Consultants see retail payment systems adapt to pandemic

Meeting new expectations

The pandemic compelled businesses to embrace omnichannel commerce and refine their digital transformation strategies to meet customer expectations, said Vijaya Prakash Pallem, Dynamics 365 retail and commerce practice delivery lead and solution architect at Synoptek, an MSP and integrator based in Irvine, Calif.

Vijaya Prakash Pallem

That retail shift began with payment systems, he said.

"The pandemic made everyone, including the customers, shift toward the digital payments," Pallem said.

Digital methods run the gamut from mobile payment apps on smartphones to e-wallets and QR code payments. The "buy now, pay later" options built into digital payment modes are another trend among retailers.

"Businesses are expanding their payment options to meet the customers' preferences for digital payments -- both in-store contactless payments and flexible online payments," Pallem said.

Consumers drive this confluence of brick-and-mortar and online sales.

"They want to shop in different ways than pure online or in-store," said Inderpreet Batra, managing director and partner, head of payments for North America at Boston Consulting Group (BCG), a management consulting firm. "What will happen is a tighter coupling between digital experience and physical experience."

Hybrid experiences include buy online, pick up in-store (BOPIS), Batra noted. He also cited the expansion of retailers' mobile apps to accommodate in-store navigation and online ordering. Another hybrid variation is offering customers the ability to order products online when items are out of stock in a physical store.

Those approaches invite retailers to think differently about payment systems.

"The biggest question is: How do they keep introducing new and novel experiences -- whether they are digital or physical or hybrid -- and how can payment support all those initiatives?" Batra explained.

The degree to which stores must adjust retail payment systems to accommodate those experiences varies. Enabling BOPIS -- which BCG's global payments report called "a must-have feature for merchants" -- generally involves setting up a dedicated station for pickup, rather than an entirely new POS system, Batra said.

Inderpreet Batra

Turning a retailer's mobile commerce system into an in-store shopping assistant will require some development work. The trick is to avoid becoming too invasive. When a shopper uses a store's mobile app to determine which aisle has a particular product, the app might also provide information on two or three related products. But that's probably enough help. "Don't send 20 notifications," Batra advised.

"If a customer hasn't responded to any notification, it may be a good idea to reduce the frequency and revisit the recommendation engine," Batra said.Retailers, in general, must be thoughtful about marketing to customers through their apps, he said. Shoppers who enable notifications typically set a high bar on relevance, so marketing offers should be carefully tailored and respond to feedback. Otherwise, a customer might ignore all notifications.

Ordering products online from a physical store offers a higher level of complexity. That capability requires integrating a retailer's store operations with its e-commerce system, he added.

The pandemic made everyone, including the customers, shift toward the digital payments.

Payment trends for small, large retailers

Service providers working with smaller retailers will find vertical software is the main payment system trend. Vertical software supports the full scope of a small retailer's operations, covering marketing, inventory management and ordering supplies -- as well as payment and POS.

Examples of vertical software providers include Clover and Square. Such vendors offer their own POS hardware or partner with a hardware vendor, Batra said. The bundling of software and hardware has resulted in a wave of POS technology replacement as retailers scrap legacy systems in favor of verticalized offerings.

Larger retailers, however, are less likely to pursue such a sweeping rip-and-replace strategy. The cost of purchasing new hardware across numerous stores and the associated expense of retraining employees argue against such a move. Instead, the bigger chains tend to tweak their POS systems or integrate new software to add functionality, Batra said.

Such retailers also look to improve the in-store experience for customers. Some businesses add dual-use POS devices that they can deploy in a checkout lane or move to another location when lines become long, said John Casebeer, product manager at Insight Enterprises, an IT services company based in Chandler, Ariz.

A dual-use device typically consists of a mobile POS unit with an attached sled that includes a scanner, card reader and receipt printer, he noted. Such devices can operate in standalone mode or reside in a docking station that attaches a mobile POS device to accessories such as cash drawers and associate/customer-facing monitors, he added.

John Casebeer

"A few of our customers are looking at something like that," Casebeer said of the line-busting technology.

POS terminals in self-checkout lanes will continue as a retail trend. Batra said stores can put four to six self-checkout areas in the space of two traditional lanes.

"That means increasing the number of checkout points for faster checkout and a better customer experience," he added.

Another retailing concept gets rid of checkout points and POS systems entirely. Amazon Go convenience stores, for example, combine computer vision, sensors, AI and a mobile shopping app to provide grab-and-go purchasing. The technology tracks items shoppers take from the stores' shelves in a virtual cart and charges credit cards linked to their Amazon accounts. United Kingdom grocery retailer Tesco offers a similar GetGo market.

Partners, however, shouldn't expect to see a huge push to adopt this model. Batra said more cashierless store pilots could emerge in 2022 but not a wholesale transition to the grab-and-go model.

Other payment technology trends for 2022 include investment in antifraud technology and the digitization of B2B payments. The latter will undergo digital transformation to meet the expectations of vendors and suppliers, Pallem said.