The rapid evolution of retail payment technology has given consumers more ways to pay than ever before, but that abundance of choice can also create complexity. Contactless payments, mobile wallets, retailer apps, loyalty programs, order-ahead services, and other capabilities may make individual transactions more convenient while simultaneously making the overall consumer payment experience more fragmented.
For retailers, the challenge is supporting these emerging payment methods without creating an increasingly complicated technology environment. A retail payments hub can provide a centralized infrastructure for connecting multiple payment services and systems, helping merchants introduce new capabilities while managing the complexity behind the scenes.
A column in Finextra brings to light a topic regarding payments that probably doesn’t get enough attention. Much of the technical development going on in payments is helping providers to streamline and simplify their operations and bring new solutions to light. The effect, however, is rarely simplification for consumers. They are bombarded with choice, which can be nice, but options also creating marketplace confusion which is most unhelpful:
The processes and IT systems needed by a retailer to send card payments to a bank for authorization, and subsequently to settle them, are simple. Many retailers have their own payments systems in place to do this, whilst others use payment service providers (PSPs). In both cases, the interaction between those systems and the banks have not changed much for many years. They get updated occasionally to cater for new requirements like contactless, but these are relatively minor technical evolutions, rather than large-scale disruptions.
However, things are more complex is on the customer side, where the shopper uses a card and interacts with the retailer.
Retailers now see payments as a means to compete for shoppers and show that they are up-to-date, modern and relevant – to appeal to millennials and their shopping behaviors. Contactless helps in this endeavor; as do Apple and Android Pay. But retailer wallets, integration with loyalty schemes, order ahead, click-and-collect and other shopping behaviors all need to be accounted for in the context of payments.
The writer suggests that retailer payment hubs are the solution. They may be helpful to sort out payment types, but if every retailer and payment provider is devising a different hub of their own or using different hub solutions, the consumer may still be left with a confusing view of their payments.
For a retailer’s payments strategy to be fulfilled with relative ease, a payments hub should allow disparate systems to consume the payment services through a range of means – whatever is the simplest in the circumstances – be it web services, APIs or even legacy protocols. Retailers need to ensure they have the right payment systems or the right PSPs available to them that can effectively deliver the simple bit, as well as offering a means to deal with complex integrations.Retail payments innovation should ultimately make commerce easier, but adding more payment methods does not automatically create a better consumer experience. Shoppers increasingly encounter different wallets, apps, loyalty programs, and checkout processes depending on where and how they make a purchase. Without thoughtful integration, greater payment choice can become another source of friction.
A retail payments hub can help merchants manage that complexity by connecting disparate payment technologies through APIs, web services, and legacy protocols. This can give retailers greater flexibility to introduce new payment capabilities without repeatedly rebuilding their underlying infrastructure.
However, simplifying technology for the merchant is only part of the solution. Retailers and payment providers must also consider how their decisions affect customers navigating an increasingly crowded payments landscape. The most effective retail payment strategies will be those that combine flexible infrastructure with a consistent, intuitive checkout experience, allowing consumers to benefit from innovation without having to understand the complexity behind it.
Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group
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