping at a checkout. Sensors automatically bill them once they’ve left.

18 | winter 2019 | the retailer