I always like to start from the beginning. So, let me begin my blog by introducing myself. I recently joined Accenture to lead our North America Payments practice. After more than 30 years in financial services—much of it working with companies across the retail and commercial payments value chains—I am no stranger to change.
But in today’s era of digital payments, it is not just velocity of change but the scale that brings with it both opportunity and peril. It is exhilarating, but can be overwhelming. My focus is helping payments players make sense of it all, so they can harness the potential of digital payments to drive their businesses forward.
Retail payments is in the thick of digital disruption. That should be no surprise. Digital is reinventing daily life fast—how we watch, listen, talk, shop, travel, ride and connect. It is a powerful and profound force of change. One that is ubiquitous for everyone. The combination of consumer demand, evolving technologies and retail market dynamics is creating a new future for retail payments with digital payments at the core.
These are the five crucial market shifts to watch:
Mobile jumps on the S-curve
Remember when you joined Facebook or made your first online banking transaction? I bet you did it from a desktop computer. I also bet that today, you check social media and bank from your smartphone. This is the trajectory of digital technology adoption. All roads lead to mobile. While US consumers haven’t embraced mobile payments with the gusto we expected considering their smartphone obsession, a tipping point is near. Accenture research shows that 64 percent of North American consumers plan to use a mobile wallet in 2020—a 39 percent rise in the user base in three years.1
This is a pivotal moment for payments players. Should they double down on the inevitability of mobile as THE consumer access point or move more deliberatively? History offers a cautionary tale. From Blockbuster and Napster to Borders and Polaroid, there’s a graveyard of companies that took a wait-and-see approach to digital disruption. Digital economies tend to scale toward natural monopolies with most markets consolidating into a handful of winners—Amazon owns nearly half of the US e-commerce market.2 I expect this consolidation to occur in mobile payments too. That’s why payments players should act now to create mobile payments experiences that capture consumer’s hearts—and wallets.
The great vanishing act
Consumers want payment transactions to disappear. Uber, Amazon and countless online subscription companies have shown that making a payment can be seamless and convenient. So much so that the payment becomes invisible. Consumer interest in frictionless payments is palpable driving recency, frequency and monetary value to digital payment savvy retailers. Consider that visits to US restaurants where payment is by mobile app jumped by more than 50 percent over the last year.3 I expect this interest across all retail categories to gain momentum fast.
But the payments industry has work to do to meet consumers’ expectations. Today, the payment transaction is often the speed bump—actually, the rush-hour traffic jam—in the retail experience. Research reveals that consumers loathe complex checkouts. In fact, they will not stand for them. Eighty-seven percent of online shoppers abandon their carts due to complex checkout. And over half (55 percent) would not just leave their carts, they would never come back to that retailer’s site.4 The time has come for payments players to make invisible payments a visible priority.
Traditionally, companies were built in a linear fashion with stores, call centers, online and mobile—a maze of departments, functional areas and channels. These silos reflect organizational structures and internal complexities, not consumer mindsets and behaviors. Put simply, channels are about companies, not consumers.
When consumers interact with payments companies and merchants, they want to learn about a product, buy a product, or service a product. They want to do this on their own terms. And in the digital era, they have countless options to do so. For payments players to be truly customer-centric, they have to stop being product- and channel-centric. They must kill channels as we know them, driving integration and absorbing complexity to provide simple, streamlined experiences to consumers. Integration must be so seamless that channels stop existing. Rest in peace.
Recognize. Remember. Recommend. Reward.
The three Rs of education are reading, writing, and arithmetic. The four Rs of the customer-centric business model: recognize me regardless of my entry point and device, remember my history of interactions, recommend relevant products and services, and reward me for my loyalty. There’s been a wake-up call for payments providers in recent years related to these four Rs. The old days of focusing purely on payments transactions are no more. After all, the digital economy is an experience economy. More and more, the customer (and merchant) experience is becoming a critical differentiator in retail payments.
As payments players develop customer experiences beyond the transaction—such as providing advisory or expense management services, offering a single view of account information, or curating real-time rewards and deals through partner networks—they should look to digital powerhouses that excel in customer experience. Amazon is a leader. The company recognizes and remembers consumers every time, recommends products they will love, and rewards them. The benefits are mutual. Amazon Prime members spend about $1,300 more each year than non-members.5
Security’s silver lining
There is not a more serious or consequential issue for payments players than security. Without it, nothing else matters. A day does not seem to go by that there isn’t news of a breach. As cutting-edge as their technologies are, even digital-born companies like Facebook and Google are not immune.
There is a silver lining in this storm for traditional financial institutions. Security is never absolute, and criminals are always getting better at being bad. Protecting data is central to the industry. It always has been. Compare this to the fact that digital competitors have built their business models on packaging and selling data, not on protecting it. The clarion call for payments players is to double down on security, to keep innovating to protect data while it is stored, and while it is in flight. Tokenization is the gold standard now. Expect biometrics and continued migration to multi-factor authentication to be the next wave.
In future blogs, I will explore these market shifts in detail and how new players are taking advantage of them. In the meantime, I hope to see you at Money 20/20 where Accenture will share more insights on what’s next in digital payments.
1 Accenture, “Driving the Future of Payments: 10 Mega Trends” 2017
2 Ingrid Lunden, “Amazon’s Share of the US E-Commerce Market is now 49%, or 5% of all Retail Spend” 7/13/2018
3 NPD Group, “In a Slow Market, US Restaurant Operators Step it Up by Offering Consumers Digitally-Enabled Convenience” 3/13/2018
4 James Melton, “Getting the Online Checkout Process Wrong Can Be Costly, Research Shows” 8/13/2018
5 Beth Braverman, “Amazon Prime Members Spend More on the Site— a Lot More” 7/7/2017