A dramatic shift in shopping and retail is happening in the U.S., Canada and other countries. Driven by technological advances, the changes include consumers’ rising use of smartphones, the growth of online shopping and the emergence of new payment types like EMV cards and Apple Pay. Recent trends confirm the shifts in retail, as evidenced in a recent survey by WSJ/comScore regarding consumer shopping behaviors. In 2014, 46% of consumer purchases were made online. By 2016, it had increased to 51%. How consumer purchases are made is also changing—the majority (42%) of consumers now search and buy online. Twenty-two per cent research online and in store and buy in store while 20% search and buy in store. Finally, 16% research online and instore but buy online.
In order to respond to these shifting trends in consumer shopping behavior, retailers are changing the way they do business and are embracing an omnichannel approach. In addition, more and more merchants are increasingly migrating from traditional terminal-based solutions toward feature-rich, cloud-based integrated payment technology at the point of sale (POS).
Utilizing cloud-based POS systems has been shown to boost overall revenue for merchants through features associated with inventory management, reporting, integrated loyalty programs and other value-added features. In addition, many of these software solutions enable omnichannel payment acceptance including accepting payments in-store, online and on-the-go through mobile applications. As 2017 continues, more merchants will convert to cloud-based POS over outdated hardware.
Software vendors serving the retail POS market should be aware that new payment types introduced in the last several years will continue to grow in 2017. First, mobile payments and mobile wallets like Apple Pay and Samsung Pay will continue to gain traction. In 2016, Juniper Research estimated that 148 million payments were made via an NFC-based mobile device and a report from Strategy Analytics forecasts NFC payments will total $240 billion by 2021. In addition to the growth in NFC, EMV chip payments have grown significantly in the last several years in response to the EMV mandate in 2015. In 2016, only 41% of merchants were accepting EMV payments despite the mandate; however, adoption is expanding rapidly and should continue in 2017 as EMV chip payments become the standard.
There are several implications for retailers that want to succeed in this market and are evaluating new POS technology and services. Smaller retailers that currently utilize terminals evaluating cloud-based POS systems should make sure the solution has the functionality to meet their needs. First, retailers should check to see if the POS system has EMV and NFC capabilities and is not relying only on magstripe cards. The upgrade process to EMV is time consuming and requires cooperation from their party processors and many vendors still have not upgraded their product.
Secondly, the retailer should check on the omnichannel capabilities of the solution, including capabilities to enable customers to purchase and pay from mobile devices, e-commerce stores, electronic invoicing and other channels. In addition, retailers should evaluate value-added features, with a particular emphasis on marketing and customer engagement capabilities, including abilities to offer loyalty programs, contextually relevant offers and leveraging data to make product recommendations. The cost of the equipment and the payment processing fees should also be evaluated, as well as the ease of use to train existing and new employees.
Retailers with proprietary systems that want to integrate payments need to evaluate the payment providers on other factors. First, the payment processor should provide integration capabilities with multiple payment types, including EMV and NFC. In addition, processor should provide EMV and NFC-enabled payment devices that are fully certified and have a variety of devices that can be used in both countertop and mobile use cases. In addition, the cost of the new device should be reasonable to avoid a significant investment. In order to enable omnichannel payments, the payments provider must enable card present payments in-store, card present transactions on a mobile device, card not present ecommerce payments and payments via app. Ease of implementation is critical for retailer as well to make sure limit the time and cost of the work for their development team. Finally, the need for security and compliance continues to be an important trend.
While it’s true that the change to EMV and PIN-compatible terminals will reduce payment fraud for card present payments, many payment “hackers” are shifting their attention to card not present payments, such as e-commerce transactions. Retailers need to make sure that the payment vendor has strong security solutions which will allow developers to keep stringent security requirements “out of scope” of their software but will still keep their end users and consumers protected.